private equity firm.ppt

,Chicago,Illinois New Delhi,India ChangAn,China,ConfidentialMarch 30,2011,Table of Contents,Private Equity OverviewPfingsten Partners,L.L.CHow Does Private Equity Work?Case StudiesPreparing for a Career in Private Equity,Private Equity Overview,Private Equity Overview,Public Equities(Stocks)Return Expectations:9%,Public Fixed Income(Bonds)Return Expectations:6%,AlternativesReturn Expectations:15%to 20%,Where does Private Equity fit in an asset allocation model?,Private EquityHedge FundsDistressed Debt,GovernmentCorporate,DomesticInternationalEmerging Markets,CommoditiesNatural ResourcesReal Estate,Private Equity Overview,Asset AllocationModel B,$60(9%)=$5.4,Alternatives,Stocks,Bonds,Asset AllocationModel A,30(6%)=1.8,10(20%)=2.0,$50(9%)=$4.5,20(6%)=1.2,30(20%)=6.0,$100$9.2(9.2%),$100$11.7(11.7%),($in millions),Private Equity Overview,Private Equity is part of the alternative asset classPrivate Equity firms make and manage investments in private companies,What is Private Equity?,Private Equity Overview,Industry segmentsTransaction sizeGeographyInvestment stageType of transactionLevel of economic or legal control,The Private Equity industry uses a wide variety of investment strategies,Private Equity transactions havecommon investment characteristics,Privately negotiated transactionsLong-term,illiquid investmentsPartnership with managementActive board-level control or influence,LiquidateInvestment,Manage Investment Portfolio,Generate Investment Opportunities and Process Transactions,Private Equity Overview,What is the Private Equity fund cycle?,Raise Capital,1 to 2 years,10 to 13 years,Private Equity Overview,How big is the U.S.Private Equitymarket?,Over$2.0 trillion in capital commitmentsOver 3,000 firms in the U.S.,What are the marketsegments in Private Equity?,Sources:World Federation of Exchanges and Dow Jones Private Equity Analyst Galantes Venture Capital and Private Equity Directory,Buyouts and Mezzanine70%Venture Capital30%,How big is the U.S.public equitymarket?,Over$16.7 trillion market value as of November 30,2010Approximately 5,000 listed domestic companies,Source:Dow Jones Private Equity Analyst,Market SourceShare(est.)Public and Private Pension Funds40%Financial Institutions20%Fund of Funds15%High Net Worth Individuals and Families10%Endowment Funds and Foundations10%Other(Governments,Corporations,GPs etc.)5%100%,Private Equity Overview,Who provides the capital for Private Equity?,Private Equity Overview,Who makes Private Equity Investments?,Fund Management FirmsHigh Net Worth Individuals and FamiliesCorporationsEndowmentsFoundationsFund of Funds ManagersGovernment EntitiesBanksNon-bank Financial InstitutionsInvestment BanksInsurance Companies,Investment Professionals at:,Private Equity Overview,Source:Bain&Company Global Private Equity Report 2010,Where is Private Equity capital invested?,Global Private Equity Investments(1998 through 2009),What are the Net Return expectations?,Private Equity Overview,(1)Net Returns:pre-tax compounded returns(compounded monthly)net of all fees,expenses and carried interest(2)Source:Limited Partners of Pfingsten Partners,L.L.C.(3)Source:ICMA Retirement Corporation(4)Source:Ibbotson Associates,Buyouts15%to 18%Mezzanine10%to 15%Venture Capital18%to 22%Public Equity 9%AAA Corporate Bonds 6%,(1),(2),(2),(2),(3),(4),Private Equity Overview,Current Issues and Trends,Capital commitment overhangLP focus on value creation driversPrivate equity shakeoutTransparency(FASB 157“Fair Value”)Not as private as it used to bePress coverage of mega buyoutsCongressional hearingsMandatory SEC registration in 2011Tax issuesCapital gainsCarried interestIndustry news lettersPrivate Equity published by Dow JonesBuyout published by Thomson Financial,Pfingsten Partners,L.L.C,Create a firm combining operating and financial expertiseInvest in middle market manufacturing,distribution and business service companiesBuild value largely through operational improvements,professional management practices,global capabilities and profitable business growth versus financial engineering,Pfingsten Partners,L.L.C.,Founded in 1989 to:,Chicago,Illinois,New Delhi,India,ChangAn,China,Pfingsten Partners,L.L.C.,Operational CapabilitiesOperating professionals represent approximately half of the professional staffContinuous improvement training programsBest practices forumsOperating Executives benchGlobal CapabilitiesOffices in ChangAn,China and New Delhi,IndiaOver 50 direct factory relationships in AsiaMarket entry servicesFunctional support servicesMultiple international add-on acquisitionsConservative Capital StructuresMinimum 50%equity in the capital structure of each platform investment,Pfingsten Partners,L.L.C.,Thomas S.BagleyFounder and Senior Managing Director,John H.UnderwoodSenior Managing Director,Alex E.GregorVice President,Matthew P.SchloopVice President,Micah K.WickersheimAssociate,Aaron D.Habriga Analyst,CORPORATE FINANCE,BUSINESS DEVELOPMENT,ADMINISTRATION,OPERATIONS,Phil