Investment Banking, parte 2

Process Overview

The seller starts contacting "all potentially" interested buyers in order to gauge their interest and gather information. This procedure allows for the broadest possible reach.

The process consists of two phases. In Phase I, the seller identifies and selects indicative buyers from the pool of potential buyers. This is done to raise interest and gather initial offers.

In Phase II, the seller screens a shortlist of buyers and asks them to submit more detailed offers. The selected buyers are also given the opportunity to conduct due diligence. The seller then chooses the final buyer with whom to close the negotiation.

Non-auction auction: The seller's advisor initiates a process similar to an auction, where interested buyers compete with each other. However, the identity of the buyers remains confidential, ensuring information disclosure and maintaining confidentiality.

An advantage is that we are talking about a “broadest”… slide.

PC. OTENTIAL ISSUES because many company visits“management”… that means that we will have by many possiblemanagers, many meetings vis-à-vis between the top manager of the selling company and thepossible buyers with their advisors and this may be distracting for the company managers.

“an “auction””… there may be some entrepreneurs that they are interest in buying that company,but they are not interested in doing that by joining a competitive deal: that’s maybe irrational, butwe have to take into account this issue. Negotiated deal.

Now, we describe all the activities performed by the advisor in the case of aassumption sellOur is to take the position of the side advisor, just for simplicity.value chain of the major activities,Here, we have a sort of which

are preparation & analysis…[leggo slide]For each detailed actions to be executedone of these main activities, we have all the and thepossible timetable: in this case, we see that the whole process might last in about 6 months (butmight last in 9 or 12 months: this is a tentative timeline).

P & A Mandate & Team setting.

1. In the , the major first activity is closing theREPARATION NALYSIS

Sometimes, we might have “a…“setting”… that means that sometimes the seller, the target company, may decide to involve manyto select best proposal,possible investment banks asking for proposals, in order to try the the oneseller) offering lowest price(for the the as for the fees.

“discussed”… so, the kind of the revenues stemming from such an advisory activity, we have“Typically”… slide. fixed at the signing of the contract,- : is a sum, payable when you get theRETAINER FEEmandate from your client;proportional on final

price-: it's a fee that you will be able to negotiate on behalf of SUCCESS FEE only after positive closing of our client, and it's paid at the end of the deal. "of the Target" ... because, in this way, they might run a competitive process, they can select the buyer available to pay the highest price and this will maximize the fees (most of all, the success fee). fee structure Now, we see an example of sell-side based on an increasing logic... For instance, we can negotiate with our client (that is the owner or are the stockholders of the target company, because we are in the sell side) to get, as success fee, the 3% of all amount over... "Multiple"... so, the kind of price multiple which we can apply to this kind of company is a multiple of 7 * EBITDA. "Gross sale price"... it is 105 mln $ because it is given by multiplying 7 to the EBITDA of 15 mln $. success fee? What's the success fee? On the first 50 mln $, we apply the basis success fee.

of 3%, giving 1.500.000 $ fees;- Then we have a residual EV of 55 mln $: that means that from 50 to 70, so on the following20 mln $, we apply the 4% as for success fee, giving 800.000$ and the remaining will be 35mln $;- Then, on the following 30 mln $, we apply a 5%, giving another 1.500.000 $;- And, finally on the remaining 5 mln $, we apply the 6%, producing an additional 300.000 $.So, if we sum all the fees coming from the different brackets from 3% to 6%, we will get 4.100.000$.This number, out of the Gross sale price, gives an overall percentage fee of 3.9%.Business plan and company valuation;2 & 3. Once selected the team, we start preparing the theInformation Memorandum…and then we have to prepare theHere we have an example of the Information Memorandum: there are some sections…“Company overview”… describing the story, the governance, the organizational structure, theclients, the suppliers and so for: so all the qualitative informations

Dealing with our company, we have conducted an "Industry overawe and SWOT analysis". Now, we have the results of our market analysis.

Firstly, we will have to prepare a data room. This is because when you will have to negotiate with possible buyers, you will have to make available a complete set of information going beyond the Information Memorandum. This will give the buyer the possibility to conduct a due diligence and check the consistency of all the data included in the Information Memorandum with the true data which we can provide by visiting the company, reviewing the material, and interviewing the top company managers.

The reasons for the data room preparation are:

1. To give information about the real value
2. To show credibility when negotiating with the counterparties
3. To demonstrate that our company is open, with no secrets
4. To provide a basis for signing

confidentialitypossible buyers, obviously to the of the so-calledagreement...“legal actions”… so, all informations which may be useful in order to give a final evaluation of thedeal.

Here, we have an example of how might be organized the informations within a virtual DataRoom: so, there are many chapters, including charts, statements, models, informations dealingwith the origination of the company, financial data, operations, R&D, suppliers, products andmarkets, sales and marketing, intellectual properties, Employees, Real estates, insurance,environmental issues, Litigations (= what are the pending actions in the court or out of the court),legal documentation (dealing with the outstanding debt contracts with banks and financialinstitutions) and other regulation informations… [leggo slide]due diligence report,

5. Then, we might also prepare some but, in most cases, we live the duediligence to the later stages of such a procedure….P -M not yet on the market,6.

have been appointed by the current owners of the company: so, the stand-alone value is the market value of the company with the underlying assumption of no future change in ownership and control.

So, we are saying that, if I'm your advisor and you are the seller, the first pillar of a sale stand-alone value strategy is making you understand that your is, for instance, 20 mln $ don't (!) want you higher expectations and, therefore, I to have for the price that will be considered when compared to the minimum price (which is the standard alone value).

So, if I'm your advisors and I'm saying that your stand-alone value is 20 mln $, you have not to expect to sell your company at 100 mln $, because it's a value too much beyond the stand-alone value;

D2) : are we talking about an acquisition? A merger? A spin off? The sale of the EAL TYPE majority equity holdings? Or the sale of the minority equity holdings?

D3) : it means that I have to reach an agreement, to abstract from my

private equity fund: