precision targeting document

PrecisionTargetingDocument

1

1.  AboutCognitive

2.  FundTypes–Overview

3.  FundTypes–Detail

4.  InvestorNetworkStructure

5.  ImportanceofPrecision–Geography

6.  ImportanceofPrecision–Sectors

TABLEOFCONTENTS

2

7.  ImportanceofPrecision–TransactionStrategy

8.  ImportanceofPrecision–TransactionTicket

9.  CaseStudy

10.  OtherusesoftheCognitiveDatabase

Annex:CCFServices

1.ABOUTCOGNITIVE

3

Cognitionis"thementalactionorprocessofacquiringknowledgeandunderstandingthroughthought,experience,andthesenses.”Itencompassesprocessessuchasknowledge,attention,memoryandworkingmemory,judgmentandevaluation,reasoningand"computation",problemsolvinganddecisionmaking,comprehensionandproductionoflanguage,etc.Humancognitionisconsciousandunconscious,concreteorabstract,aswellasintuitive(likeknowledgeofalanguage)andconceptual(likeamodelofalanguage).Cognitiveprocessesuseexistingknowledgeandgeneratenewknowledge.

•  Cognitiveisacutting-edgeCorporateFinanceWirmfoundedwiththeobjectiveofprovidingnewandinnovativeWinancialservicesonaglobalscale.

•  Theteamhasmorethan60years’combinedexperience,coveringeveryfunctionoftheC-suiteWinancialspecter,andhasmanagedpracticallyeverymajorWinancialeventinthelifeofacorporate,SPVorinvestmentvehicle.

•  CognitiveCorporateFinanceaimstobethemostholistic,mostconnectedandmosteffectivecorporateWinanceadvisorintheworldintheWieldofPrivateEquity-liketransactions*.

•  Usingourproprietaryinvestors’network,weaimtobesointimatelyawareoftheneedsofinstitutionalandcorporateinvestorsworldwidethatwecanmatch–inrealtime–awell-expressedfundingneedwiththemostrelevantsourcesofcapitalmostlikelytocompletethetransaction.

•  WewanttobringourclientsthemostrelevantWinancialadvice,theoptimalWinancialsolutionandthebestandfastestserviceinWindingcapitalfortheircorporaterequirements.

*WedeFinePrivateEquity-liketransactionsasanytransactionexecutedoutsidetherealmofcapitalmarketsandlistedsecurities.

2.FUNDTYPES–OVERVIEW

4

“PlainVanilla”PEFunds

CreditFund(Mezz-anine)

Internet&HighTech

TurnaroundFunds

GrowthFunds

CreditFund(SeniorDebt)

LitigationFunds

DistressedFunds

•  Forthepastfewyears,therehasbeenasurplusofcapitalintheworld,meaningthatthereistoomuchmoneychasingtoofewdeals.

•  Inordertodifferentiatethemselvesfromthecompetition,thevastmajorityofinvestmentfundshavereactedbyhoningandevolvingtheirownrazor-sharpinvestmentstrategy.

•  Inaddition,astheimaginationofWinanciersknowsalmostnolimits,newinvestmentstrategiesconsequentlycomeonlineonaregularbasis.

•  Findingtherelevantcapitalforone’sprojectorcompanyisthereforeanexerciseofgreatandgrowingcomplexity.

•  ThisdocumentdescribeshowCognitiveCorporateFinancemapstheinvestmentuniverseonbehalfofitscurrentandfutureclientslookingtoraisecapital.

3.FUNDTYPES–DETAIL

5

TransactionStrategy:Majorityorminorityequitywithcontrol.

TargetCharacteristics:StablecashWlows,strongmanagementteam,strongmarketposition,positiveEBITDA

TypicalSectors:Industrials,BusinessServices,Energy,Healthcare,Consumer&Leisure.

Avoid:Loantoown,Distressed,Non-PerformingLoans,Seed/EarlyStage/Venture.Financials,RealEstate

“PLAINVANILLA”PEFUNDS

TransactionStrategy:Majorityorminorityequity.

TargetCharacteristics:Strongmanagementteam,Nicheposition,Growth,InternationalGrowthposition,ReplacementcapitalTypicalSectors:SectoragnosticbutprefernottoinvestinbusinessthathavehighCAPEXrequirementssuchasindustrials.Avoid:Cashout,Seed/EarlyStage

GROWTHFUNDS

TransactionStrategy:MinorityEquitySeed/EarlyStage/SeriesA,B,C…

TargetCharacteristics:Disruptivetechnology,Growth,Strongmanagementteam.

