William Blair Investment Banking Competition Slide Deck

13th Annual William Blair Investment Banking Case Competition
Paesano’s Products
Eric Bonelli | Max Steinbach | Will Vandeveer
1

Executive Summary Industry Analysis Company Overview Valuation Strategic Options Final Thoughts Appendix
Max Steinbach
Will Vandeveer
Eric Bonelli
Senior Finance Major at the Farmer School of
Business from Manhasset, NY
Senior Finance and Accounting Major at the
Farmer School of Business from Caramel, IN
Senior Finance and Economics Major at the
Farmer School of Business from Cincinnati, OH
Meet the Team
2

Executive
Summary
3

Executive Summary
Valuation Methods Output
Positioned for Growth Company Financials Recommendation
 Examining past transactions, we believe a
sale to a middle market financial sponsor
would optimize growth potential for
Paesano’s Products
 Potential financial sponsors include …
 Valuation analysis places
Paesano’s Products enterprise
value between $600mn –
$800mn
 2021E Revenue: $272,887mn
 2021E EBITDA: $63,431mn
 Paesano’s Products is a leader in
manufacturing personal and
household products gaining
momentum due to the pandemic
 Ideal business model for expansion
in North American markets
$0 $500 $1,000 $1,500
Comparables - 2020E Revenue
Comparables - 2020E Adj. EBITDA
Precedents - 2020E Revenue
Precedents - 2020E Adj. EBITDA
DCF - Exit Multiple
DCF - Perpituity Method
Leveraged Buyout
4
($ mn)

Industry
Analysis
5

6
Market Share & Major PlayersProducts and Services Segmentation
Major Market Segmentation
Source: IBIS World Soap & Cleaning Compound Manufacturing in the US
Industry Overview
23.50%
76.50%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Major Players Minor Players
19.10%
20.90%
21.10%
38.90%
0% 10% 20% 30% 40% 50%
Surface Active Agents
Commercial Soap and Detergents
Polishes and All other Sanitation
Groups
Households Soaps and Detergents
1.20%
9.70%
12.10%
14.80%
16.10%
19.50%
26.60%
0% 5% 10% 15% 20% 25% 30% 35%
Convenience Stores
Lodging Establishments
Health Care Prodivders
Food Service Establishemnts
Independent Retailers
Exports
Supermarkets and Mass Merchants
P&G Ecolab Other
Key Takeaways
 Notable Trends
 Products: natural/green ingredients
 Customers: US population growing at decreasing rate
 P&G, Ecolab lead segmented market
 Brand loyalty, product innovation
 Minor players: quicker to shelves, cheaper cost to produce
 International Competition

7
Industry Overview
Supply Chain AnalysisSignificant Industry Trends
Source: IBIS World Soap & Cleaning Compound Manufacturing in the US
COVID-19 Industry Impact
$39.1bn
Revenue
$2.4bn
Profit
6.1%
Profit Margin
Annual Growth Annual Growth Annual Growth
2015-2020 2020-2025 2015-2025
-1.7% 1.9%
2015-2020 2020-2025 2015-2025
-0.2% 1.1%
Annual Growth Annual Growth
2015-2020 2015-2025
-3.8%
Annual Growth Annual Growth
2015-2020 2015-2025
-0.7%
2015-2020 2020-2025 2015-2025
1.9% 1.7%
2015-2020 2020-2025 2015-2025
1.1% 1.8%
4,467
Businesses
$49,247
Employment
$3.2bn
Wages
 Rising future demand from downstream customers
 Current trough in demand due to low economic activity
 Increase in level of future cleaning supply inventory
 Increase healthcare sector demand
 Ex: P&G Q2 2020 Earnings Results
Raw Material Extractors
Chemical Manufacturing
Wholesalers
Grocers
Paesano’s
 Variable input prices on
multiple supply levels
 Upstream potential for
consolidation
 Price structure dependent
on buyer classification
1st Tier Buyers
2nd Tier Buyers
2nd Tier Suppliers
1st Tier Suppliers

8
External Drivers
Decrease in Disposable Income
 Industry manufactures luxury nonessentials goods
(perfume, cosmetics)
 As disposable income decreases by 1%, demand for
discretionary products decreases by 2% - Income
Effect
Increase in Number of Households
 US population projected to increase 3.8% by 2025
 Increased number of potential customers to
support long term growth
Increase in Trade Weighted Index
 An increase in TWI makes foreign manufactured goods
more affordable
 Strong foreign competition and low international
manufacturing costs
 Firm needs to be able to justify its prices
Porter’s Five Forces Model
Low barriers to entry
Many buyers result in low
bargaining bargaining power of
consumers
Many manufacturers producing
similar and cheaper products
result in high threat of substitute
Many small players make
industry competitiveness high
Many suppliers results in low
bargaining supplier power
Source: Statista, US Population Projections 2015-2060

