smith street introduction 200911 fs27 en
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Financial Service Into deckTRANSCRIPT
Problems Projects People Solutions
November 2009www.smithstreetsolutions.com
“ Unlocking China’s Talent and Information ”
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Service Offerings
SmithStreetSolutions is a China-based Consulting and Advisory firm that provides services to clients around the world.
� Our diverse skill sets, language competencies and industry experience enable our team to collect, collaborate, analyze and organize information to deliver superior solutions
� Our solutions provide the flexibility for clients to focus on their core competencies and scale their business while effectively managing their cost structure and allocation of resources
� International presence of senior management allows for immediate attention to each client’s unique needs
� Our diverse skill sets, language competencies and industry experience enable our team to collect, collaborate, analyze and organize information to deliver superior solutions
� Our solutions provide the flexibility for clients to focus on their core competencies and scale their business while effectively managing their cost structure and allocation of resources
� International presence of senior management allows for immediate attention to each client’s unique needs
� Investment Opportunity Identification
� Industry Research & Company Profiles
� Strategic / Operational / Investment Related Due Diligence
� Valuation Analysis including 409A and FAS 157 Quarterly Valuations for Portfolio Companies
� M&A Advisory
� Financial Modeling
� Financial Document Translation – Chinese (Traditional & Simplified), Japanese, Korean
� Investment Opportunity Identification
� Industry Research & Company Profiles
� Strategic / Operational / Investment Related Due Diligence
� Valuation Analysis including 409A and FAS 157 Quarterly Valuations for Portfolio Companies
� M&A Advisory
� Financial Modeling
� Financial Document Translation – Chinese (Traditional & Simplified), Japanese, Korean
� Market & Business Research
� Primary Research
� Pharmaceutical Research
� Competitive Intelligence
� Data Analysis
� Sales & Marketing Analysis
� Media Monitoring
� China Market Entry / Feasibility
� Market & Business Research
� Primary Research
� Pharmaceutical Research
� Competitive Intelligence
� Data Analysis
� Sales & Marketing Analysis
� Media Monitoring
� China Market Entry / Feasibility
Investment Research & AnalyticsInvestment Research & AnalyticsInvestment Research & Analytics Market ResearchMarket ResearchMarket Research
“ Managing across time, distance and culture ”“ Managing across time, distance and culture ”
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Solutions Provided to Financial Services Clients
Our clients can attest to our ability to produce high-quality work outputs – with fast turnaround times – which provide real value to their businesses.
ClientClient Service ProvidedService Provided Client's RequestClient's Request SmithStreet SmithStreet ––> Solutions > Solutions
Leading PE firm � Industry Research� Investment Opportunity
Identification� Market Entry Feasibility� Company Profiles� English-to-Chinese Translation
� Evaluate investment opportunities and competitive landscape of select industries in China
� Delivered a comprehensive report outlining global and domestic trends, regulatory environment, and key competitor profiles
Global Financial Advisory Firm � Offshore Analyst Staffing� Business Research� Data Cleansing, Analysis and
Modeling
� Provide flexible staffing of qualified business analysts to support US-based engagement team from offshore
� Staffed fully-managed and dedicated resources to execute research and analyses, providing the flexibility to scale up or down the offshore team based on workload during each project phase
Multinational Industrial Products Corporation
� M&A Advisory� Client Liaison / Intermediary� English-to-Chinese Translation
� Facilitate the acquisition of a Chinese industrial products company (including manufacturing facilities, sales teams, trademarks and licenses)
� Guided the client through business, legal and cultural aspects of acquiring a Chinese firm
� Acted as an intermediary to find resolutions to disagreements
Boutique Investment Bank � Industry Research� Investment Opportunity
Identification
� Recommend attractive retail chains in second- and third-tier cities in China based on specific investment criteria
� Engaged in both primary and secondary research to identify potential target companies meeting investment criteria
� Facilitated initial negotiations between potential targets’management and client
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SmithStreetSolutions – Senior Management
Our leadership is made up of experienced consulting and financial services professionals with in-depth experience and successful track records across industries.
Franklin Yao – Chief Executive Officer
Franklin has spent his career advising Financial Services, Insurance, and Professional Services organizations in both Asia and North America in the areas of investment strategy, China market entry, offshoring and outsourcing, analytics, business strategy, operations reengineering, and strategic sourcing.
