melcap partners, llc presentation to northwest ohio manufacturing forum and expo private capital...
TRANSCRIPT
MelCap Partners, LLC
Presentation to
Northwest Ohio Manufacturing Forum and EXPO
Private Capital Market Analysis
November 12, 2010
Securities offered through Burch & Company, Inc. Member FINRA/SIPC.
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MelCap Partners, LLC Confidential
I. Overview of MelCap Partners
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MelCap Partners, LLC Confidential
Qualifications MelCap Partners, LLC (“MelCap”) is a specialized investment-banking advisory firm involved in providing the following financial advisory services to middle-market companies with net sales/transaction values between $10mm to $100mm:
Mergers, acquisitions, and divestitures; Private placement of debt and equity capital; General advisory services including business valuations, turnaround plans, and
feasibility assessments.
The principals of MelCap, along with its financial advisory board, have extensive experience in completing a wide variety of transactions. MelCap is also involved in a number of industry organizations including:
I. Overview
Alliance of Merger & Acquisition Advisors
Association for Corporate Growth
American Bankruptcy Institute
Turnaround Management Association
Commercial Finance Association
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MelCap Partners, LLC Confidential
Qualifications (Continued)
I. Overview
It should be noted that MelCap is not licensed as a securities broker or dealer by any state or federal government agency. Any services that require a securities license offered herein shall be effected through MelCap’s registered broker-dealer, Burch & Company, Inc. (“BurchCo”), a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”) and the Securities Investors Protection Corporation (“SIPC”). Albert D. Melchiorre, President of MelCap, is a Registered Principal of BurchCo and Sean T. Demlow, Vice President of MelCap, is a Registered Agent of BurchCo. MelCap and BurchCo are not affiliated entities.
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MelCap Partners, LLC Confidential
Qualifications (Continued)MelCap has been successful in assisting its clients in a variety of assignments. Set forth below is a list of some of our client engagements:
Aztec Concrete Accessories, Inc. Fontana, CA
has been acquired by
a portfolio company of
The undersigned initiated the transaction, assisted in the negotiations, and served as financial advisor to Aztec Concrete Accessories, Inc.
I. Overview
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MelCap Partners, LLC Confidential
II. Market Overview
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MelCap Partners, LLC Confidential
II. Market Overview
Current State of M&A Market
Source: Mergerstat Review
AGGREGATE VALUE OF CLOSED DOMESTIC M&A DEALS
$1,786
$1,155
$627$532
$865
$1,013
$1,433$1,369
$994
$496$435
$0
$250
$500
$750
$1,000
$1,250
$1,500
$1,750
$2,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Q3Year
($ b
illi
on
s)
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MelCap Partners, LLC Confidential
II. Market Overview
Current State of M&A Market
Source: Mergerstat Review
NUMBER OF CLOSED DOMESTIC M&A DEALS
8,930
6,3985,660
6,2467,315
8,218 9,0809,747
7,623
5,976
5,748
0
2,000
4,000
6,000
8,000
10,000
12,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Q3
Year
Num
ber
of D
eals
$0
$75
$150
$225
$300
$375
$450
Ave
rage
Dea
l Siz
e ($
m)
Number of Deals Average Deal Size
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MelCap Partners, LLC Confidential
II. Market Overview
Some of the Key Factors or Drivers
Slowly Improving Economy Availability of Bank Debt Interest Rates/Cost of Capital Private Equity Availability
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MelCap Partners, LLC Confidential
Improving Economy
II. Market Overview
Source: Econstats
Quarterly Growth in Real GDP2004Q3 - 2010Q3
2004Q3 2005Q2 2006Q1 2006Q4 2007Q3 2008Q2 2009Q1 2009Q4 2010Q3
% C
hang
e
