Joseph V. Rizzi Amsterdam Institute of Finance November, 2012 Sponsor Based Leveraged Acquisition Market Overview

Volumes outside of UK depressed – 2Q12 down 60% from prior year  Low confidence/macro uncertainty  Valuation gap  Smaller transactions Sellers Pressured  IPO alternative muted  Double Blind Auctions Amsterdam Institute of Finance November,

3 To access the data points underlying the chart, double-click on the chart. Copyright© 2012 by Standard & Poor’s Financial Services LLC (S&P) a subsidiary of The McGraw-Hill Companies, Inc. LCD updates all current year volume as necessary to reflect the latest bank meeting information Reflects total sources of funding of initial or secondary buyout by a private equity firm (excludes recaps, refinancings, etc). Analysis reflects both actual sources/uses data as well as estimates based upon total sources.

4 To access the data points underlying the chart, double-click on the chart. Copyright© 2012 by Standard & Poor’s Financial Services LLC (S&P) a subsidiary of The McGraw-Hill Companies, Inc. Amsterdam Institute of Finance November, 2012

5 Single vs. Multiple SponsorsMost Active Sponsors Avg. Senior Deal Size: €297.3M Avg. Senior Deal Size: €446.3M

6 Based on VolumeBased on Deal Count USA reflects the European allocation of US companies with cross-border transactions. Observations: 45 deals with €12.7B equivalent volume

Stone AgeBronze Age Silver Age Golden Age Back-to-the-Future ( )( ) ( ) ( ) ( ??) Cottage IndustryKKR Fund proliferation Goes global Shakeout/consolidation Bootstrap dealsHigh Yield Represents 40% higher equity levels of M&A smaller deals Mega Funds Operating improvements focus. Increase in PIPE and minority interests Regulation Amsterdam Institute of Finance November,

PE Firm  General  Limited Seller Financing  Banks  CLO  Bonds  Mez Professionals  Lawyers  Accountants  Advisers Amsterdam Institute of Finance November 20128

Asset Classes  Sovereign  Corporate  Equity  Alternatives Styles  Value  Momentum  Carry  Volatility Risks  Economic Growth  Inflation  Liquidity  Tail Amsterdam Institute of Finance November 20129

Fund manager Carried interest partner General Partner LP A LP B LP C US Investors US Exempt Investors Non-US Investors FUND Investment Hold Co. Operating Entity Bank Bridge finance Syndicate participants Leverage finance syndicate participants Nominee High Yield Investors Mezzanine Investors FLL SLL CLO Hedge funds 10 Amsterdam Institute of Finance November, 2012

NowIn 5 yrs EBITDA of Acquired Firm (c) Sale 8 x EBITDA1,0001,500 Financing Plan: Total Capital Raised1,000 Fees Net Sale Proceeds on Exit1,450 Original Debt 800 Less: Debt pay down over 5 years 260 Debt at end of 5 years Return of Original Equity -200 Net gain to be allocated % to mgmt options 71(a) 20% to general partner % to limited partners 497 (b) Total 710 Amsterdam Institute of Finance November, (a)Share to CEO2% pointsor $14.2 x 1 = $14.2 Share to next 4 senior officers1% pointsor $ 7.1x 4 = $28.4 Share to next 8 key players1/2% pointsor $ 3.6x 8 = $28.4 Total Management share $71.0 (b) Equals a 28.4% compound annual rate of return on investment. (c) Assumes $12 taken out of cost structure immediately and 6.5% growth/year in EBITDA thereafter. Source: Casewriter – The Role of Private Equity Firms in Mergers & Acquisitions Transaction Harvard Business School case Rev 10/16/06 - $ millions -

Amsterdam Institute of Finance November Tax – Legal – Accounting Knowledge Network Management Industry Expertise Corporate Finance Delivery Fund Raising Investing Managing/ Monitoring Exit VALUE

Increased Debt (lower taxes) Bargain Purchase Operating Improvements Improved Governance Bondholder Value transfer Opportunistic Sale Restructuring Skills Private Equity Value Added 13 Amsterdam Institute of Finance November, 2012

Focus on return: what is the maximum price I can pay based on given set uf projection and earn X% return? Tradition Valuation = Projected cash flows Discounted rate Terminal value LBO Prespective =IRR (Equity discount rate) Projected cash flows Purchase Price Sale Price (Terminal Value) Amsterdam Institute of Finance November

DCF Net Income + Dep/Amt +/_ Change in deferred taxes +/- Other noncash items +/- Change in working capital Cash flow from operations +After tax interest - CAPEX - Unleveraged FCF Amsterdam Institute of Finance November CFADS Net Income Dep/Amt Change in deferred taxes Other non cash changes Change in working capital Cash flow from operations No interest expense adjustment Capex CFADS

IRREquivalent MOC Over 6 Years 10%1.8X 20%3.0X 30%4.8X 40%7.5X 50%11.4X Amsterdam Institute of Finance November

17 To access the data points underlying the chart, double-click on the chart. Copyright© 2012 by Standard & Poor’s Financial Services LLC (S&P) a subsidiary of The McGraw-Hill Companies, Inc. Excludes U.S. Dollar Tranches Syndicated in the US Amsterdam Institute of Finance November 2012

18 To access the data points underlying the chart, double-click on the chart. Copyright© 2012 by Standard & Poor’s Financial Services LLC (S&P) a subsidiary of The McGraw-Hill Companies, Inc. Excludes U.S. Dollar Tranches Syndicated in the US Amsterdam Institute of Finance November 2012

Amsterdam Institute of Finance November, Bull Market Menu Bear Market Menu As the credit curve shifts, the menu that is available to Issuers / Arrangers changes Holding Company PIK Tranche Term Loans Covenant Light High Yield Debt Bridge Loans Second Lien Hybrid Preferred Cross Lien Facilities Asset Carve-outs OPCO/PROPCO Recapitalizations Stretch Senior Seller Notes Senior Notes Private Placements Equity R/C Lite Mezzanine Smaller floors Sweeps Prepayment penalties covenants Issuer Friendly Investor Friendly

Amsterdam Institute of Finance November, Fixing the Broken Deal – Price and Structural Flex Increase spread Original issue discount Eliminate PIK Reduce debt Add a subordinate tranche More equity Add covenants Reduce Price Seller Paper

Credit Accounting Tax Regulation Excess Capacity Fundraising Fund Structure Returns LPs Public GPs Dry Powder – 193B Amsterdam Institute of Finance November,

Amsterdam Institute of Finance November, Deal market Disappoint returns Impacts fundraising Deals chase money Superior returns Attracts capital Capital chasings deals Macro Financial Markets

23 Disclosure This information has been prepared solely for informational purposes and is not intended to provide or should not be relied upon for accounting, legal, tax, or investment advice. The factual statements herein have been taken from sources believed to be reliable, but such statements are made without any representation as to accuracy or completeness. Opinions expressed are current opinions as of the date appearing in this material only. These materials are subject to change, completion, or amendment from time to time without notice and CapGen Financial is not under any obligation to keep you advise of such changes. All views expressed in this presentation are those of the presenter, and not necessarily those of CapGen Financial. Amsterdam Institute of Finance November, 2012