Bryan Livingston and Paul Puri Capital Alliance

1. Avoiding Crucial Mistakes During a Transaction
Lessons learned “in the trenches”
Presented by Bryan Livingston and Paul Puri
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2. M&A International – The World’s Leading Mid-Cap
Investment Banking Organization
Worldwide Transactions Closed by MAI ( deal volume)
M&A International, Inc. offers the unparalleled resources of over
600 professionals in M&A advisory and investment banking
offices operating around the globe.
We seamlessly advise our clients on acquisitions, divestitures and
financing. In 25 years, M&A International Inc. has grown to be the
leading M&A advisory provider for mid-cap companies.
We combine local market knowledge with professional discipline
and sector expertise. Our industrial practice is strongly focused on
energy services, manufacturing and distribution worldwide.
About M&A International, Inc.
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3. Professionals
• Founded and chairs M&A International Inc.'s
Construction and Engineering Services Group
• Vice President, National Accounts Designtex
(Steelcase Inc.)
• MBA (George Washington University)
• BS (United States Naval Academy)
• Attended US Naval Nuclear Propulsion School
and operational prototype training after
graduation and commissioning
Bryan Livingston
CEO and Managing Director
Direct: 214.382.4464
bryan.livingston@cadallas.com
• Global Head of M&A International’s Energy
Investment Banking Group.
• MBA (Southern Methodist University)
• BS (Cornell University)
• Paul has active clients across oilfield service
and manufacturing sectors. He has unlocked
over half a billion dollars of liquidity to his
North American clients in sell-side
transactions.
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Paul Puri
CDO and Managing Director
Direct: 214.382.4492
paul.puri@cadallas.com
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4. Key Oilfield and Infrastructure Transactions
Our Credentials
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5. 5
Transition Planning – 1 to 2 years
Advice that generates $ Millions more at closing
Management Readiness
 Put the right management team in
place
 Invest in employees who can grow
the business
 Assure other stakeholders are
onboard
Financial Readiness
 Upgrade financial reporting
systems and internal controls
 Audited Financial Statements
 High quality bookkeeping and
accounting standards
 CFO with high credentials
 Taxes filed and paid
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3
Operational Readiness
 Deploy technology to give you
day-to-day insight into order
flow, WIP, invoices & payables
 Create competitive advantages
in the marketplace through
patents and product or service
uniqueness
 Diversify your client base to
avoid customer concentration
 Manage order flow and pricing
risk through longer term
customer contracts
 Understand your limits as an
entrepreneur
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6. Transition Planning – 1 to 2 years
Advice that generates $ Millions more at closing
 Put the right management team in place
 Empower that team to make the critical decisions
 Invest in employees who can grow the business
 Assure other stakeholders are onboard with the transaction
 Understand your limits as an entrepreneur
 Understand the risks of timing the transaction amidst highly
volatile commodity pricing cycles
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Management Readiness
Work yourself out of your Job
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7. 7
Transition Planning – 1 to 2 years
Advice that generates $ Millions more at closing
 Deploy technology to give you day-to-day insight into your
business, such as order flow, WIP, invoices & payables
 Create competitive advantages in the marketplace through
patents and product or service uniqueness
 Diversify your client base to avoid customer concentration
 Manage order flow and pricing risk through longer term
contracts
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Operational Readiness
Manage Risk & Invest in your Operations
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8. 8
Transition Planning – 1 to 2 years
Advice that generates $ Millions more at closing
 Upgrade financial reporting systems and internal controls
 Audited Financial Statements
 High quality bookkeeping and accounting standards
 CFO with high credentials
 Taxes filed and paid
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Financial Readiness
Get your Financial Systems in Order
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9. Proprietary Capabilities You Need from an
Investment Bank
 Personal & Industry Networks
 Deep International Contacts and
References
 Established closing record in Oilfield
Services and Manufacturing
 Private Equity relationships
throughout the energy industry
 Compelling Marketing
Materials
 Identifying Well-Suited &
Qualified Prospects
 Expert Interaction with
Prospects
 Skillful Negotiating of Key
Terms
 Facilitating a Smooth
Closing
VALUE ENHANCEMENTCONTACTS
 Seasoned M&A Veterans
 Operational Focus
 Results-oriented
 Power Negotiators
 Trustworthy
 Energy Services Specialist
PROFESSIONALS
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10. M&A Process – Maximizing Value and Fit
3 to 9 months
Negotiation
Interact with Buyers
Negotiate Letter of
Intent (LOI)
Solicit Offers
Seller Reporting
Narrow Buyer List
Acceptance of Offer
Closing
Due Diligence
Negotiate Definitive
Agreement
Close Transaction
Preparation
Company Research
Industry Research
Financial Analysis
Buyer Targeting &
Behavior Research
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11. 11