TypicalSectors:E-Health,Digitalmedia,E-commerce,Ed-tech,Nanotechnology,Agri-tech.

Avoid:StablecashWlows,distressed,familybusinesses,Spinoffs,Replacementcapital.

INTERNET&HITECH


6

TransactionStrategy:fundingaClaimant’slegalcostsinordertoshareintheoutcomeofthelegaldecision(the“award”).

TargetCharacteristics:CommerciallitigationBreachofcontractclaimsInternationalarbitrationProfessionalnegligence§Professionalliabilityclaims§IntellectualPropertyinfringement§Patentinfringement§Businessdefama<ons

Typicalsectors:Claimantcanberepresentedbyeitheranindividualoracompany.Sectorisirrelevant.

Avoid:TypicalcorporateWinancetransactions.

LITIGA-TIONFUNDS

TransactionStrategy:Majority,needcontroloftheboardandmanagementinordertocarryoutextensiveturnaroundacrossthewholevaluechain.

TargetCharacteristics:StrongmanagementNegativeEBITDA,Nicheposition,Buyout,Familybusiness.

TypicalSectors:Completelysectoragnosticincludingrealestate.

Avoid:Cashout,Seed/EarlyStage

TURNAROUNDFUNDS

TransactionStrategy:Acquiringassetsoranoperatingbusinessinformalbankruptcyproceedings,witherthrough

TargetCharacteristics:NegativeEBITDA,Nicheposition,Buyout,Familybusiness.

TypicalSectors:Completelysectoragnosticincludingrealestate.

Avoid:StablecashWlows,disruptivetechnologies,Seed.

DISTRESSFUNDS


7

TransactionStrategy:Lendmoneyonaseniorbasis,takingguaranteesincaseofdefault.

TargetCharacteristics:Strongmanagementteam,stablecashWlows.

Sectors:Completelysectoragnosticincludingrealestate.

Avoid:Turnarounds,Restructurings,Distressed,NegativeEBTIDA,Seed

CREDITFUNDSENIORDEBT

TransactionStrategy:Lendbelowseniordebt,withWlexibleinterestratestructureoftenrolledupwithcovenants.

TargetCharacteristics:Spinoffs,Nichepositions,Successionissues.

Sectors:Sectoragnosticwithnopreference.

Avoid:Turnaround,Distressed,NegativeEBTIDA,Seed.

CREDITFUND

MEZZANINE

•  TheinvestmentstrategiesdescribedinthepreviouspagesdrawonlybroadcategorieswhichrequirefurtherbreakdowntoreWlectthewidevarietyofcapitaltypesavailableintheworld.

•  Moreover,wehavenotcoveredarangeofother–lesswell-known–investmentfundtypessuchas:agriculturalfunds,artandartlendingfunds,searchfunds,sportsfunds,illiquidfunds,etc.

•  This“zoological”touroftheworldofinvestmentfundsservestosetthescenefortheneedforhigh-precision,technology-enhancedtoolstoidentifytherelevantcapitalforone’scompanyorproject.

4.INVESTORNETWORKSTRUCTURE

8

Personalcontact:Whomdoweknow?

Geographicremit:Wheredo/cantheseinvestorsdeploytheirfunds?

Sectorpreference:Whichsectorsdotheseinvestorstarget?

Transactionstrategy:Howdotheseinvestorsdeploytheirmoney?Majority/minorityequity,senior/juniordebt,mezzanine,assetdeals,specialsits,etc.

Transactionticket:Whatistheminimum/maximumtransactiontheseinvestorswillconsider?

Puttingitalltogether…:Whatistheindicativeinvestmentappetiteforthetransactionproposedbyourclient?

•  Ithasbeenestimatedthattherearebetween60,000and100,000institutionalinvestorsintheworld.

•  Todate,CognitivehasmappedoverfourthousandoftheseWinancialandindustrialinvestorsandwegrowourcoverageonacontinuousbasis.

•  TotheextentthatweareprimarilySellSideadvisers,wededicatesigniWicanttime,resourcesandtechnologytounderstandingtheseinvestors’detailedinvestmentspeciWications.

•  AsaWirststep,ourmappingfocusesonthefourcriteriadescribedinthediagram,astheseallowustorapidlyidentifyrelevantinvestorsforagiveninvestmentopportunity.

