MSC Global Healthcare Markets Group_2011

8/3/2019 MSC Global Healthcare Markets Group_2011

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Global Healthcare Markets Group

CONFIDENTIAL


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ConfidentialGlobal Healthcare Markets Group

I. Madison Street Capital Overview

II. Transaction Process Overview

III. Madison Street Capital Deal Team

Table of Contents

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Madison Street Capital Overview

Madison Street Capital, LLC, (MSC) is an international investment banking firm thatprovides corporate financial advisory services, merger and acquisition expertise,financial opinions, and valuation services to publicly and privately held businesses.

Investment banking services in North America are provided through MSC-BD, LLC, aFINRA registered broker dealer (www.finra.org) and which is also a member of theSecurities Investor Protection Corporation (SIPC: www.sipc.org).

The Global Healthcare Markets Group has worked with healthcare and pharmaceuticalcompanies around the world on engagements ranging from M&A transactions, fairnessopinions, private placements, valuation, and ESOP advisory

MSCs professionals have represented dozens of boards, special committees, public

companies, and private business owners on a broad range of financial matters

Current in-house deal count of more than 100 deals under exclusive contract (70%financing and 30% M&A)

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Madison Street Capital Expertise

MSC is a unique blend of independent valuation services, investment banking offerings, andseasoned professionals that intersect to provide a comprehensive range of professional

financial services to maximize value for businesses and their shareholders

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Investment Banking

Mergers & Acquisitions

Capital Raising Private Placements Corporate Finance Advisory

Financial Restructuring

ESOP Advisory

Independent Valuation Services

Fairness and Solvency Opinions

Financial Reporting Compliance

Tax Compliance

Portfolio Valuation

Litigation Support

Seasoned Professionals

Unparalleled Leadership

Decades of Experience

National Footprint

Highest level of Professional

Standards

Dedicated Healthcare Practice

Highly Experience Professionals

Expertise in a Broad Arrays ofthe Healthcare Industry

Comprehensive Resources

Extensive Exposure to Capital

Market


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Unique Appreciation for the Middle Market

Management is a more crucial variable

More room for creativity with growthopportunities (storytelling)

More granular due diligence requirements

Wider range of potential valuation outcomes

Larger number of potential participants inprocess

Business is often not a must have for any

single investor

Transaction agreements are highly customized

Process can be taxing on limited managementresources

Must make room in the process for investors to get to know management,sometimes even before submission of first round bids

More time invested in pre-launch phase of process

Requires anticipation of potential issues to avoid slippage in timetable andunwinding of competitive tension

Process matters

Requires experience to narrow the field and to interpret first round bids

Need to walk a fine line between drawing investors into the process and conveyingstrength at the same time

Contract negotiations cannot be divorced from the rest of the process

Advisor must be prepared to carry a significant load

GREATER SCOPE FOR ADVISOR TO ADD VALUE. NEED FOR SPECIALIZED SKILLS.

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Sound Strategic Advice

MSC differentiates itself by leveraging our experience to provide sound strategic advice ateach of the critical junctures in the Transaction process

Dedication toMiddle Market

M&A / Cap Raise

Superior SeniorLevel Attention atEach Stage of the

Process

UnparalleledAttention to Detail

Outstanding

Negotiation Skills

InstitutionalKnowledge ofStrategic and

Financial Buyers

Critical Junctures in the Front-End Marketing Process

Identifying timing to initiate a process Crafting the appropriate sale process Identifying potential strategic and financial partners Conveying the story and opportunities

Deciphering initial indications

Assembling a competitive group of investors Showcasing the Company and management to

investors

Critical Junctures in the Back-End Process

Fully understanding all final proposals to develop atrue comparison between bids

Establishing the right next steps

Determining the most advantageous time tonegotiate with potential investors

Developing counter proposal(s) and the best scriptwith which to deliver them

Craft a process to maintain leverage through closing

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Specialized HEALTHCARE Investment Banking Advisory Services

PRIVATE EQUITY: The team has extensive relationships and deal structure negotiationexperience for both controlled and non-controlled private equity investments relative to healthcare entities

