Escolar Documentos
Profissional Documentos
Cultura Documentos
3rd September,2010 p ,
Presentedby CA.NimeshSalot
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AGENDA
WhereDoYouBegin? PlanningForPE RoleOfAdvisors InvestmentProcess Investment Process StructuringTheBusiness BusinessPlanAndMarketingcollateral ShortListAndEvinceInterestFromTheInvestors ValuationandNegotiation TermSheet Term Sheet DueDiligence DefinitiveAgreement ExitOptions Q&A
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WHEREDOYOUBEGIN?
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Right
Plan GetAdvisor
Documentation andmarket
Negotiate
Closure
ImplementationStage
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PLANNINGFORPE
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PLANNING FOR PE
Prepare forapartner Value the experience and input potential of the PE Fund Expect questions, information requests Flexibility will be key virtue
PLANNING FOR PE
Articulate business strategy
Define niche or unique selling proposition (USP) for the business Develop growth plan strategy diversify customer base or product line / offering or geographic presence Develop implementation plan for the strategy
Bring scattered businesses under one entity Simplify the Business Structure
Retain goodadvisors
Engage experienced advisors / bankers Attorney and Accountant are your business partners Broad base your Board of Directors
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ROLEOFADVISORS
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Lawyer
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Auditor
Inhouse Team
DueDiligence Agencies
Lawyer
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Execution
PEPlacement Deal makingandNegotiations CoordinationforDue Diligence Coordinationfor CompletionofCPsandCSs
Compliance
Auditing LegalCompliance CorporateGovernance ReviewofLegal documents
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COST OF ADVISORS
Advisor s Advisors fees (usually around 2 4% depends on the quantum of fund raising) 4%,
Fees to due diligence agencies (usually a lump some amount finance/accounts, legal, environmental, technical)
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INVESTMENTPROCESS
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PE/VCINVESTMENT PROCESS
Preparationof BusinessPlanand Marketingcollateral Shortlistand evinceinterestfrom theInvestors
Structuringthe Business
DueDiligence
ObtainTermSheet
Definitive Agreement
Funding
Dependinguponcasetocasetotaltimeframewouldbe58months D di t t t l ti f ld b 5 8 th
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RestructuringtheBusiness
PreparationofBusinessPlan andMarketingcollateral
DueDiligence
ObtainTermSheet
Businessdiscussions& ValuationNegotiation
DefinitiveAgreement
ClosingFormalities
Funding
STRUCTURINGTHEBUSINESS
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Scattered businesses Cross holdings in the business Fragmented holdings Value split across entities Multiple businesses
Capturetheentireworthofthebusinessinoneentity
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RestructuringtheBusiness
PreparationofBusinessPlan andMarketingcollateral
DueDiligence
ObtainTermSheet
Businessdiscussions& ValuationNegotiation
DefinitiveAgreement
ClosingFormalities
Funding
BUSINESSPLANANDMARKETINGCOLLATERAL
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Itisthedocumentthatdetailsthebusiness history,currentstandingandfutureplansof thecompany the company Itisabasicmanagementtoolthatguides thefuturedirectionofacompanyanda mandatorydocumenttoseekbusiness financing Itprovidesaconsideredandlogical It provides a considered and logical frameworktosetoutabusinesssshort termandlongtermplans,showshowthese planscanbeachieved,anddemonstrates l b hi d d d t t thattheplanaddressestherequirementsof thetargetaudience
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RestructuringtheBusiness
PreparationofBusinessPlan andMarketingcollateral
DueDiligence
ObtainTermSheet
Businessdiscussions& ValuationNegotiation
DefinitiveAgreement
ClosingFormalities
Funding
SHORTLISTANDEVINCEINTERESTFROMTHEINVESTORS
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IDENTIFICATION OF A FUND
Domestic D ti
Sectors thatthey focuson Otherthan money whatelse?
Foreign F i
Investment philosophy
PrivateEquity Fund
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Understanding Business
PromotersviewonfutureoftheIndustry anditsbusiness and its business Capexplanandutilizationoffund Scalabilityofthebusinesspostcapex MeetingPlantmanagerandotherkey Meeting Plant manager and other key members Infrastructure Understandingstepbystep manufacturingprocess Understandingtechnology machines, suppliers
PlantVisit
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RestructuringtheBusiness
PreparationofBusinessPlan andMarketingcollateral
DueDiligence
ObtainTermSheet
Businessdiscussions& ValuationNegotiation
DefinitiveAgreement
ClosingFormalities
Funding
VALUATIONANDNEGOTIATION
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Secondary Investment
Instruments
Instruments
DirectEquity
Warrants
DirectEquity
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ProjectedP&L
Investment Construction
WhyDirectEquity?
Comm.Start Thestateofbusinessgivesgoodvisibilityandto
FY09 FY10 FY11 FY12 FY13 100.00 110.00 124.30 144.19 209.07 100 00 110 00 124 30 144 19 209 07
10% 13% 16% 45%
EBITDA
EBITDAMargin
22.00
22%
24.20
22%
27.97
23%
33.16
23%
49.13
24%
PAT
PATMargin PAT Margin
12.00
12%
15.40
14%
18.02
15%
21.63
15%
25.09
12%
Futuregrowthlowerthanexpecteddiscountbyinvestor,earlyconversiononexistingbusinessordirectequitypreferred
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WhyConvertible? Thebusinessisgrowing,generatesgoodcash flowsandscaleupfromcurrentlevelscanreap hugebenefits providescomforttoaninvestor Thereislotofdemandpull,henceselling additionalcapacitieswouldbeeasier dditi l iti ld b i Investorcommunityprefersconversionwithin 18to24months(stretched) Investmentisintoprojectswithgestationcycle of12to24months of 12 to 24 months Thusconvertiblestructuremakessense..