•  However,inordertobeasaccurateaspossiblewhenpresentinganinvestmentopportunitytothemarketonbehalfofoneofourclients,westrivetogointoasmuchdetailaspossible,aswedescribeinthefollowingslides.

5.IMPORTANCEOFPRECISION–GEOGRAPHY

9

NorthAmerica1,601investors

Europe1,804investors

Asia517investors

LatinAmerica434investors

Africa472investors

Worldwide433investors

-  Whiletalkingtoinstitutionalinvestorsonadailybasis,Cognitivetakestheopportunitytounderstandtheexactcountrieswheretheseinvestorsarepermittedtoinvest,aswellaswheretheyactivelyseektoinvest.Thesemaydiffer.

-  ThediagramtotherightshowsthenumberofinvestorsperregionofinterestmappedbyCognitivetodate.Wearealsoabletopinpointtheexactcountriesofeach.

-  Ourdetailedunderstandingofeachinvestor’sgeographyofinterestallowsustooptimizetheclosureofadealastheopportunitywillonlybepresentedtoinvestorswithamatchinggeographyofinterest,therebyincreasingtheprobabilityofsuccess.

5.IMPORTANCEOFPRECISION–GEOGRAPHY(Cont’d)

10

Europe{1,804investors}

•  Withineachcontinent,CognitiveseekstoidentifyaspreciselyaspossiblethespeciWicregion(s)andcountriesoffocusforeachinvestor.

•  Somefundsclaimtobepan-European,butinfact–althoughallowedtoinvestallacrossEurope–onlyinvestinselectedcountries.

•  Otherfundshaveclearlydelineatedregionswhereintodeploytheircapital:WesternEurope,SouthernEurope,DACHcountries,CentralandEasternEurope,orNordics.

•  Otherwaysofbreakingdowngeography–likethoseofLitigationFunds,forexample–includethenatureofthelegalsystem:Civillawcountries,Commonlawcountries,countrieswherebilateralinvestmenttreatiesareinforce,etc.

•  Otherfunds–likeRealEstatefunds–focusonprimarycities/gatewaycitiesvs.secondarycities,cityvs.beach,premiumareasvs.low-incomeareas,etc.

•  Thereisnolimittothedegreeofprecisiononecanreach.

Switzerland{963}

Poland{890}

Germany{1,107}

Italy{985}

France{1,055}

Sweden{912}

UnitedKingdom{1,195}

Spain{1,124}

RealEstateIndustrials

Retail&FMCGEnergy&RenewablesBiotech&LifeSciencesEducation&e-learning

Media&ContentFinancialServicesAgriculture&Food

TelecomInternet&DigitalMedia

BusinessServicesArt

NaturalResourcesInfrastructureLogistics

Construction&Development

Tourism&LeisureAircraft&Shipping

Other

6.IMPORTANCEOFPRECISION–SECTORS

11

•  InitiallyCognitiveWilteredinvestorsbytargetsectors,asoutlinedintable1totheleft.Withtimeandexperience,CognitivequicklyrealizedtheneedtobemorepreciseinreWlectingthespeciWicsub-sectorstrategyofeachinvestor.

•  Asshownintable2totheright,Cognitiveisnowabletopinpointtheparticularsub-sectorfocusofeachinvestorwithinitsnetwork.

•  EnhancinginformationtothislevelofdetailhasmeantthatCognitivehasincreaseditsnumberofsectorsfromatotalof20to108,therebyallowingustopinpointtherelevantsourceofcapitalforclientsinanyparticularindustry.

•  Suchdetailedunderstandingofeachinvestor’ssectorofinterestallowsustooptimizetheclosureofdealastheopportunitywillonlybepresentedtoinvestorswithamatchingsectorofinterest.

Internet&DigitalMedia

InternetSoftware

Fintech

IoT

Software

Hardware

ITServices

BigData

Ecommerce

OtherIT

SECTORS

SUB-SECTORS

7.IMPORTANCEOFPRECISION–TRANSACTIONSTRATEGY

12

MajorityequityMinorityequityLoan–MezzanineLoan–SeniordebtLoan–JuniordebtProjectWinanceSpecialsituationsLoantoownAssetdealsLitigationStructuredWinanceRealestate–CoreRealestate–CoreplusRealestate–ValueaddRealestate–Development

•  Inadditiontothetransactionstrategy,itisimportanttoknowwhatassetclassestheinvestorsareallowedtoenterinto.•  ThemajorityofPE-likefundsarenotallowedtoinvestinpooledinvestmentsorotherinvestments.•  FundsofFundstypicallycannotmakedirectinvestmentsintoacompanyorprojects.•  Corporateinvestorsusuallylookfor100%straightacquisitions.