Company
Overview
9

10
Company Overview
 Market-leading product developer, formulator, and
manufacturer of household, personal care, and
hospitality products
 Unparalleled innovation and R&D capabilities
 6 manufacturing facilities in North America
Customer Relationships
 Contract Manufacturing (CPG Firms)
 Customer Manufacturing (Brand Marketers)
 Guest Amenities (Hotels)
Industry Positioning
 Broad capabilities to meet diverse customer needs
 Disruptive, high growth brands
 Households wash their hands 75% more often than
2019 as result of COVID-19
Adjusted EBITDA Margin
Paesano’s Products Profile
21.0%
22.0%
23.0%
24.0%
25.0%
$20,000
$40,000
$60,000
$80,000
$100,000
2018 2019 2020 2021 2022 2023 2024 2025
Adjusted EBITDA Adjusted EBITDA Margin
Political Factor:
Uncertainty surrounding presidential
elections
PEST Analysis
Economic Factor:
 Tax Indicator
 Economic Growth Rates
 Industrial Market
Development
Technological Factor:
 R&D Performance
 Technological
improvements to increase
production
Social Factor:
 R&D and Human Resources
 Consumer Preferences
Source: Morbidity and Mortality Weekly Report, CDC, October 2020

11
Product Mix
 Households solution mix
 Leading North American manufacturer of
personal care products
 Provider and distributor of hospitality products
Competitive Advantages
 Low-cost manufacturing
 Integrated systems
 Full-Service solutions
 Diverse manufacturing capabilities
Service & Hospitality
Revenue Mix
Product Offerings
 Service is critical in hospitality business
 Highest percentage of production made in
American than any other supplier
$0
$75,000
$150,000
$225,000
$300,000
$375,000
2018 2019 2020 2021 2022 2023 2024 2025
Revenue Per Product
Household Personal Care Hospitality
57%
35%
8%
Household
Personal Care
Hospitality

12
Situation Analysis
STRENGTHS
WEAKNESSES
OPPORTUNITIES
THREATS
 High growth vs. sector
average
 Low product/service
concentration
 High revenue per employee
 Quick adaptability to meet
fast-moving demands
 Strong competition
 Large capital
requirements
 High fixed costs
associated with factories
 Hotels are switching
from small plastic
bottles to dispensers
 Raising demand for
organic/natural personal
care products
 Low Revenue growth
(2005-2015)
 Pandemic limiting
hospitality sector

13
Current Market Opportunities
 The pandemic is driving a permanent change in
demand for hygiene products
 Public authorities (CDC) are promoting regular use of
hand sanitizer
 18B personal care and beauty market fueled by high
growth
Key Growth Initiatives
Total Revenue Growth
Growth Positioning
Paesano Product’s vs Overall Sector
$237
$245
$258
$273
$284
2018A 2019A 2020E 2021E 2022E
 Increase awareness of hair and skin care product
offerings
 Expand licensing partnerships with leading hospitality
brands
 Initiatives in reducing fixed, material, and direct labor
costs at multiple facilities
 Pursue strategic acquisitions targeting companies with
strong manufacturing capabilities
8.2%
4.6%
(8.3%)
2.20%
4.30%
(16.4%)
-20%
-15%
-10%
-5%
0%
5%
10%
Household Personal Care Hospitality
Paesano Product's Overall Sector
Source: US Lodging Industry Overview, Valuation & Advisory

Valuation
Executive Summary Industry Analysis Company Overview Strategic Options Final Thoughts Appendix
14Valuation

Executive Summary Industry Analysis Company Overview Strategic Options Final Thoughts Appendix
15
Strong tailwinds and demand for Paesano’s
Products’ Industry will lead to higher
revenue growth rates over the next five years
Industry Trends
Cost of Sales
Expanding Hospitality Business
Gross Profit Margin
Revenue Growth
Capital Expenditures
Total revenue CAGR of 4.8% from 2020-
2025 based on strong industry trends and
growth in the Household, Personal Care, and
Hospitality product lines
Unique position to continue its strong
profitability with a gross profit margin of
42% from 2020-2025
Paesano’s hospitality products will continue their
rapid growth into the future as hospitality business
recovers from the pandemic
As Paesano’s Products continues to grow, we
assume the company will carry on becoming more
profitable, and lower its cost of sales to 57% of
total revenues
As Paesano’s Products matures, its capital
expenditures as a percentage of revenue will
decrease to 1.6% in order to sustain the business
Key Assumptions
Valuation