VENTURE CAPITAL: The firm has extensive relationships with Healthcare venture capital firmsfocusing on the specialized needs of medical device and healthcare services companies

MEZZANINE DEBT: The firm has infinite knowledge relative to mezzanine debt including deal

structure relative to providing flexible financing structures align with strategic and growth initiatives relativeto healthcare medical device companies. Mezzanine debt can also be a critical financing component in theacquisition of other medical device and healthcare companies

HEALTHCARE REITS: The team has extensive experience relative to sale/lease back transactionsand construction financing and construction buy out structures for new and existing healthcare properties

TECHNOLOGY LEASING/PARTNERSHIPS: The team has participated in technologylease financing arrangements greater than $100 MM relative to the implementation and utilization ofancillary and surgical medical devices for hospitals and outpatient surgery centers

PHYSICIAN/HOSPITAL JOINT VENTURES: The HS&C Global Healthcare MarketsGroup has extensive experience and knowledge regarding joint venture agreements with physicians andhospitals including the development of the Nebraska Orthopedic Hospital

The team has exceptional knowledge of valuation implications based on extensive knowledge of healthcare

financials including Medicare/Medicaid reimbursement for both In-Patient and Out-Patient procedures,

managed care reimbursement issues, professional versus technical fee issues, and Stark I & II implications.

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Representative Healthcare and Pharmaceutical Clients

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Representative Healthcare and Pharmaceutical Clients

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Private equity, hedge funds, venture capital and growth capital investor database

Heavily relied on by most bulge bracket banks; detailed information on companies and

transactions

Provides real-time pricing, data, history, news, analytics and research for globalfinancial markets

Markets covered include government and corporate bonds, mortgage, money-market, indices,currency, commodities and equities

Exhaustive database complete with information about industries, companies, and keydecision makers

Leading provider of M&A deal information, including transaction value, deal terms

and multiples

M&A intelligence service reporting forward-looking origination and deal flowopportunities integrated with a comprehensive deals

Comprehensive source of business information including research, statistics, industryreports and forecasts
http://www.ibisworld.com/default.aspxhttp://images.google.com/imgres?imgurl=http://www.bvmarketdata.com/images/logoMergerstat.gif&imgrefurl=http://www.bvmarketdata.com/defaulttextonly.asp?f=CPS%20Faqs&h=50&w=216&sz=5&hl=en&start=15&um=1&tbnid=Ykh2DAgtl3-KFM:&tbnh=25&tbnw=107&prev=http://images.google.com/imgres?imgurl=http://web.uflib.ufl.edu/cm/business/images/hoovers_logo.gif&imgrefurl=http://web.uflib.ufl.edu/cm/business/subjects/companie.htm&h=70&w=140&sz=3&hl=en&start=13&um=1&tbnid=W6SvsLOINmRw-M:&tbnh=47&tbnw=93&prev=http://images.google.com/imgres?imgurl=http://www.c4ads.org/files/logo_bloomberg.gif&imgrefurl=http://www.c4ads.org/media/091206/bloomberg?PHPSESSID=1545febd6f1be27a7b01531937d0&h=49&w=200&sz=5&hl=en&start=7&um=1&tbnid=kgXDNrPfuvVZGM:&tbnh=25&tbnw=104&prev=http://images.google.com/imgres?imgurl=http://www.gammainvestors.com/logos/capitaliq.jpg&imgrefurl=http://www.gammainvestors.com/funded_companies.asp&h=45&w=162&sz=4&hl=en&start=17&tbnid=Z9eRchjhgFVvEM:&tbnh=27&tbnw=98&prev=


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Healthcare Advisory Board

The company has a team of more than 900 professionals dedicated to examining critical

issues related to every sector of the healthcare market

Healthcare M&A Monthly

The Dealmakers FormRecent Healthcare M&A Deals

The Healthcare M&A Information Service

Healthcare M&A data by sector

Healthcare Corporate Finance NewsVenture Capital Financing

SG2 The Edge

Provides expert-led resources, tools and education to maximize clinical effectiveness