FundsofFunds(239)

PrivateEquity-likeInvestors(3,449)

TargetCompanies/Assets/Opportunities

CorporateInvestors(401)

Endowments(32)

FamilyOfWices(236)

•  Through itsdaily contactswith institutional investors, Cognitivehas identiWied15broad transaction strategies implementedby theseinvestors,furthersegmentedbysub-strategies,e.g.minorityinvestorvsminorityinvestorwithaneedforacontrollingstake.

•  Foreachofthe≈4,000institutionalinvestorsinCognitive’snetwork,wenotonlyseektounderstandtheprecisetransactionstrategyforeach,butseektocaptureasmuchdetailaroundthemetricsanddynamicsofeach:e.g.distressedwithminimum50%IRR.

•  Thisinformationiscrucial,asthecriteriaforrejectionarenumerous,andthereisnogreaterwasteoftimethantalkingtothewrongperson.

•  Bywayofexample,adebtfundprovidingjuniordebtwouldneverconsideranopportunitywheretheclientisseekingtoexitthebusinessbysellingamajoritystake.Itisimportanttoknowthisinformationpriortomakinganycontactwithinvestors.

7.IMPORTANCEOFPRECISION–TransactionStrategy(Cont’d)

13

•  Cognitivedoesnotseektomaptheentireinvestmentuniverse,onlythatrelevantforourclients.•  Asweoperateinthemid-market,ontransactionsrangingfrom€1mto€100m,wefocusonacertainnumberoffunds.•  Investorsthatwedonottypicallystudyinclude:

•  Becausetheirinvestmentticketsaretoolarge:hedgefunds,fundsexposedtocapitalmarketsorlistedcommodities,sovereignfunds,etc.

•  Becausetheirinvestmentticketsaretoosmall:businessangels,privateindividuals.

€1m

€100m

PEFunds

VCFunds

Seed

Funds

Angel

Investors

€10m

€1bn

CCF’stargetmarket

Special

Sits

etc.*

LitigationFunds RealEstate

Funds

Infrastructure

Funds Hedgefunds&

cap.markets

InvestmentTicket

8.IMPORTANCEOFPRECISION–TRANSACTIONTICKET

14

•  TheamountofcapitalaninvestmentfundputstoworkisadirectfunctionofitsAssetsUnderManagement,combinedwithitsneedtodiversifyitsinvestmentsacrossaportfolio.

•  Forcorporates,theinvestmentticketsizevariesaccordingtocriteriathatareamixtureofhardandsoft:thesizeofitsownbalancesheet,thestrategicimportanceofagivenmarket,cashavailablecombinedwithavailabilityofacquisitionWinance,etc.

637

1954

2372

1265

446

InvestmentSizes

MicroSmallMediumLargeMacro

•  AninvestmentfundwithA.U.M.of,say,€50mwillmakearound10to15acquisitionsof€3mto€5m.•  Conversely,aninvestmentfundswithA.U.M.of€5bnisunlikelytomaketransactionsbelow€100m(ifthat“small”).•  Otherconsiderationscanimpactthetransactionticketafundiscapableofexamining:

•  A“small”fundmayhaveco-investorswhocaninvestalongsidethemand“beefup”theamountofcapitalitcanputonthetable

•  Similarly,a“large”fundmaybeabletoenterintoa“small”transactionbecauseoneofitsLimitedPartnersislookingtodosmallertickets.

•  Priortomakingcontactwithinstitutionalinvestors,itisimportanttoknowhowdeepthepocketsare,andmostimportantly,whetherornotthetransactionthecompanyproposesmatcheswithitsrangeofpossibleinvestmentcriteria.