Executive Summary Industry Analysis Company Overview Final Thoughts Appendix
16Strategic Options
Valuation Overview
$0 $500 $1,000 $1,500
DCF - Exit Multiple
Leveraged Buyout
Valuation Summary - Football Field Analysis
10.5x EBITDA 14.0x EBITDA
$600Mn $800Mn
Valuation
($ mn)

17
Implied Valuation
Comparable Company Analysis
Total Comparable Company Analysis
Select Companies
Valuation Commentary
 The Comparable Companies were
determined by similar market size and
industry classification.
 The companies in Paesano’s Products
industry are moderately levered.

18
 The Precedent Transactions were
determined by similar market size and
industry classification
 The Primary Payment Type in Paesano’s
Products Industry is Cash transactions
Implied Valuation
Precedent Transactions Analysis

19
Discounted Cash Flow Analysis
Implied Valuation
Commentary
Sensitivity Analysis
 We concluded that Paesano’s Products had
a WACC of 6.5%
 Comparable unlevered betas were used to
calculate the systemic risk of Paesano’s
Products
 The EV/EBITDA method returns a
higher valuation due to Paesano’s Products
projected increasing profitability

Leverage Statistics Sensitivity Analysis
 Paesano’s Products would return an expected
IRR of 20.8% and a MOIC of 2.57x
 The company is a strong candidate for
acquisition due to its rapid growth
opportunities and strong performance history
20
Leveraged Buyout Analysis

Strategic
Options
21

Strategic Acquirers
Acquirer Description Metrics Reasoning
22
Kimberly-Clark is a global health
and hygiene company that
manufactures and provides
consumer products
TTM Revenue
$18,844bn
Market Cap
$52,924bn
Kimberly-Clark has had an appetite for acquisitions in
the valuation range of Paesano’s Products which places
Paesano’s Products as a target for consolidation
Colgate-Palmolive is a consumer
products company that markets
its products throughout the
world
TTM Revenue
$15,937bn
Market Cap
$68,857bn
Colgate-Palmolive is already a partner with Paesano’s
Products and could acquire Paesano’s Products in order
to vertically integrate their business
Edgewell Personal Care
Company operates as a personal
care company
TTM Revenue
$1,657bn
Market Cap
$1,988bn
As a competitor to Paesano’s Products, Edgewell may
want to acquire Paesano’s in order to benefit from
synergies, capture market share and continue their
aggressive M&A strategies
Estēe Lauder manufactures and
markets a wide range of skins
care, makeup, fragrance, and hair
care products
TTM Revenue
$14,294bn
Market Cap
$80,957bn
As a competitor to Paesano’s Products, Estēe Lauder will
want to acquire Paesano’s in order to benefit from
synergies, capture market share and continue their
aggressive M&A strategies
Proctor and Gamble manufactures
and markets consumer products in
countries throughout the world
TTM Revenue
$70,950bn
Market Cap
$359,4765bn
Proctor and Gamble would be able to vertically integrate
Paesano’s Products due to its existing partnership and
close geographic location

Strategic Acquirers
Acquirer Description Metrics Reasoning
Executive Summary Industry Analysis Company Overview Valuation Final Thoughts Appendix
23Strategic Options
USANA Health Sciences
develops, manufactures and
markets nutritional, personal care
and weigh management products
TTM Revenue
$1,095bn
Market Cap
$1,656bn
USANA Health Sciences may want to expand its
personal care business while taking its health focused
approach to the household care sector as well
The Clorox Company
manufactures, and markets
consumer products sold primarily
through grocery and other retail
stores
TTM Revenue
$6,721bn
Market Cap
$27,096bn
As a competitor to Paesano’s Products, Clorox has the
resources and motivation to horizontally integrate
Paesano’s in order to gain market share
E.L.F. Beauty Inc. operates as a
cosmetic company. The company
offers beauty products for eyes,
lips, and face
TTM Revenue
$287mn
Market Cap
$1,066bn
As a competitor to Paesano’s Products, E.L.F has the
resources and motivation to horizontally integrate
Paesano’s in order to gain market share
A global direct selling company
that distributes personal care
products and nutritional
supplements
TTM Revenue
$2,303bn
Market Cap
$2,657bn
With over 3 deals in the past two years, NU Skin may
look to continue its aggressive M&A by purchasing a
manufacturer for its personal care products in order to
vertically integrate
Johnson and Johnson
manufactures health care
products and provides related
services for the consumer,
pharmaceutical and medical
devices and diagnostic markets
TTM Revenue
$80,856bn
Market Cap
$389,920bn
Johnson and Johnson has had an appetite for
acquisitions in the valuation range of Paesano’s Products
which places Paesano’s Products as a target for
consolidation