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Table of Contents

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Ways an Advisor Adds Value

Serves as an intermediary in negotiations

Insulates the owners and management from the need to make immediate decisions

Ability to act as the bad cop and not sour the buyer on the transaction or the owners and management

team

Provides the owner the ability to maintain an appropriate distance from the sales process

Leverages industry and financing experience

Prepares a company for the transaction process and can provide suggestions on how to enhance valuein the eyes of bidders

Utilizes industry contacts and pre-existing relationships to target investors most likely to meetshareholder objectives

Understands the implications of different deal terms and how to guard clients against disadvantageousconditions

Allows the management team to concentrate on the day-to-day issues of running the business

Avoid neglecting customers, vendors, and employees

It is critical that the business continues to perform well during the transaction process

Heightens the sophistication level of the transaction and maximizes potential value

Investors assume they can acquire stakes in companies that lack representation at bargain prices

Representation translates directly into more advantageous transaction terms

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Unrealistic pricing expectations Historical results or projections do not support

valuation

Negative surprises uncovered during due

diligence Issues uncovered regarding sales, profits, customers,

employees, environmental

Inability of parties to agree on representationsand warranties/indemnification language inpurchase contract

Inability of buyer to finance the purchase Seller often has to be willing to offer some type of

financing or earn-out arrangement

Deterioration of financial performance duringthe marketing process

Common Reasons Deals Fail

Critical Issues: MSC Solutions:

Comprehensive analysis of financials todetermine potential synergistic benefits for

strategic buyers & financial buyers

Thoroughly discuss expectations withmanagement as it relates to market standard

deal terms, and gain an in-depth

understanding of shareholder objectives Perform in-depth seller due diligence to

identify problematic trends/issues, and present

rationale or strategy for favorable resolution

of issue

Require potential buyers to document

proposed sources and uses well in advance ofthe purchase agreement, and compare to

current availability in the credit markets

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Valuation Methodologies

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In order to provide a more accurate estimate of the enterprise value for a company, multiple

valuation methodologies are employed

ComparableCompanies

(Public Comps)

ComparableTransactions

(M&A Comps)

DiscountedCash Flow

(DCF)

LeveragedBuyout Analysis(LBO)

Description: Identify the key publicly-traded comparable companies for the company and calculate andapply multiples of Revenues, EBITDA, and EBIT.Comment: A widely accepted valuation technique that provides current, market-based valuationinformation. Multiples are adjusted to reflect a premium for control and discounted for liquidity and size.

Description: Identify key comparable transactions for the company, and where possible, calculate andapply multiples of Revenues, EBITDA and EBIT.Comment: A popular valuation technique for measuring market valuations on a control basis. Precedent

multiples are dependent on market conditions at the time of the transaction.

Description: Model the free cash flows resulting from the companys financial projections and discount

using an appropriate cost of capital.Comment: Arguably the most sophisticated valuation technique, providing real insight into divisional

valuation drivers. Highly sensitive to numerous key assumptions.

Description: Using the same projections as the DCF, apply a suitable leveraged capital structure and solve

the valuation using a 2040% target equity rate of return.Comment: A useful alternative perspective since it implies a valuation level at which a private equityinvestor would typically be prepared to bid for the company.


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Comparison of Buyer Types

The two primary types of acquirers are strategic and financial buyers

Each set of buyers typically evaluates an acquisition based on different criteria and goals

FINANCIAL BUYERS (Private Equity Groups)

STRATEGIC BUYERS

Typically public or private corporationscurrently involved in similar or complementarybusiness line

Places a greater emphasis on identifying andrealizing potential revenue and cost synergies

Rationale for acquisition more strategic innature (i.e. reducing competition, enter newgeographic markets, etc.)

