An Overview of Private Equity

Transcription

1 An Overview of Private Equity September 29, 2014 Private Equity Panel Moderator Les Alexander, Partner, Jefferson Capital Partners Panelists Mark Jones, Partner, River Associates Investments Gretchen Perkins, Partner, Huron Capital Partners Erik Holmsen, Principal, The Riverside Company 1

2 River Associates Investments, LLC State of the Market Panel September 29, 2014 Demonstrated Track Record of Success Overview What Happened Chattanooga, TN Based Private Equity Group Demonstrated 20+ Year Track Record Investing since investments in 34 platform companies since inception Add-on acquisitions in 2/3s of all realized transactions 30.5% gross IRR and 2.5x multiple of invested capital on all realized transactions Experience Experienced, Cohesive Professional Team Five partners with over 85 years combined experience working together Deep experience in operations, finance, M&A and other strategic planning with lower-middle market companies Focus Philosophy Consistent Focus on Lower-Middle Market Revenues of $ million EBITDA of $3-12 million Investments with Management Equity co-investment Incentive equity Partnership mentality Committed Capital Vintage Fund Amount 1989 River I, L.P. $5 Million 1993 River II, L.P. $15 Million 1996 River III, L.P. $44 Million 2001 River IV, L.P. $58 Million 2006 River V, L.P. $110 Million 2011 River VI, L.P. $222 Million 1 2

3 Geographic Location of River Associates Acquisitions 2 Current Investment Portfolio Number of Portfolio Company Fund Description Acquired Transactions 1. Intelliteach V Outsourced Revenue Cycle Management and IT Help Desk Oct National Deli Acquisition Corp. V/VI Manufacturer of Authentic Deli Products Nov TrueNet Communications V/VI Outsourced Telecom Engineering Service Provider Mar Omega Environmental Technologies, Inc. VI Distributor of Aftermarket Auto Climate Control Parts Jan Industrial Magnetics, Inc. VI Designer and Manufacturer of Industrial Magnets Feb Rose City Printing and Packaging, Inc. VI Printing and Paperboard Packaging Converter Dec-12 1 Total

4 Mark Jones, Partner 633 Chestnut Street, Suite 1640 Chattanooga, TN P: F: We Invest in People We Build Leaders Accounting and Financial Women s Alliance Gretchen Perkins, Partner October 29,

5 We have raised over $1 billion in committed capital Raised through four funds since 1999 We are solely focused in the lower end of the middle market Service and manufacturing companies in the U.S. or Canada Revenue up to $200 million EBITDA of $5 million or more; add-ons of any size We are control investors We get deals done Huron has completed 84 investments since 2000 We maximize value Operational approach has resulted in average portfolio company EBITDA growth of 87.4% for all realized investments, as of 9/15/14. 9 Huron s focus on operations stems from our personal experience as direct employees of these companies: Our operating partners have had leadership roles in these companies: 10 5

6 Platforms Business Services Healthcare Niche Manufacturing Consumer Products & Services Add-ons Dental Products & Services Energy Efficiency Services Used Car Remarketing Services Coffee Roasting & Distribution Engineered Plastic Flims Consumer Wall Décor Direct Marketing Services Fire Protection Engineering Services Liquid Food Transportation Sauces & Italian Food Products Socks & Hosiery Aftermarket Brake Pads Cabinet & Furniture Components 11 6

7 Equity Funding By Stage Equity Funding by Stage of Company Typical VC Fund Typical Private Equity Firm Late Stage Private Equity (Buyouts, Growth, Turnaround, etc.) Growth Equity Seed Equity Early Stage VC Late Stage VC Company s Stage of Development 7

8 Private Equity Comes in All Shapes and Sizes Industry Focus: Asset Type: Size: Investment Horizon: Control: Stage: Involvement: Targeted (e.g., healthcare) vs. generalist Private company assets/stock, real estate, distressed debt Micro-funds (<$50M) to Middle-Market funds ($100M to $1B) to Mega-funds (>$10B) Short duration (quick flip < 2 years) to long-term (4 6 years) Majority vs. minority Early-stage capital ( Venture ) to late-stage buyouts ( Private Equity ) Active operators, active managers, passive investors How Private Equity Builds Value Equity Value The Simple Math Enterprise Value = (EBITDA x Multiple) Debt Ways To Create Value Grow Sustainable EBITDA Increase The Exit Multiple Reduce Debt Efficient production Growth prospects Buy/structure right Accelerate Value Drivers Economies of scale Expense management Grow revenue Synergistic add-ons Diversification Trend line Infrastructure Management Maximize capital efficiency Capital expenditures Working capital Sell non-core assets Tax shields 8

9 Overview of the Middle Market U.S. Private Equity Market Statistics U.S. Private Equity Acquisition Activity: Platform Versus Add-on Transactions Source: William Blair. 9

10 U.S. Private Equity Market Statistics 1,200 Source: William Blair. Private Equity Market Statistics Source: PitchBook. 10

11 Private Equity Market Statistics Source: GF Data. PE Deal Structures Source: GF Data. 11

12 PE Deal Structures Source: GF Data. Portfolio Company Exits Source: PitchBook. 12

13 Private Equity Fundraising Source: PitchBook. Private Equity Fundraising Source: PitchBook. 13

14 Private Equity Fundraising Source: PitchBook. Private Equity Fundraising Source: PitchBook. 14