Previously, Franklin was at the global consulting firm Opera Solutions, where he managed the day-to-day operations of the Shanghai office and oversaw an eight-fold growth in its size. Prior to Opera Solutions, Franklin was a strategy consultant at the Mitchell Madison Group, Cap Gemini Ernst & Young, and Inductis. In addition to his work at SmithStreetSolutions, Franklin is a Partner at Glocal Strategy, China’s leading PR agency; a Strategy Advisor for JUCCCE, a joint US-China NGO for clean energy development; and Deputy Chairman of the Shanghai Yangpu High-Tech District Overseas Chinese Committee.
Franklin received a B.A. in Economics and in East Asian Studies from Yale University.
Franklin Yao – Chief Executive Officer
Franklin has spent his career advising Financial Services, Insurance, and Professional Services organizations in both Asia and North America in the areas of investment strategy, China market entry, offshoring and outsourcing, analytics, business strategy, operations reengineering, and strategic sourcing.
Previously, Franklin was at the global consulting firm Opera Solutions, where he managed the day-to-day operations of the Shanghai office and oversaw an eight-fold growth in its size. Prior to Opera Solutions, Franklin was a strategy consultant at the Mitchell Madison Group, Cap Gemini Ernst & Young, and Inductis. In addition to his work at SmithStreetSolutions, Franklin is a Partner at Glocal Strategy, China’s leading PR agency; a Strategy Advisor for JUCCCE, a joint US-China NGO for clean energy development; and Deputy Chairman of the Shanghai Yangpu High-Tech District Overseas Chinese Committee.
Franklin received a B.A. in Economics and in East Asian Studies from Yale University.
Robin Kerawala – Chief Operating Officer
Robin has been advising his North American clients in the areas of strategic procurement and outsourcing over the past 10 years. He has served clients in the financial services, professional services, manufacturing and government sectors.
Previously, Robin was an Engagement Manager at Mitchell Madison Group where he delivered significant cost savings for his clients, advising them on global logistics strategy, raw materials sourcing, as well as legal services and HR outsourcing issues. Robin also worked as a consultant at Operations Management Group, Cap Gemini Ernst & Young, and Silver Oak Solutions.
Robin graduated from Brown University with a B.A. in Economics.
Robin Kerawala – Chief Operating Officer
Robin has been advising his North American clients in the areas of strategic procurement and outsourcing over the past 10 years. He has served clients in the financial services, professional services, manufacturing and government sectors.
Previously, Robin was an Engagement Manager at Mitchell Madison Group where he delivered significant cost savings for his clients, advising them on global logistics strategy, raw materials sourcing, as well as legal services and HR outsourcing issues. Robin also worked as a consultant at Operations Management Group, Cap Gemini Ernst & Young, and Silver Oak Solutions.
Robin graduated from Brown University with a B.A. in Economics.
Steven C. Lee, CFA – Principal, Investment Research & Analytics
Steven has over 13 years of experience in investment analysis, structured products, and portfolio management. Prior to joining SmithStreet, Steven served as Managing Director for an opportunistic, multi-strategy hedge fund in New York focusing primarily on private investments. Previously, he was the Head of Structured Products at Refco Alternative Investments, where he was responsible for the creation, distribution and management of Principal Protected Notes and Total Return Swap structures. Steven has also formerly worked at Asset Alliance Corporation, Bear Stearns investment banking, and James D. Wolfensohn, Inc.
Steven received a Bachelor of Arts in Economics, with Distinction, from Yale University and is a CFA Charterholder.
Steven C. Lee, CFA – Principal, Investment Research & Analytics
Steven has over 13 years of experience in investment analysis, structured products, and portfolio management. Prior to joining SmithStreet, Steven served as Managing Director for an opportunistic, multi-strategy hedge fund in New York focusing primarily on private investments. Previously, he was the Head of Structured Products at Refco Alternative Investments, where he was responsible for the creation, distribution and management of Principal Protected Notes and Total Return Swap structures. Steven has also formerly worked at Asset Alliance Corporation, Bear Stearns investment banking, and James D. Wolfensohn, Inc.
Steven received a Bachelor of Arts in Economics, with Distinction, from Yale University and is a CFA Charterholder.