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FY10 FY11 FY12 FY13 23,500 32,000 54,100 80,000 77.00 115.50 161.70 242.55
40% 50% 40% 46% 50% 47%
EBITDA
EBITDAMargin
34.65
45%
52.55
46%
PAT
PATMargin
13.75 13 75
25%
15.40 15 40
20%
23.68 23 68
21%
41.23 41 23
17%
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Valuation
Participatory i i Rights
Deal D l Negotiation
ExitRoutes
Commercial Rights
NegotiationisultimatelyasummationofGive(s)andTake(s)
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VALUATION NEGOTIATION
HardAspects
Structureofproposed Structure of proposed investment Equity/Convertible Valuationbenchmarkingvisvis comparabletransactions,peer analysis,etc. y , Potentialreturnsanalysisinterms ofRoCE,RoE,investorIRR Sector/companygrowthpotential andothereconomicaspects and other economic aspects EntryandExitPEmultipleasviewed bytheinvestor CommittedIRRinfavorofinvestor
SoftAspects
Appetiteforinvestmentinthesector Appetite for investment in the sector Comfortonthepromoterpedigree Comfortonthepromotersintegrity andtheoverallintent Hardnegotiationsshouldnotgivea negativeimpression henceshouldbe inasubtleandstructuredmanner Investor sinterestshouldbekept Investors interest should be kept inmindduringtheprocessof negotiationswhichwouldclearthe thoughtprocesstoalargeextent
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VALUATION METHODS
Thereisnorightorwrongwayofvaluingabusiness g g y f g Thereareseveralwaysinwhichitcanbedone p g/ p CapitalizedEarning/PeerComparison Valuationmethodologythatappliesamultipletotheearningsofabusinessto capitalizethoseearningsintoavalueofabusiness AcquisitionComparables ValuationmethodologythatCompareswithsimilartransactions DiscountedCashFlow ValuationmethodologythatbasedonExpectedCashFlowsDiscountedattheWeighted AverageCostofCapital
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RestructuringtheBusiness
PreparationofBusinessPlan andMarketingcollateral
DueDiligence
ObtainTermSheet
Businessdiscussions& ValuationNegotiation
DefinitiveAgreement
ClosingFormalities
Funding
TERMSHEET
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TERM SHEET
Private equity firm sends an Offer Letter, setting out general terms of the proposal, q y ff g g p p subject to the outcome of the due diligence and other enquiries and the conclusion of the negotiations Negotiating deals with terms that are satisfactory to both sides and ensuring that stakeholders interests are properly aligned A Term Sheet is a brief preliminary document designed to facilitate and provide a framework for negotiations between investors and entrepreneurs Generally focuses on a given enterprises valuation and the conditions under which investors agree to provide financing Usually contains certain conditions to be met before the investment is completed and these are known as Conditions Precedent
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TERM SHEET
TermSheetIncludes AboutCompany,Promoters,InvestorsandProposedTransaction CostofProject,BusinessPlan,CurrentShareHoldingPattern Valuation ConditionPrecedent PrincipalCovenants UtilizationofFund&FreshissueofCapital AntiDilutionRights NoPledgingInvestorsShare TagAlongRights DragAlongRights RightofFirstRefusal LiquidityPreference BoardofDirectors Exit
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RestructuringtheBusiness
PreparationofBusinessPlan andMarketingcollateral
DueDiligence
ObtainTermSheet
Businessdiscussions& ValuationNegotiation
DefinitiveAgreement
ClosingFormalities
Funding
DUEDILIGENCE
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DUE DILIGENCE
Analysesandvalidatesthefinancial,commercial,operational,andstrategic Analyses and validates the financial commercial operational and strategic assumptionsunderpinningthecompanythrough: Historicalfinancials Contractualdocumentprovidedbythecompanyincludingalllegaldocuments Publiclyavailableindustryandcompetitorinformation,and Duediligenceislinkedtotheinvestorscorporatestrategy
Goalofduediligenceistodeterminewhetheratransactionwithagiventargetisinline whatwascommunicatedtotheinvestor
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Legal
Corporate PermitsandConsents Contracts&Agreements Insurance LegalProceedings Legal Proceedings Employment Property Trademark,Patentand OtherIntellectualProperty Other Intellectual Property EnvironmentSafetyPublic Health
Business
Market&Business Market & Business potential Competition&Peer Analysis AssumptionofFinancial Assumption of Financial Model Supplier&Distributors Customers
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RestructuringtheBusiness
PreparationofBusinessPlan andMarketingcollateral
DueDiligence
ObtainTermSheet
Businessdiscussions& ValuationNegotiation
DefinitiveAgreement
ClosingFormalities
Funding
DEFINITIVEAGREEMENTANDCLOSINGFORMALITIES
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EXITOPTIONS
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EXIT OPTIONS
IPO SaletoanotherInvestor g / Strategic/TradeSale PartialExit RepurchasebyCompany Liquidation
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Q&A
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CONTACT
NimeshSalot
Phone Email : +919820128301 : nimesh@ladderup.com
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THANKYOU
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