Typically concerned with generating long-termvalue from acquisition and effectively

integrating the target into the buyers existingoperations

Higher valuation could be supported by therealization of synergies

Does not have a similar business inexisting investment portfolio

Seeks entry into an attractive market withpotential for growth and definable exitstrategy

Acquisition can serve to diversify

investment portfolio and create aplatform for future acquisitions in thesame space

Identification of opportunities to createvalue through a strategic partnership

Has a similar or complementary businessin existing portfolio of investments

Acquisition drivers are typically similar tothose of strategic buyers, but additionallydriven by the need to put raised capital towork and grow investments before fundlife expires

Often an ideal buyer as they havefinancial resources of private equitybacking and strategic rationale to supporta favorable purchase price

Raises capital in funds from various sources to invest in businesses with the expectation ofexiting within a relatively short time period (typically five to seven years) to achieve atargeted rate of return for investors (generally 20% to 25%)

ADD-ON PLATFORM

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Characteristics of a Successful Partner/Investor

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SUCCESSFUL

TRANSACTIONS

Successful transactions are the result of pairing the right partner with the client; MSCsexperience lends to the following characteristics of the right partner:


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Assessing Deal Structure and Options

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Number of transactions completed Integration success of previous transactions

Integration planning effort Marketing Financing relationships Credit approval process of financing source Financing structure of current operations

Equity available

Returns to equity participants Deal with the decision makers who can allocate capital Strong strategic fitcore business:

Strategic logic: component, module, system Geographic reach; low cost sourcing opportunity Capacity needs Capable of identifying and implementing process improvements

Capable of bringing engineering and design improvements Focused purchasing effort could generate material cost reduction Customer diversification


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Table of Contents

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Madison Street Capital Transaction Team

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Barry Petersen

Senior Managing Director

Mr. Petersen is Senior Managing Director at Madison Street Capital where he headsthe Capital Markets Group. His investment banking experience is diverse, coveringM&A advisory, corporate finance, institutional debt and equity placements includingall hybrids, and significant out-of-court and in-court restructuring transactions. Hissignificant depth of experience includes oil and gas sectors, alternative energy,manufacturing, financial services, and business services.

Previously, Mr. Petersen served as Managing Director at Madison Street Capital, andas Vice President with Dresner Partners. He began work completing acquisitionsfor the Loews Corporation in the financial services sector for CNA Insurance.

Mr. Petersen also has significant capital markets trading experience includingmanaging an institutional derivatives desk, and as principal of a debt futuresarbitrage desk. He has international trade experience as well, having worked inmanagement for the U.S. subsidiary of the oldest Japanese trading company, Okaya,

where he was involved directly in their investment in U.S. based manufacturingassets as well as cross-border trade and investment.

Mr. Petersen received a B.A. in history from Knox College and an M.B.A. fromNorthwestern University's J.L. Kellogg Graduate School of Management. He holdsSeries 7, 66, 79 and Series 24 Principal securities licenses.


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Karl D'Cunha

Senior Managing Director

Mr. D'Cunha is a Senior Managing Director at Madison Street Capital, where heoversees the firms services geared toward public companies, large privatecompanies, and asset management firms. The range of services include M&Aadvisory, capital raising, fairness and solvency opinions, portfolio valuation, financialreporting valuation, and structured finance advisory services. Mr. DCunha hasbroad professional experience with more than 13 years in the financial servicesindustry. He was previously an audit manager at Ernst & Young, LLP andPricewaterhouseCoopers, LLP with eight years of experience in the InvestmentManagement Industry Group.

Mr. D'Cunha holds a B.A. in Finance and Economics from The University ofWestern Ontario and a Graduate Diploma in Accounting from McGill University inToronto. He is a Chartered Accountant, a Level III candidate in the CharteredFinancial Analyst program, and is registered with FINRA as a General SecuritiesRepresentative (Series 7) and an Investment Banking Representative (Series 79). Mr.DCunha is a member of New York Hedge Fund Roundtable, Hedge Fund

Association, Canadian Institute of Chartered Accountants, CFA Society of Chicago,CFA Institute, Association of Chartered Accountants in the U.S., Appraisal Issues

Task Force, and American MENSA, Ltd.


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Dipesh PatelSenior Vice President

Dipesh Patel a Senior Vice President at Madison Street Capital. Mr. Patel helps tomanage numerous sell and buy-side M&A mandates, private debt and equityplacements, as well as financial restructuring transactions. In addition, he overseesthe training of analysts and associates. Mr. Patel concentrates his time onassignments covering oil and gas, alternative energy, financial services, lodging andgaming, and transportation and logistics.