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SmithStreetSolutions – Team Member Profiles
We have built a diverse and talented team representing 11 countries and bringing together a wide range of industry experience.
Anders Paulsson – Director, Investment Research & Analytics
Collectively, Anders is well experienced in finance, divided between fixed income derivatives and asset back securitization at RBC Capital Markets. Within these areas, he has experience in the marketing and structuring of derivatives and the risk analysis and portfolio management of securitized assets.
Anders graduated from the MBA program at CEIBS in Shanghai and earned his B.Sc. in Economics & Finance from Lehigh University.
Anders Paulsson – Director, Investment Research & Analytics
Collectively, Anders is well experienced in finance, divided between fixed income derivatives and asset back securitization at RBC Capital Markets. Within these areas, he has experience in the marketing and structuring of derivatives and the risk analysis and portfolio management of securitized assets.
Anders graduated from the MBA program at CEIBS in Shanghai and earned his B.Sc. in Economics & Finance from Lehigh University.
Feng Xu – Research Associate, Investment Research & Analytics
Feng has experience in international M&A, private equity and venture capital at SmithStreet. He previously worked at a Philadelphia-based asset management company as an investment advisor and a Pennsylvania-headquartered US mortgage company as a financial analyst.
Feng earned his M.S. in Analytical Finance from Lehigh University, M.Sc. in International Business from University of Nottingham, a B.S. in Information and Computer Science from Zhejiang University (China).
Feng Xu – Research Associate, Investment Research & Analytics
Feng has experience in international M&A, private equity and venture capital at SmithStreet. He previously worked at a Philadelphia-based asset management company as an investment advisor and a Pennsylvania-headquartered US mortgage company as a financial analyst.
Feng earned his M.S. in Analytical Finance from Lehigh University, M.Sc. in International Business from University of Nottingham, a B.S. in Information and Computer Science from Zhejiang University (China).
Joseph Floyd – Director, Investment Research & Analytics
Previously, Joseph was an investment professional at American Capital, a US private equity firm and an investment banker at FT Partners, a US boutique investment bank. He has deep experience with both principal investing and M&A advisory.
Joseph graduated with high honors from the University of California, Berkeley with a B.A. in Economics and a B.S. in Business Administration. He previously held an NASD Series 7 license.
Joseph Floyd – Director, Investment Research & Analytics
Previously, Joseph was an investment professional at American Capital, a US private equity firm and an investment banker at FT Partners, a US boutique investment bank. He has deep experience with both principal investing and M&A advisory.
Joseph graduated with high honors from the University of California, Berkeley with a B.A. in Economics and a B.S. in Business Administration. He previously held an NASD Series 7 license.
Michael Yeo – Manager, Market Research
Michael has managed numerous global & China market research initiatives for clients across a range of industries. His projects have ranged from identifying potential investment opportunities for private equity firms to delivering strategic recommendations to Chinese government agencies. Previously, Michael was a SOX Internal Auditor at Shell and an External Auditor at Ernst & Young.
Michael received his B.A. in Accounting & Economics from the University of Reading.
Michael Yeo – Manager, Market Research
Michael has managed numerous global & China market research initiatives for clients across a range of industries. His projects have ranged from identifying potential investment opportunities for private equity firms to delivering strategic recommendations to Chinese government agencies. Previously, Michael was a SOX Internal Auditor at Shell and an External Auditor at Ernst & Young.
Michael received his B.A. in Accounting & Economics from the University of Reading.
SmithStreet Understands the Factors that Drive Valuation
SmithStreet analyzes each unique situation to unlock maximum value for clients.
