% & THE Secret SAUCE MARC EMMER
( ) Secret Sauce INGREDIENTS Required for companies to scale while preserving profjtability 2
THE BENEFITS OF SCALE Median EV/EBITDA 10.5x 10.0x 9.3x 9.5x 9.0x 8.5x 8.2X 7.8X 8.0x 7.5x 7.0x 3 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 L3M
WHERE TO GROW? & Transformational % & Adjacencies % Products & Markets & Core % 4
GROWTH PORTFOLIO 70/20/10 IN THE LONG TERM, 70% OF VALUE COMES FROM TRANSFORMATION 5
DIFFERING COMPETENCIES CORE EXPLORATION Short-term Long-term Effjciency Innovation Discipline Flexible adaptation Clarity of direction Empowerment Internal focus External focus Productivity focus Growth focus ~2% 6 OF FIRMS
COMPANIES DEFINE INNOVATION 80% 35% INCREMENTAL RADICAL ONLY 30 PERCENT OF COMPANIES FOCUS ON BUILDING “DISRUPTIVE TECHNOLOGY” 7 7
( ) Secret Sauce # 1 INGREDIENT Growth companies identify sustainable growth opportunities that balance core and non-core growth, while understanding industry disruption. 8
( ) Secret Sauce # 2 INGREDIENT Growth companies dedicate resources to innovation. 9
REAL STORIES DAN URI RYAN MONTE 10
QUESTIONS TO ASK About Adjacent Markets w What data supports our position? w Can we protect – or even leverage – the core? w Is there a repeatable formula? w Can we manage the supply chain, as opposed to being an intermediary? w Will we be top dog? w Do we know the terrain? w Can we trade upstream into higher profjt categories once we enter? w What technologies can we leverage to improve customer experience? w Will our systems and processes support entering this business? 11
LEVERAGING VERTICAL INTEGRATION 12 12
( ) Secret Sauce # 3 INGREDIENT Growth companies participate in multiple steps in the value chain. 13
ACQUISITIONS 14
WHEN DO ACQUISITIONS ADD VALUE? Access to New Markets 55% Growth in Market Share 54% O B J E C T I V E S A C H I E V E D Access to New Products 56% Redirection of Operating Expenses 39% Enhanced Reputation 45% Access to Distribution Channels 39% 38% Access to Additional Mgmt or Tech Talent Reduction in Number of Competitors 77% Access to New Brands 72% Access to New Technologies 55% Access to Manufacturing Capacity 50% Entry to New Industry 69% 21% Access to Manufacturing Know-How 8% Reduction in Manufacturing Costs 15 27% Access to Suppliers
THREE-YEAR GROWTH TREND Median Three-Year Revenue Growth (LTM YoY) As of May 31, 2018 Source: Capital IQ CLEANING & JANITORIAL 16
CLEANING AND JANITORIAL Median Valuations LTM EBITDA As of May 31, 2018 Source: Capital IQ CLEANING & JANITORIAL 17
PUBLIC COMPANY BENCHMARKS LTM LTM Margins Enterprise Value/LTM Revenue EBITDA Gross EBITDA Revenue EBITDA Diversifjed Facility Services Mitie Group $2,934 $132 10.90% 4.50% 0.4x NM Lassila & Tikanoja 874 96 24.40% 11.00% 1.0x 9.3x Comp Group Median $1,904 $114 17.60% 7.80% 0.7x 9.3x Hard Services - Segment Medians Electrical & Building Maintenance $4,690 $42 14.9% 0.9% 0.4x 41.4x Lift & Elevator Maintenance $10,541 $1,452 61.5% 13.8% 2.1x 15.5x HVAC & Plumbing $1,786 $240 25.7% 11.4% 1.6x 11.1x Comp Group Median $2,773 $240 27.8% 9.4% 1.0x 15.1x Soft Services - Segment Medians Cleaning & Janitorial $9,134 $497 50.50% 5.00% 0.6x 12.1x ISS $12,554 $772 90.60% 6.10% 0.7x 10.8x ABM Industries 5,715 222 10.50% 3.90% 0.5x 13.4x Pest Control $2,944 $669 51.0% 21.0% 3.4x 15.0x Security $10,421 $677 17.8% 7.7% 0.7x 9.4x Environmental & Waste Management $2,406 $358 31.3% 19.3% 2.5x 11.4x Food Services $23,803 $1,746 15.1% 8.2% 1.1x 13.7x Uniform Rental $2,590 $771 37.8% 19.9% 3.3x 11.2x Comp Group Median $3,457 $671 30.3% 17.1% 2.0x 11.4x
( ) Secret Sauce # 4 INGREDIENT Growth companies constantly reevaluate their service bundle and business model. 19
LIVING ON THE EDGE Of The Ofger Supported by education, warranty, confjguration, inventory support, training and support 20
MANAGING MARGIN Through Mix 21
GOOD BETTER BEST L L $1.80 $2.50 $3.40 5% 85% 10% 22
TIERED PRICING 23
L BETTER GOOD BEST L Introduces new High margin customers to Provides preferred products the brand choice Increases value Provides opportunity Makes it easy to of the brand to sell ancillary make a decision Improves stickiness products Drives volume Flanks low-cost of better competitors 24