Financial Sponsors
Sponsor ReasoningInvestment Criteria
Enterprise Value: $200 mm – $2 bn
EBITDA: > $25 mm
Berkshire Partners is a private equity firm that focuses on the industrials
and healthcare industries. They look for companies that can achieve a low-
cost position and have a strategy to lead their industry/market niche
EBITDA: > $5mm
Enterprise Value: $25 mm – $200mm
Equity Investments: $20 mm – $75mn
AUA Private Equity is an operationally-focused lower-middle market
investment firm with an expertise on consumer products and consumer
services. Named top 50 PE firms in 2019
American Securities focuses on investing in leading companies that are
growing their market share, operate in industries with strong long-term
demand, and have sustainable competitive advantages
Revenues: $200 mm – $2 bn
EBITDA: $50 mm – $250 mm
Equity: $75mm – $350mm
Enterprise Value: $150mm – $1.5bn
Court Square focuses on investing in companies with high-growth
potential in fragmented industries where consolidation can lead to
significant cost or competitive advantages
Nautic Partners seeks to help management teams drive value creation
through sales and earnings growth. They typically invest in companies in
the healthcare and industrials industries to leverage their deep sector
knowledge
EBITDA: $10mm – $75 mm
24Strategic Options

Financial Sponsors
Sponsor ReasoningInvestment Criteria
25Strategic Options
Revenue: < $500 mm
SPC already has a complimentary line of Personal Care, Beauty, OTC,
and Health & Wellness brands and products
Revenue: $25 mm – $300 mm
EBITDA: > $5mm
Mason Wells specializes in consumer-packaged goods, specifically in
Household, Healthcare and Personal Care Brands, as proven by their
eight investments in the sector
Marlin Equity Partners invests in companies with strong customer bases
and recurring revenue streams in fragmented industries in which
consolidation opportunities are present
Enterprise Value: $100mm – $1 bn
EBITDA: $20mm -– $100 mm
Wellspring Capital’s objective is to invest in companies that are well-
positioned to capitalize on changes and operate in the general industrial,
healthcare, packaging, and consumer/restaurant industries
Revenue: $1bn – $5bn
CVC has 43 investments in the consumer/retail sector all around the
world with a large stake in North America
EBITDA: $10mm – $2 bn

26
Market Commentary
M&A Market Volume & Value
Market Median EV/EBITDA vs Consumer Staples
 The market for M&A activity suffered a dramatic decline
early in the year but has bounced right back to normal levels
 Consumers Staples companies EV/EBITDA ratios have
grown with the market median
 The Consumer Staples M&A Market (B2C) has remained
stable as a percentage of all M&A activity
Consumer Staples Sector M&A Activity
M&A Market Overview
Source: Pitchbook N.A. M&A Report
Source: MergerMarket Global & Regional M&A Report 1Q - 3Q20

Final
Thoughts
27

Final Thoughts
Valuation Analysis Output
Strategic vs. Sponsor Final Recommendation
 Sale to a financial sponsor would offer optimal benefits
 Paesano’s Products strong management team is more likely
to be retained
 Paesano’s Product can continue to focus on researching and
developing their products
28
 Our final Recommendation is for Paesano’s Products to
pursue a sale with a financial sponsor that has
manufactory industry experience
 Implied Valuation Range $600mn-$800mn
$0 $500 $1,000 $1,500
DCF - Exit Multiple
Leveraged Buyout
($ mn)

Appendix
29

Executive Summary Industry Analysis Company Overview Valuation Strategic Options Final Thoughts
30
Pro Forma Statement of Income
Appendix

31
Pro Forma Segments and Growth

32
Pro Forma Balance Sheet

33
Pro Forma Working Capital Schedule

Weighted Average Cost of Capital
34

Comparable Company Analysis
35

36

37

38

39

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