Presentation on Private Equity Exit Considerations April 2012
Exits: Key Considerations for Private Equity Exits by Year Exit Capital ($B) # of Exits VALUE $140 600 449 510 $120 434 500 420 $100 350 400 $80 ECONOMY TAX 300 207 $60 200 $40 100 $20 $121 $120 $80 $40 $106 $104 $0 0 2006 2007 2008 2009 2010 2011 Median Exit EBITDA Multiple MORALE TIMING 9.9x 10.0x 9.3x 9.0x 8.7x 8.5x 8.6x FINANCING 8.0x 8.0x 8.0x 7.4x 6.9x 7.0x 6.6x 6.0x 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Pitchbook & Grant Thornton, 2011. 1
Plan Your Exit • Know How to Get Out Before You get In ONEX – Sky Chefs EBITDA (1987-2000) • Abundance of natural buyers? 120 • Strategic acquiror? 107.0 • Financial buyer? • IPO candidate? 100 • Confidentiality issues? • Vendors, competitors, customers 80 EBITDA ($MM) • Micro Analysis – Is Your Company 60 Ready? CAGR: 15.1% 46.0 • If NO – nothing else matters 40 • Execution of the investment thesis is key 25.6 CAGR: 8.7% • Capex, acquisitions, asset sales, HR • Tangible success? ROI? 20 • Opportunity cost – time / money / outlook 0 1987 1994 2000 IRR: 29.7% Multiple of Capital: 16.5x 2
Exit Paths – IPO Number of PE-Backed IPOs • Rarely a “mid - market” option 66 • Typical market cap: $1 billion 70 60 • The most “macro sensitive” option 51 50 • IPO market can be shut (mid-late 2008) 40 40 30 • Confidentiality is lowest 30 24 • Profit margin disclosure 20 14 10 • Hard to “exit” 100% - • Exit in stages over time 2006 2007 2008 2009 2010 2011 Average IPO Market Cap ($MM) 1 1,315 1400 1,267 1,200 1200 1,099 1000 827 772 800 700 600 400 200 - 2006 2007 2008 2009 2010 2011 2012 1. Source: S&P Capital IQ. average value of sponsor backed offerings of at least 5% of shares offered with gross proceeds over $50 mm. 3
Exit Paths – Auction vs. Targeted Sale Auction Targeted Sale • The most common mid-market exit • Effective for “natural fit” • Story needs broad appeal • Often involves unsolicited approach • Consumes time and management • Value not compromised • Confidentiality “contained” • Confidentiality maximized Case Study – ONCAP/WIS International Case Study – ONCAP/WIS International Case Study – ONCAP/CSI Date: January 2007 Date: November 2010 Buyer: Moody’s Corp. Calls Made: 18 Strategic / 52 Private Equity Buyer Interest: 7 Strategic / 36 Private Equity Rationale: Complimented global effort in regulation, risk management Preliminary Bids: 12 Private Equity and education tools Result: 8.1x ROI / 73.7% IRR Result: 5.8x ROI / 57.2% IRR 4
Financing Considerations …And High Equity Contributions Will Drive Strong Debt Multiples = Strong PE Interest… Values Higher 6.0x 60.0% 5.6x 50.8% 5.5x 50.0% 39.5% 5.0x 40.0% 4.8x 37.8% 4.7x 4.7x 4.7x 4.5x 33.6% 4.5x 30.0% 30.0% 4.3x 26.2% 4.2x 4.2x 4.1x 4.0x 4.0x 3.9x 20.0% 20.7% 3.8x 3.5x 3.4x 10.0% 3.3x 7.0% 3.0x 0.0% '97 '99 '01 '03 '05 '07 '09 '11 '87 '90 '93 '96 '99 '02 '05 '08 '11 Debt/EBITDA Equity Contribution to LBOs Source: Lcdcomps.com 5
Other Exit Considerations Tax Considerations – Number of Exits (2010) Tax Fundraising – Inventory of PE-owned Companies 180 7,000 163 5,745 5,968 160 6,000 5,435 Number of PE-Backed Companies 5,164 140 5,000 Number of Exits (2010) 4,549 120 104 3,678 4,000 100 84 83 2,894 80 3,000 2,223 60 2,000 40 1,000 20 - - Q1 Q2 Q3 Q4 '04 '05 '06 '07 '08 '09 '10 '11 • • LP’s like to see realizations Tax rate fears drove activity in late • 40% of PE-owned companies have 2010 been held more than 5 years 6
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