Discounted Cash Flow Analysis
Discounted Cash Flow Analysis
Buyer(s’) Ability to Pay
Buyer(s’) Ability to Pay
Industry &Market
Conditions
Industry &Market
Conditions
Projections / Strategic Plan
Projections / Strategic Plan
Balance Sheet Optimization
Balance Sheet Optimization
Potential Synergies / Risks
Potential Synergies / Risks
Inherent Risk of Business
Inherent Risk of Business
Understanding of Business, Incremental
Assets & Liabilities
Understanding of Business, Incremental
Assets & Liabilities
Recent Comparable Transactions
Recent Comparable Transactions
Public Market Comparables
Public Market Comparables
Industry Merger and Acquisitions Comparables
Industry Merger and Acquisitions Comparables
Other Companies for Sale or Potentially
for Sale
Other Companies for Sale or Potentially
for Sale
Public / Private Market Conditions
Public / Private Market Conditions
Industry and Company Specific Characteristics
Industry and Company Specific Characteristics
Sale Process and Collective Judgment
of SmithStreet
Sale Process and Collective Judgment
of SmithStreet
Maximum Valuation
Maximum Valuation
Strategic ImplicationsStrategic Implications Ability to Raise Capital / Leverage
Ability to Raise Capital / Leverage Dilution / IRRDilution / IRR Potential Synergies /
Risks
Potential Synergies / Risks
Other Investment Opportunities
Other Investment Opportunities
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SmithStreet Identifies M&A Synergies to Unlock Value
Revenue EnhancementRevenue EnhancementRevenue Enhancement
Cost ReductionCost ReductionCost Reduction
Asset OptimizationAsset OptimizationAsset Optimization
Tax ReductionTax ReductionTax Reduction
Financial SynergiesFinancial SynergiesFinancial Synergies
Strategic OptionsStrategic OptionsStrategic Options
� Cross-selling opportunities between different sales forces, products and verticals
� Potential new product lines and geographic markets
� Cross-selling opportunities between different sales forces, products and verticals
� Potential new product lines and geographic markets
� How economies of scale can reduce average production costs, increase purchasing power, eliminate supply chain intermediaries and better utilize capacity
� Appropriate size of Management teams and office locations post-M&A
� How economies of scale can reduce average production costs, increase purchasing power, eliminate supply chain intermediaries and better utilize capacity
� Appropriate size of Management teams and office locations post-M&A
� Non-essential assets post-M&A that can be divested: real estate, factories, inventory, etc.
� Value of intangible assets such as patents, copyrights and trademarks
� Non-essential assets post-M&A that can be divested: real estate, factories, inventory, etc.
� Value of intangible assets such as patents, copyrights and trademarks
� Tax savings via NOLs
� Tax savings via geographic location post-M&A
� Tax savings via NOLs
� Tax savings via geographic location post-M&A
� Decreases in WACC via optimal debt / equity ratio
� Reductions in beta via increased assets, cash flow and diversified income
� Decreases in WACC via optimal debt / equity ratio
� Reductions in beta via increased assets, cash flow and diversified income
� Additional strategic options due to increased assets and cash flow, such as: IPO, debt recapitalization, geographic expansion, etc.
� Additional strategic options due to increased assets and cash flow, such as: IPO, debt recapitalization, geographic expansion, etc.
SmithStreet Analyzes the Acquirer and Target to Identify Synergies
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Illustrative Example: Preparation, Process, Negotiation Drive Value
Pre
pa
rati
on
an
d S
yn
ergy
Id
enti
fica
tio
n D
riv
e P
erce
ived
E
arn
ings
Up
Process and Negotiations Increase Core Multiple Paid
The market’s initial perception will not fully capture your Company’s inherent value.
$18.0
$24.0
8 x 12 x 12+ x
Market willinitially
discount Management’sprojections by 25%
Market’sFirstImpression
$144 mm
$192 mm
$288 mm
$216 mm
’10
EB
ITD
A (
$ i
n m
m)
Note: all figures are representative examples only
Through preparation, process and negotiation, SmithStreet increases the market’s willingness to commit to higher valuations.
Through preparation, process and negotiation, SmithStreet increases the market’s willingness to commit to higher valuations.
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Methodology for Valuation Analysis (409A and FAS 157 Services)
SmithStreetSolutions reviews and analyzes multiple information sources to determine valuation parameters.