Macro

Medium

Large

Small

Micro EUR.1-1m

EUR1-10m

EUR20-50m

EUR50-200m

EUR200m+

9.CASESTUDY

15

AGermansupplierofAutomotivepartshasjustappointedCognitivetoassistthecompanyinitsfundraisingefforts.ACognitiveemployeeworkswiththisclienttounderstandthedetailsoftheirfundingneeds:•  Howmuchisthecompanylookingtoraise/investmentticket:€15m

•  FormofWinancing:minorityequity•  Sector:Automotive•  Geography:Germany,EuropeOncethisinformationisgatheredtheCognitiveemployeeinformsinreal-timetheclientofthenumberofrelevantinvestorswithintheCognitivenetworkwhocouldpotentiallybeinterestedinparticipatinginsuchatransaction.AsaWirststep,theCognitivedatabaseisWilteredaccordingtothe4maincriteriadescribedinthepreviousslidesandexpressedintheWiguretotheright.SubsequentadhocsearchesarethenusedtoreWinethatnumber,eitherupwardsordownwards.

Withasimpledatabasesearch,Cognitiveisabletoinformtheclientthatthereare72relevantinvestorswhohaveclearlyexpressedinterestininvesting€15mforaminoritystakeinanAutomotivecompanybasedinGermany.

CognitiveDatabase

TransactionStrategy CountryTransactionSizeSector

MinorityEquityMedium–€15m

Industrials-Automotive Germany

72Investors

Weillustratewithanexamplehowthecombinationofalltheabove-mentionedinformationallowsCognitivetomatchtheclientwiththerelevantsourceofcapital:

10.OTHERUSESOFTHECOGNITIVEDATABASE

16

Company

Inv.Fund1

Inv.Fund2

Inv.Fund3

Inv.Fund4

Inv.FundN

PortfolioCompany1

PortfolioCompany2

PortfolioCompany3

PortfolioCompany4

PortfolioCompanyN

PotentialJVwithPartnerClientSupplier

Fundswithportfoliosintherelevantsectorsandgeographiesforthecompany:

CognitiveworksprimarilyasaSellSideadvisor,meaningweworkwithcompanieslookingtoraisecapital,andguidethemtothemostrelevantsourceofcapitalfortheirproject.Thisbeingsaid,ourdatabaseoffersotherfunctionalitiesforcompanieslooking1)toacquireothercompaniesor2)toWindcommercialorJVpartners.ForacompanylookingforJVpartnersorclients,orforaninvestmentfundlookingforopportunities,wecanWilterourdatabaseandidentifysuchopportunitiesintheportfoliosofthefundsintherelevantsectorsandgeographies.Inaninvestmentuniverseofover4,000investorsandwithanaverageportfoliosizeof5companies,ournetworkinfrastructurecoversaround20,000companies.

•  CognitivecanassistanycompanylookingforJVpartners,clientsorsuppliersinagivencountry/sectortoWindrelevantmatches,aswellastoputthemindirectcontact.

•  Thedynamicsofsuchanexercisearesubstantiallydifferentfromalltheabove-mentionedSellSideprecisiontargeting,butisequallypowerfulandfast.

ANNEX.CCFSERVICES

17

•  PracticallyeveryeventinthelifeofacompanyhasaWinancialdimension,impactorconsequence.•  ThetablebelowgivessomeexamplesoftheworkwecarryoutandasampleoftheWinancialeventswehelpour

clientsaddress:

FinancialEvent Diagnose Design Deliver

Fundraising&Financing • FormalizeCorporateStrategy• ProWit&LossForecasts

• CashFlowForecasts• DesignFinancialInstrument

•  Investorcontacts• Negotiationandclosing

CorporateDisposal • VendorDueDiligence• P&LandBalanceSheetrisksandimpactsonprice

• Pricingstrategyandmechanism• Buyersearch


RealEstateDisposal • VendorDueDiligence• Documentation

•  Investorreturnsandpricing• Buyersearch


Acquisitions • Growthandacquisitionobjectives• Valuepropositionofbuyer

• Acquisitionandapproachstrategy• Shortlist

• Contactsandapproach• Negotiationandclosing

Mergers • Understandnatureofproposedtransaction• Calculateupsides&risks

• Negotiationstrategy• Acquisitionoptions

• Negotiationandclosing

Investment&BusinessCases • Targetreview • Solutiondesign • Execute• Negotiationandclosing

Restructurings • Natureofproblem• CashWlowforecasts

• Restructuringplan• Financialsolution

• Executeandrestructurebalancesheet• Negotiationandclosing

FinancingGrowth • Designmarketing&salesgrowthplan

• EstimateWinancingneeds:Capex,workingcapital,other

• DesignWinancialinstrument• Obtainfunding

OtherFinancialEvent • Understandnatureofproblem• Calculateimpact

• Designasolution• Calculateneedfornewmoney

• Execute

precision targeting document

Documents