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MelCap Partners, LLC Confidential
II. Market Overview
Source: S&P/Portfolio Management Data
AVERAGE DEBT MULTIPLESMiddle Market Transactions
3.1 2.8 3.1 3.03.5 3.9 4.0 4.4
3.62.6 2.9
1.2
0.60.7 0.8
0.80.4 0.4
0.4
0.7
0.80.9
4.3
3.4
3.9 3.84.2 4.3 4.4
4.84.3
3.4
3.8
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Q3
Year
Bank Debt/EBITDA Non-Bank Debt/EBITDA
Availability of Bank Debt
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MelCap Partners, LLC Confidential
Interest Rates / Lower Cost of Capital
II. Market Overview
Source: Federal Reserve Bank
INTEREST RATE TRENDS
0%
3%
6%
9%
12%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 OCT '10
Year
1 Year T-Bill 5 Year T-Bond 10 Year T-Bond 20 Year T-Bond Prime Rate
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MelCap Partners, LLC Confidential
II. Market Overview
Source: Yahoo! Finance
STOCK MARKET PERFORMANCEMonthly Closing Prices
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Q3
Dow
Jon
es I
nd
ust
rial
Ave
rage
An
nu
al C
lose
0
500
1,000
1,500
2,000
2,500
3,000
NA
SD
AQ
& S
&P
500
An
nu
al C
lose
DJIA NASDAQ S&P 500
Public Equity
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MelCap Partners, LLC Confidential
Private Equity
II. Market Overview
Source: Private Equity Analyst
PRIVATE EQUITY PARTNERSHIPSAnnual Commitments to All Types of Funds
$68.3$79.9
$183.6
$117.1
$66.7 $53.8
$119.0
$168.1
$254.7
$325.7
$299.9
$95.8
$0
$50
$100
$150
$200
$250
$300
$350
$400
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Q3
Year
($ b
illio
ns)
0
100
200
300
400
500
600
Nu
mb
er o
f F
un
ds
Total Dollars Raised through September Total Dollars Raised No. of Funds
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MelCap Partners, LLC Confidential
Private Equity by Fund Type
II. Market Overview
Source: Private Equity Analyst
PRIVATE EQUITY PARTNERSHIPS2010 SEPT. YTD % Commitments by Fund Type
61% Corporate Finance
8% Mezzanine
13% Venture Capital18% O ther Private
Equity
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MelCap Partners, LLC Confidential
II. Market Overview
Source: S&P/Portfolio Management Data
Increasing Equity Contribution
AVERAGE EQUITY CONTRIBUTION TO LBOs
32%36%
38% 41% 40% 40%35% 32% 33%
39%
46%51% 50%
0%
10%
20%
30%
40%
50%
60%
Year
Eq
uit
y a
s a
Per
cen
t o
f T
ota
l S
ou
rces
% Equity Contributed
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MelCap Partners, LLC Confidential
Increased Bankruptcy Filings
II. Market Overview
Source:American Bankruptcy Institute (“ABI”)
QUARTERLY BUSINESS BANKRUPTCY FILINGS 2004-2010Q2
10,566 8,063 4,086 6,280 8,71314,6074,858
9,743
14,452
34,16739,073
19,814
14,319
8,249 8,7366,705
16,0147,574 9,476
5,284
7,167
11,504
15,177
7,778 12,798
5,586
7,985
12,901
15,020
28,137
43,042
62,837
29,059
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
2004 2005 2006 2007 2008 2009 2010Q2
# o
f F
ilin
gs
1st Q 2nd Q 3rd Q 4th Q Series5
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MelCap Partners, LLC Confidential
Conclusion
II. Market Overview
Over the next several months, business owners will be planning to exit and, therefore, M&A activity will increase due to of the following factors:
Economy – Showing signs of improvement during 2010:• Retail Sales – up 7.7% from 2009;• New Home Sales – up 6.6% in September ‘10;• Intel’s Sales – up 18% in 3rd quarter 2010;• Durable Goods – up 3.3% in September ‘10;• Exports – up 5% in 3rd quarter 2010.
Capital Gains Tax Rate – Set to increase in 2011, which will drive retirement aged business owners to consider selling;
Increased Availability of Capital – Banks return to lending and PEGs need to deploy capital in order to raise new fund.
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MelCap Partners, LLC Confidential
Contact Information
Sean T. Demlow
Vice President
For additional information on MelCap Partners, please feel free to visit our website:
www.melcappartners.com
5164 Normandy Park Drive ● Suite 285 ● Medina, Ohio 44256
Phone 330/721-1990 ● Fax 330/721-1991
Thank you!