Specific Valuation MethodologiesSpecific Valuation Methodologies
Discounted CashFlow Analysis
Discounted CashDiscounted CashFlow AnalysisFlow Analysis
Common Stock Comparison
Common Stock Common Stock ComparisonComparison
Precedent Transaction Analysis
Precedent Transaction Precedent Transaction AnalysisAnalysis
� Build detailed financial projection model and discount cash flows to present value using WACC method
� Build detailed financial projection model and discount cash flows to present value using WACC method
� Compare financial performance of company to a select group of comparable public companies
� Compare financial performance of company to a select group of comparable public companies
� Use relevant precedent M&A and private placement transactions to establish valuation parameters
� Use relevant precedent M&A and private placement transactions to establish valuation parameters
SmithStreet delivers comprehensive valuation analysis: enterprise value determined by multiple methodologies and equity value per share determined by capitalization table waterfall analysis
SmithStreet delivers comprehensive valuation analysis: enterprise value determined by multiple methodologies and equity value per share determined by capitalization table waterfall analysis
� Review financial statements and Management estimates to develop several sets of projections by which to value the company
� Hold discussions with Management or Advisors concerning the business, milestones, operations and future prospects
� Review financial terms and conditions set forth in the capitalization table and articles of incorporation
� Compare the financial performance of the company with that of publicly traded comparable companies and relevant precedent transactions
� Review financial statements and Management estimates to develop several sets of projections by which to value the company
� Hold discussions with Management or Advisors concerning the business, milestones, operations and future prospects
� Review financial terms and conditions set forth in the capitalization table and articles of incorporation
� Compare the financial performance of the company with that of publicly traded comparable companies and relevant precedent transactions
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Methodology for Identifying Investment Targets
SmithStreet uses a rigorous methodology to search for and identify potential investment targets meeting client-specified criteria.
Analyze key trends, government policies, map out the value chain, and highlight areas of opportunity
Compile a master list of available companies along with key data & financials for each individual company
Screen companies using defined investment criteria including: company financials & ratios, growth rates, number of locations, geographic coverage, etc.
Senior management interviews to determine: SWOT (strengths, weaknesses, opportunities & threats), brand recognition, openness toward outside investors, etc.
Present industry report with recommended investment candidates; facilitate company introductions and negotiations
Industry Research
Identify the Key Players
Quantitative Analysis
Qualitative Research
Recommend Targets
Our investment research projects are custom-tailored to each individual client’s needsOur investment research projects are custom-tailored to each individual client’s needs
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Complete Confidentiality
At SmithStreetSolutions, we regard confidentiality as our lifeline and have actively taken measures to safeguard our clients’ business information.
Our access controlled data centers are protected and secured
at various entry levels: perimeter, network, host, application
and data
Multiple barriers ensure the integrity of our network which
are designed to detect, prevent and defend against threats
Our managed firewall provides around-the-clock security
monitoring, and management logs and reviews of potential
intrusions
Firewall log data is continuously archived in a physical
backup media available for restoration for a specified time
period commensurate with service levels
Our physical workspace consists of one floor, accessible
only to employees of the company
Each individual terminal is secured by multiple logins /
password-protected entryways
Restricted internet access (personal email accounts, online
chatting tools, personal websites)
Disabled USB and copying capabilities (data cannot to be
transferred without the proper authorization)
Restricted access available to client team only
Strict confidentiality agreements are required for all
employees
ServersServers Employee’s TerminalEmployee’s Terminal
Our Infrastructure For Information SecurityOur Infrastructure For Information SecurityOur Infrastructure For Information Security
• SmithStreetSolutions has taken crucial steps to manage sensitive information so that it remains secure, credible and trustworthy
• SmithStreetSolutions has taken crucial steps to manage sensitive information so that it remains secure, credible and trustworthy
Steven C. Lee, CFAPrincipal, Investment Research & Analytics
US Mobile: +1 (917) 806 6508China Mobile: +86 150 2190 8229Email: [email protected]
Robin KerawalaChief Operating Officer
US Mobile: +1 (917) 771 7153China Mobile: +86 158 0092 2899 Email: [email protected]
Steven C. Lee, CFAPrincipal, Investment Research & Analytics
US Mobile: +1 (917) 806 6508China Mobile: +86 150 2190 8229Email: [email protected]
Robin KerawalaChief Operating Officer
US Mobile: +1 (917) 771 7153China Mobile: +86 158 0092 2899 Email: [email protected]
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Contact Information
New York Office521 Fifth Avenue, 17th Floor
New York, NY 10175+1 (212) 292 4420
Shanghai Office20 Jinchuang Road, 10th Floor
Yangpu, Shanghai 200433+86 (21) 6565 6533
www.smithstreetsolutions.comwww.smithstreetsolutions.com