B2B BUSINESS MODEL INNOVATION (Transformation) w PERSONALIZATION w NETWORKS & PLATFORMS: w ASSET SHARING Facebook w USAGE-BASED Apple w COLLABORATIVE Amazon w SEAMLESS TRANSACTIONS eBay w EDUCATION Uber w CO-REVENUE w RADICAL PRICING 25
( ) Secret Sauce # 5 INGREDIENT High-growth companies leverage multiple profjt centers. 26
( ) Secret Sauce # 6 INGREDIENT High-growth companies leverage technology for competitive advantage, usually by providing value-added information. 27
How Will We Survive A WORLD DRIVEN BY ALGORITHMS? 28 28
AI IoT BIG DATA 29 29
( ) Secret Sauce # 7 INGREDIENT High-growth companies build a synergistic relationship between sales and marketing. 30
OFFICE SPACE TRENDS Health Care Sector 52% 14% vs. Expansion Contraction Technology and Financial Sector 50% 20% vs. Contraction Expansion 31 Source: 2017 America's Occupier Survey
THE SURVEY SAYS 65% of facilities executives point to “disposal of surplus space” as their top cost-saving initiative 51% of large tenants will have moderate to By 2020 substantial use of coworking spaces Expansion of desired offjce amenities (by Millennials): Wellness Facilities, Rest Areas, Daycare 32 Source: 2017 America's Occupier Survey
HOW WILL BSCAI COMPANIES RESPOND in a Contracting Market? 33
STAGES OF THE BUYING DECISION Stage 1 Stage 2 Stage 3 RESEARCH QUALIFICATION VALIDATION On average, clients invest 20 minutes per phase. 34
SELLING VALUE-ADDED SERVICES Why Customers Buy 1. Free up time 1. More professional job High Frequency Buyer Criteria 2. Save money 2. Free up time Seller's Assumptions 3. Don't worry how 3. One less thing to worry about 4. One less thing to worry about 4. Overcome lack of capacity 5. More professional job 5. Save money 6. Lack the capacity 6. Offmoad disliked tasks 7. Dislike the task 7. Has necessary knowledge 35
STAGES OF THE BUYING DECISION Stage 1 Stage 2 Stage 3 What Research Qualifjcation Validation Client has reached a I need to feel good about Why Find a pro. Make a decision. pain point. the decision I made. Eliminate the pretenders. Buyers reach out to their Talk to a representative to network of business Seeks data that supports Activities understand features and benefjts. owners and advisors and their decision. They will confjrm details with conduct digital research. vendors. The consultation begins. How things work: Prove you understand. You are the professionals. Seller's features, benefjts, Reinforce opportunity Use specifjc examples. comparisons. Use cases, cost (time), and total Focus Introduce price range. research. cost of ownership. 36
STAGES OF THE BUYING DECISION Permission to Upsell (2 Services) Stage 1 Stage 2 Stage 3 Post Sale MADE Research Qualifjcation Validation DECISION VIEW WEBSITES INCREMENTAL COST OF 80% OF THE TIME ACQUISITION IS $0
BUYING PROCESS 38
INTEGRATED SALES AND MARKETING SALES Sales Management MARKETING CRM Market Research Pipeline Management Web/Digital Assets Inside Sales Traditional Media Sales Training Social Media Selling Tools Analytics Channel Strategy 39
( ) Secret Sauce # 8 INGREDIENT Growth companies do not settle for idle claims; they prove their value. 40
SOCIAL PROOF B2C B2B 41
( ) Secret Sauce # 9 INGREDIENT Growth companies prove their expertise in sectors or industries. 42
INDUSTRY LANDING PAGE 43
FOCUS ON PURCHASE TRIGGERS 44
VALUE PYRAMID CUSTOMER ENTERPRISE VALUE ENTERPRISE VALUE INNOVATION LOYALTY SAFETY FUN CULTURE EXCLUSIVE REWARDS ME SOCIAL EMOTIONAL EMOTIONAL EXPERIENCE AFFILIATION PROOF AUTHENTICITY MAKES US TECHNICAL TECHNICAL MAKES MONEY INFORMS REDUCES RISK COMPLIANT SAVES TIME SIMPLIFIES ORGANIZES INTEGRATES IMPROVES REDUCES FUNCTIONAL FUNCTIONAL CONNECTS VARIETY SPEED QUALITY EFFORT
MARKETING THAT CONNECTS 46
( ) Secret Sauce # 10 INGREDIENT Growth companies are able to articulate their value proposition in simple terms that resonate with customers/clients. 47
EMOTIONAL CONNECTION 48
SAFETY Difgerentiator 49
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