Mistakes that can cost you $ Millions at closing
Management Risk
 Entrepreneur owns all the client
relationships
 No seasoned, outside management
team that can run the business
 No clear business or growth strategy
over the next 3-4 years
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Financial Risk
 No formal accounting records
 Large family deductions
 No retained equity
 High debt
 Substantial exposure to
commodity price
 Inability to stand up to a
formal due diligence process
3 4 Business and Transaction Risk
 Substantial customer
concentration or order risk
 High employee turnover
 High dollar claims, such as
legal, IRS, or OSHA challenges
 Not understanding the unique
motivation of each buyer to
pursue an acquisition
2 Operational Risk
 Manual processes
 No competitive advantages, no
longer term client contracts
 No insight into day-to-day
order flow, WIP, inventory,
payables
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12. Some Understanding of Buyer Motivations
 Ability to act as a single-source supplier to larger customers operating across the various segments of the North
American energy industry
 Desire to commit significant financial resources to further develop and invest in operating infrastructure and
provide a strong platform for future expansion
 Secure improved access, service, and volume purchasing benefits from suppliers
 End market, product, service, and/or geographic diversification
 Diversification of clients
 Investment in new ideas and best-of-breed management teams and entrepreneurs
 Improved customer benefits through lower inventory investment or reduction of transaction costs
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13. Potential Transactions
• Recapitalization
Minority
Majority
Leveraged Dividend
• Strategic Sale
• Acquisition / Merger
Vertical Integration
Diversification
Consolidation
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14. Comments
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Tweet your takeaway from this educational session.
@MidlandEnrgExpo #MEECapAlliance
Tweet your takeaway from this educational
session.
@MidlandEnrgExpo #MEECapAlliance
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15. Our Success Over 3 Decades is Based on Attributes
Important to the Clients We Serve
Confidentiality Independence
Seamless cross-
border continuity
International
network
Extensive contacts
with direct access
to many relevant
decision makers in
the industry
Sector expertise in
key energy sectors,
including
manufacturing,
distribution and
services
Cross-border price premium
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16. Oil & Gas Infrastructure Industrial Space - Keys
to Sustained Success
Our confidential bidding process:
Generates premium prices
Gives you a choice among
attractive options
We know who is buying and why
We use a systematic process
and highly talented people
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17. MAI Oil & Gas Equipment & Supply
Chain Subsector Focus
 Pipeline valves and instrumentation
 Pipeline application castings
 Standard and specialty drilling tools
 High-precision, ultra-hard drilling and
refining tools
 Transportation equipment
manufacturing
 Tool and die equipment
 Refinery specialty parts and equipment
 Fabrication
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18. MAI Oil & Gas Infrastructure Services Subsector
Focus
 Site preparation
 Drilling and workover
 Equipment rentals
 Offshore and logistical support
 Flow back
 Hydraulic fracturing
 Pipeline and drilling
measurement
 Pipeline construction, services
and maintenance
 Water hauling
 Wireline
 Perforation
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19. Enhancing the Price Over the Initial Offer –
Five Examples ($Million)
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20. Minority Recapitalization
PE investment which provides a minority (less than 50%) equity interest
Key Elements
 Finance growth
 Provide partial liquidity for a business owner’s estate
 Recapitalization gives shareholders a partner that is willing to fund growth with the common
objective of creating significant future value
 Most private equity firms invest with a 5-7 year investment horizon
 Continuity of key management team is critical
 Leaves daily operating control (and usually voting control) in the hands of present management
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21. Majority Recapitalization
PE investment which provides a majority (more than 50%) equity interest
Key Elements
 Same elements as minority recapitalization except that voting control passes to PE
 Recapitalization includes leveraging of company
 Sellers typically retain 10% – 40% equity
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22. Leverage & Dividend
Refinance and distribute proceeds to shareholders
Key Elements
 Provides liquidity to shareholders while retaining 100% equity interest
 Tax considerations based upon corporate form
 Attractive credit markets
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23. Strategic Sale
Acquisition of all or substantially all of the company
Key Elements
 Synergies
 Consolidation of a competitor
 Leveraging intellectual property or strong market position
 Time to market new/competitive product/service usually a key factor
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24. Acquisition / Merger
Acquire or merge with similar company with different characteristics
Key Elements
 Opportunity for increased scale / valuation
 Potential for margin enhancement
 Probably defers sale transaction given time needed for integration
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