Private and public financing for the acquisition of SMEs

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2 16.15 > Workshop 4 Private and public financing for the acquisition of SMEs Moderator : Maurice Olivier CEO, BlueOcean Ventures Switzerland

3 16.15 > Workshop 4 Private and public financing for the acquisition of SMEs Chris Raman - Managing Partner, Ventures for Growth, Belgium Patrick Angier - Regional Director, Beer & Partners Limited, United Kingdom Jonathan Widart - Private Banker at ING Luxembourg, G.D. of Luxemburg Pierre de Waha - Invest Manager, Nivelinvest, Belgium Jean-Louis Leloir - International Consulting Activities, OSEO, France

4 16.15 > Workshop 4 Private and public financing for the acquisition of SMEs Chris Raman Managing Partner Ventures for Growth Belgium

5 Ventures4Growth The Result Driven Capital Matchmaking & Ownership Succession Practice Transaction Services for B2B enterprises 2.5 M to 25 M Private Placements of Debt and Equity Subordinated/Unsecured Debt Recapitalization & Balance Sheet Strengthening Seed Money & First Round Financing Second Round & Growth Financing Bridge, Expansion and Mezzanine Funding Acquisition/LBO Capital Turnaround/Working Capital Company Brokerage Mergers & Acquisitions Corporate Equity (Re)structuring Enterprise Sales & Divestures Management Buy-Outs / Buy-Ins Strategic Alliances & Joint Ventures Industry Consolidation / Roll-Ups Corporate Exit Strategy Owner Buy-Outs Family Restructuring & Inheritance Planning/Succession

6 Type Case Study 1 Case Study 2 Case Study 3 ACQUISITION FINANCING (of an aircraft refueling trailer manufacturer) (Expansion Phase) FINANCING OF A FAMILY BUY-OUT (of a building construction & renovation business) (Rapid Growth Phase) FINANCING OF SHAREHOLDERS REPLACEMENT combined with a capital increase (of a video casting company) (Survival Phase) The Problem Illness of the owner, made an urgent request for a successor Succession issue in a family where the next generation want to take over the business Through CCI go between program, an exciting growth company in difficuties because of a shareholders issues. The Solution Finding the right successor (skillset) and structuring a LBO scenario The younger generation mostly has not been able to have the funds available for buying out other Resolving the matter with the non participating shareholders and finding revitalisation capital The Deal Structure & Challenges (to be discussed) Deal value equity (MBI + Private Investors/Family Office) Vendor Loan Bank Loan of which: short term (company reserves) Art 629 Belgian Corporate Law (investment loan) Deal Value for 50% shares subordinated vendor loan own equity public participation fund (Optimeo) Bank Finance coverage by Flemish Guarantee Fund Deal Value for x% shares + capital increase go to market growth BA + loan (public) own equity

7 Pierre de WAHA Investment Manager

8 NIVELINVEST Nivelinvest is a private investment company with a shareholding structure 50% private and 50% public. Wallonia is covered by 8 local investment companies from which Nivelinvest Our main investment focuses are: All kind of equity solutions (max. EUR 1,2 million) At all stages Minority

9 Some points to be tackled Public Financing (PF) Approach Strong support to management team Access to advisors Private Equity (PE) Direct negotiation Alignment with management Financing Various tools Mostly equity Partnership Minority («influent») No lead position Hands by LBO No aggressive leverage structure Return is important but not the only objective Management Exit Strong involvement and: Majority possible Few incentive on exit but important «envy ratio» Evergreen fund: Exit is important but no pressure Majority Lead Position Hands on Leverage could be aggressive, optimization of multiple effects Strong involvement and: Incentive mainly based on exit Closed End fund: Clear timing for exit

10 Conclusion Deals between PE Players ad Public financing should be encouraged: Experience and networks could be shared Best practices from both sides could be exchanged But fair balances between risk/return and power sharing remain crucial.

11 16.15 > Workshop 4 OSEO and transfer operations in France A comprehensive approach to financial support Jean-Louis Leloir International Consulting Activities OSEO France

12 SME transfer: huge financial needs for different actors A generational problem ( transfers yearly for France) Shortage of personal resources affect most actors (of all sizes) OSEO, French public agency for SME support, is the enterprise of entrepreneurs Solutions proposed: 0ptimal match making with VCs, and for business opportunities Active social networks and instruments Adapted incentives offered to the banks: - provision of guarantees for risk sharing (for 1,7 B in 2011) - impact on risk mitigation (better visibility)

13 OSEO s contribution to SME transfer Equity guarantee for VC investments: over 250 insured VCs or investment funds VCs are present in 7 % of medium size supported operations (selling price over to 1,5 M ) and in 20 % of large operations (price over 1,5 M ) Support to small projects: reducing risk adverse banking attitude Guarantees on personal loans (with associated mentorship from local entrepreneurs associations) Supply of quasi equity (contrats de developpement, maximum ) by OSEO: complementing the classic loans

14 16.15 > Workshop 4 Private and public financing for the acquisition of SMEs Chris Raman - Managing Partner, Ventures for Growth, Belgium Patrick Angier - Regional Director, Beer & Partners Limited, United Kingdom Jonathan Widart - Private Banker at ING Luxembourg, G.D. of Luxemburg Pierre de Waha - Invest Manager, Nivelinvest, Belgium Jean-Louis Leloir - International Consulting Activities, OSEO, France

15 16.15 > Workshop 4 Funding SME Transfers Private Equity and Angel Funding Patrick Angier Regional Director Beer & Partners Limited United Kingdom

16 SME Transfers key to the early stage investment Market? Does it provide the exit route for Investors? Seeing a lack of exits to mid to large sized corporates Investors having to re-invest in existing portfolio Lack of funds for new deals? Are shareholders over valuing their existing investments? SME Transfers create value for shareholder and increase return on investment?

17 Background levels of activity in UK m VAT registered companies in the UK Private Equity Important, but just a small part HMRC Enterprise Investment Scheme 6 to 700 companies issue EIS shares per annum - 25 to 35m from private investors Private Equity BVCA report on investment activity 2010 Investments Venture Capital 397 co., 313m Growth Capital co., 1,653m MBO / MBI 103 co., 4,752m Exits Total 823 co., 9,730m Of which Trade sales 165 co., 2,253m Write offs 124 co., 1,146m IPOs, post IPO or sale to other finance houses 376 co., 5,918m

18 What Investors Want Angel / Early stage VC Beer & Partners Space. High Growth Potential 4 to 5 times return on investment in three to five years 40% return per annum Potential for 10x plus return big upside 2x return over five years only 15% return per annum Exceptional management team Niche market position unique Intellectual Property or product / service offering, with high margins Investment to remain within the company investors do not like cash going out for Very few investments purely to fund acquisitions?

19 Private Equity funding for acquisition at the smaller early levels Secure investment for growth and development Acquisition funded off the balance sheet Acquisition brings earlier return on investment Return on Acquisition vs Cost of Capital do many acquisitions return 40% return on investment? Where it does work Combining new technology with existing distribution network Acquiring new technology / IP / Service to improve margins A Share for Share merger / acquisition all parties are locked in for the long term and share in the long term upside Provides liquidity for shareholders e.g. acquisition / merger with listed company But Do most vendors want to be locked in 5 years more hard work vs. the yacht? Do most acquirers want Private Equity do they want their own exit in three years time?

20 16.15 > Workshop 4 Private and public financing for the acquisition of SMEs Jonathan Widart Private Banker at ING Luxembourg, G.D. of Luxemburg

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