D.BronsteatterVice President,Patrick A.RileyAnalyst,Robert A.GladdenVice President,Scott A.FineganManaging Director,James J.NortonSenior Managing Director,Jonathan E.LeimanSr.Vice President,Jeffrey A.CoteCFO,Andrew W.PetriController,Lori A.CunninghamVice President,Denio R.BolzanManaging Director,John J.StarcevichManaging Director,Lawrence E.TaylorVice President HR,Brenda Lee LallyVice President HR,David H.JohnstonVice President,John W.MattheiVice President HR,Barbara P.FuzesiOperational Analyst,Craig J.TompkinsVice President,Jennifer S.ChristensenAssociate,Nick R.JohanssonAnalyst,Tina M.TromiczakVice President,Norma L.CanalesOffice Manager,Pfingsten Partners,L.L.C.,Portfolio Company FacilitiesCurrent:Netherlands,Germany,England,Poland,Spain,China,CanadaFormer:Taiwan,South AmericaOfficesChangAn,China(22 people)New Delhi,India(3 people),Zhuhai,China,New Delhi,India,ChangAn,China,Global Facilities,Pfingsten Partners,L.L.C.,Product SourcingProduct identification and specificationSupplier identification and qualificationEngineering support for new product developmentQuality assurance and controlLogistics and shippingMarket EntryMarket research and competitive analysisIncubation capability for sales,marketing,engineering,administration,manufacturing and/or distributionFunctional SupportEngineering,sales and marketingAdd-on acquisitions,Global Services,Pfingsten Partners,L.L.C.,Minimum 50%equity in the capital structure of each platform companyMaximizes operational flexibilityProvides capacity to weather economic downturns and competitive threats Increases our ability to close transactionsPfingsten has never failed to close a transaction due to financing,Pfingsten Partners,L.L.C.,$525.0 million,($millions),($millions),Composition of Fund IV Investors,FUND IV,FUND III,FUND II,Pfingsten Partners,L.L.C.,FUND I,1991-1999,1997-2006,2004-Present,$26.3 Million,$100.0 Million,$285.0 Million,6 Platforms9 Add-ons,4 Platforms20 Add-ons,12 Platforms17 Add-ons,All portfoliocompanies exited,Actively seekingadd-on investments,Fund Size,InvestmentActivity,Status,All portfoliocompanies exited,2009-Present,$525.0 Million,7 Platforms,Actively seekingplatform investments,Investment History,Pfingsten Partners,L.L.C.,Deliver a Net IRR equal to or greater than 20%and a Net Cash Multiple equal to or greater than 2.0 times to limited partnersComplete all initial platform company investments within the Funds five and one half year investment periodBuild value primarily through operational improvements,professional management practices,global capabilities and profitable business growthAchieve liquidity for each platform company investment,on average,within four to seven yearsOnly close investments that meet the Funds stated investment criteria Communicate actively with limited partners,Performance Standards,Global manufacturer of vapor recovery units and replacement parts and provider of related field and emissions testing services for the oil production,biogas,and industrial markets.Acquired June 2009.www.hy-,Pfingsten Partners,L.L.C.,Global manufacturer of commercial and industrial food processing equipment and parts for the meat,poultry,fish,vegetable,fruit,bakery,confectionery,snack,and dairy markets.Acquired December 2009.,Leading manufacturer and distributor of light towing products,including trailer hitches,ball mounts,electrical products,and other accessories.Acquired December 2010.,National independent service and equipment provider for mission critical power equipment offering a full range of preventative,remedial and emergency maintenance services for uninterruptible power supplies.Acquired January 2011.,Leading supplier of high-performance wire,cable and connectors used in harsh industrial environments.Acquired January 2011.,Global manufacturer and national service provider of security,safety and asset protection products.Acquired September 2010.,Global designer,manufacturer and distributor of playground and recreational products and site amenity solutions for a variety of end markets.Acquired March 2011.,Fund IV Platform Investments,Global manufacturer and distributor of parts and accessories for the gaming,amusement,vending and industrial markets.Acquired June 2004.,Distributor of replacement parts and related supplies for the foodservice equipment market.Acquired April 2006.Divested November 2010.,Pfingsten Partners,L.L.C.,Full service marketing firm providing customized sports and entertainment programs,sports travel packages and event tickets to corporate and retail clients.Acquired January 2006.,Global manufacturer of custom engineered interconnect solutions for the medical device,test and instrumentation,and aerospace markets.Acquired June 2006.Divested June 2010.,Manufacturer of pressure sensitive prescription labels for the U.S.retail pharmacy market.Acquired June 2004.Divested July 2006.,Global manufacturer and distributor of electrical power conditioning equipment for the medical,retail point-of-sale,industrial,and other markets.Acquired