Previously, Mr. Patel served as a Vice President at Madison Street Capital. Mr. Patelbegan his career at Zurich Financial Services, a global insurance company. AtZurich, Mr. Patels last role was to determine credit counterparty risk, whichincluded analyzing both publicly traded and privately held clients involved in M&Aand special situations.

Mr. Patel was also responsible for updating senior management on fundamentalchanges to industries of major exposure and interest, primarily oil and gas, and

construction. His previous engagements at Zurich included private equity co-investments, corporate/ product development, and mentoring new analysts.

Mr. Patel holds a B.A. honors degree from the University of London and an M.S.from Cass Business School in London from which he graduated with Distinctionand concentrated in capital and financial management. He holds Series 7, 63, and79 licenses.

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Brian GorskiVice President

Mr. Gorski is a Vice President with Madison Street Capital focusing on corporatefinance and M&A advisory services. Mr. Gorski has extensive experience in capitalraising assignments including private placements of debt and equity, venturefinancings and institutional debt and equity raisings. He has worked closely withexecutive management teams and boards of directors of both publicly traded andprivately held companies, advising on transaction structure, capital structure, andstrategic alternatives. Prior to joining Madison Street Capital, Mr. Gorski workedfor Donnelly Penman and Partners, a Detroit-based investment banking firm. AtDonnelly Penman and Partners Mr. Gorski rendered sell-side, valuation and capitalraising services for publicly traded and privately held clients in the automotive,manufacturing and financial services industries.

Mr. Gorski graduated from Miami University, in Oxford, Ohio with a BachelorsDegree in Finance and a minor in Latin America Studies and holds Series 7 andSeries 63 Registered Representative licenses.

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Brian GorskiVice President

Mr. Gorski is a Vice President with Madison Street Capital focusing on corporatefinance and M&A advisory services. Mr. Gorski has extensive experience in capitalraising assignments including private placements of debt and equity, venturefinancings and institutional debt and equity raisings. He has worked closely withexecutive management teams and boards of directors of both publicly traded andprivately held companies, advising on transaction structure, capital structure, andstrategic alternatives. Prior to joining Madison Street Capital, Mr. Gorski workedfor Donnelly Penman and Partners, a Detroit-based investment banking firm. AtDonnelly Penman and Partners Mr. Gorski rendered sell-side, valuation and capitalraising services for publicly traded and privately held clients in the automotive,manufacturing and financial services industries.

Mr. Gorski graduated from Miami University, in Oxford, Ohio with a BachelorsDegree in Finance and a minor in Latin America Studies and holds Series 7 andSeries 63 Registered Representative licenses.

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Darcy BonnerAnalyst

Prior to joining the firm, Mr. Bonner worked with a sector of the U.S. SmallBusiness Administration in which he helped consult aspiring entrepreneurs andsmall business owners. He also assisted in weekly workshops that discussed varioustopics such as business plans, marketing, selling, and financial fundamentals. Mr.Bonner also volunteered his time within the financial sector at Bethel New Life. Inthis role, he assisted in weekly classes that taught low-income families theimportance of money management and directed a small business workshop.

Mr. Bonner graduated from Union College in upstate New York with a BachelorsDegree in Economics. During his time at Union, he also conducted a 25-weekanalysis on India and China's economy.

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Maria Ika ErwinaAnalyst

Prior to joining Madison Street Capital, Ms. Erwina was an Analyst for Attucks Asset Management, LLC, an investment advisor that specializes in creatingmanager-of-managers portfolios. She was responsible for conducting managerresearch analytics, generatingclients performance reporting, and constructing andevaluating investment structure design. Ms. Erwina also oversaw the companysresponse to Request for Proposals from potential corporate and public institutionalinvestors. Ms. Erwina began her career as a Senior Market Research Analyst for alarge management consulting firm.

Ms. Erwina holds a Bachelors Degree in Mathematics from Beloit College.

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MSC Global Healthcare Markets Group_2011

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