September 2006.,Manufacturer of closet and home organization solutions for the residential construction and remodeling markets Acquired March 2007.,Designer and manufacturer of upscale casual outdoor furniture for the specialty retail and commercial markets.Acquired October 2007.,Global manufacturer of agricultural implements and tractor replacement parts for farm,ranch,and related markets.Acquired June 2008.Divested August 2010.,Manufacturer of custom-engineered,metal enclosed bus duct solutions for the power generation,petrochemical,commercial and industrial markets.Acquired September 2008.,National distributor of parts and components and provider of related repair services for aeroderivative gas turbine engines used in the power generation,industrial,marine propulsion,and oil and gas markets.Acquired December 2008.,Full service provider of party-neutral,outsourced settlement administration services for the healthcare market.Acquired December 2008.,Fund III Platform Investments,Pfingsten Partners,L.L.C.,Business-to-business media company serving the financial services,art,and industrial markets.Acquired April 1998.Divested November 2006.,Manufacturer of kitchen and bathroom cabinetry for the new construction and remodeling markets.Acquired June 1998.Divested October 2003.,Distributor of automotive,electronic,entertainment and general merchandise products to travel centers,car washes,mass merchants,convenience stores,and other related channels.Acquired May 1999.Divested May 2004.,Catalog and internet distributor of automotive aftermarket products for specialty vehicles including Jeep,Porsche,Mercedes,and Toyota truck.Acquired April 2000.Divested February 2006.,Publisher of recreational vehicle park and campground directories.Acquired January 1991.Divested May 1994.,Distributor of educational supplies,teaching aids,furniture and equipment to primary and secondary schools and early learning centers.Acquired March 1993.Divested December 1997.,Manufacturer of thermochromic liquid crystal products and irreversible color change indicators for the medical,industrial,and consumer products markets.Acquired November 1992.Divested December 1997.,Business-to-business magazine publishing company serving the manufacturing and process industries.Acquired June 1993.Divested January 1997.,Manufacturer of food and beverage products serving foodservice,in-store bakeries,contract packing and private label retail markets.Acquired May 1991.Divested July 1998.,Fund I and II Platform Investments,How does Private Equity work?,Pfingsten Partners,L.L.C.Fund Cycles,NA,8.8 years,9.3 years,11.0 yearsprojected,Fund I,1.3 yrs,$26M,Fund II,2.0 yrs,$100M,Fund III,2.1 yrs,$285M,Fund IV,1.0 yr,$525M,LiquidateInvestment,ManageInvestment Portfolio,Generate Investment Opportunities and Process Transactions,Raise Capital,Total 2009 Transactions:3501%Closed 2 Platforms and 2 Add-ons,Step I:Generate Investment OpportunitiesIndirect Marketing ProgramDirect Marketing Program,How do we buy companies?,Total 2010 Transactions:4271%Closed 2 Platforms and 2 Add-ons,Generate Investment Opportunities and Process Transactions,Step II:Screen Investment OpportunitiesInvestment CriteriaInvestment Characteristics,How do we buy companies?,Generate Investment Opportunities and Process Transactions,No geographic preference for add-on acquisitions,Manufacturing,distribution and business service companies,Between$15 and$100 million,All platform companies must be headquartered in the United States,Established and profitable,Private companies undergoing an ownership transition,recapitalization or requiring growth capital;,Required(alone or with a compatible co-investor),We have not made,nor do we intend to make,direct investments in real estate;natural resource companies;highly regulated businesses such as banks,insurance companies and utilities;retail businesses;restaurant chains or technology,telecommunications or Internet companies.,corporate divestitures;strategic add-on acquisitions;select financial restructurings or turnarounds,EBITDA,Transaction Types,Revenue,GeographicPreference,Control,Investment Stage,IndustrySegments,TransactionValue,Between$20 and$150 million,Between$3 and$12 million,What is the Pfingsten Partners investment criteria?,Generate Investment Opportunities and Process Transactions,Stable and diverse customer base and product lines,Defensible market position,Company culture compatible with:change,open communication and team-basedmanagement approach,Opportunity to at least double net revenues of the platform company during ownership,Gross margins reflecting value-added products or services,Opportunities to reduce cost or improve productivity,Revenue Stability and Concentration,Market Position,Culture,Growth,Gross Margins,Cost Improvement,Asset Management,Exit Options,Opportunities to improve working capital or fixed asset management,Potential for multiple strategic or financial buyers upon exit,Market Position,Generate Investment Opportunities and Pr