Norwest Equity Partners | 1 CFA Society of Iowa February 2008

Norwest Equity Partners | 2 The Private Equity Market -Introduction to Norwest Equity Partners (NEP) -The Evolution of Private Equity -Current Middle Market Overview -Trends in Private Equity

Norwest Equity Partners | 3 Who We Are Norwest Equity Partners (NEP) invests in profitable and growing middle market companies – Four decades of investment experience; heritage dates back to 1961 – $3 billion in capital under management – Currently investing NEP VIII — $800 million private equity fund – Affiliated mezzanine fund: Norwest Mezzanine Partners (NMP), $650 million under management – Limited partner is Wells Fargo & Co. – NEP General Partners have autonomous decision-making – 25 investment professionals located in Minneapolis (20 NEP, 5 NMP)

Norwest Equity Partners | 4 What We Do Types of Transactions – Buyouts – Recapitalizations – Growth Equity – Mezzanine – Other Investment Criteria – EBITDA greater than $10 MM for standalone investments; any size for portfolio company add- on acquisitions – Transaction size between $50 MM - $500 MM – Equity investments of $20 MM - $100 MM

Norwest Equity Partners | 5 Agricultural Services and Products Business Services Consumer Services and Products Distribution Energy Financial Services Healthcare Manufacturing Plastics and Packaging Proven Technology Transportation and Logistics Representative Investments

Norwest Equity Partners | 6 National Presence Not shown on map: Hawaii Brazil, Mexico, Canada ● ● – current portfolio company – exited investments – add-on investments NEP Office, Minneapolis ● ●● ● ● ● ● ●● ● ● ● ● ● ● ●● ● ● ● ● ● ● ● ● ● ● ●

Norwest Equity Partners | 7 POET Biorefining Jewell, IA POET Biorefining Gowrie, IA Paladin Brands Cedar Rapids, IA Jacobson Companies Des Moines, IA Becker Underwood Ames, IA NEP and NMP have invested over $265 million in Iowa Combined sales of over a billion $’s NEP Iowa Investments

Norwest Equity Partners | 8 The Evolution of Private Equity

Norwest Equity Partners | 9 What is Private Equity?

Norwest Equity Partners | 10 Venture Capital BDCs SPACs Leveraged Recaps Leveraged Buyouts Mezzanine PIPEs Management Buyouts

Norwest Equity Partners | 11 What is Private Equity? Source: Credit Agricole

Norwest Equity Partners | 12 Top Quartile Performance Source: Bain

Norwest Equity Partners | 13 “Cowboy Days”  <20% of capitalization in equity for LBOs  Some deals funded with 0% equity  Mega deals like RJR Nabisco  6x leverage, emergence of cash flow loans and junk bonds The Early Stage Early 1980’s - Mid 1990’s

Norwest Equity Partners | 14 Return Model The Early Stage Debt Paydown -Debt arbitrage -Cost cuts -Junk bonds Multiple Arbitrage -Fewer exit options Earnings Growth -Don’t rock the boat

Norwest Equity Partners | 15 The Early Stage Source: Venture Economics

Norwest Equity Partners | 16 “The Proliferation Story”  More funds, more specialization, spin-out funds  Over-levered deals in trouble  Growth slows with recession  It’s all about the internet and technology The Middle Stage Late 1990’s - Early 2000’s

Norwest Equity Partners | 17 Return Model The Middle Stage Debt Paydown -Asset Sales -Cost cuts Multiple Arbitrage -Roll-ups Earnings Growth -Cost take-outs in roll-ups

Norwest Equity Partners | 18 Institutional “Grown-up” Stage  Record fundraising and investments  Record leverage and purchase multiples The Recent Stage Mid-2000’s – 6 Months Ago

Norwest Equity Partners | 19 Return Model Recent Stage Debt Paydown -Not at these prices and required equity % Multiple Arbitrage -Not at these prices Earnings Growth -Operational improvements

Norwest Equity Partners | : Record Breaking U.S. Buyout and Mezzanine Fundraising, 1996–2007($Mil) Source: Buyouts Magazine

Norwest Equity Partners | : Record Breaking U.S.-Based Disclosed Deal Volume By Quarter In Billions Source: Buyouts Magazine

Norwest Equity Partners | : The Year of the Mega Deal Biggest Closed Deals Ever SponsorTarget NameValueSectorClosing Date 1Kohlberg Kravis Roberts & Co., TPG, Goldman SachsTXU Corp$44.3 billion UtilitiesOctober The Blackstone GroupEquity Office Properties Trust$37.7 billion Real EstateFebruary KKR, Bain Capital, Merrill Lynch CapitalHCA Inc$32.1 billion HospitalsNovember KKRRJR Nabisco Inc$30.2 billion CigarettesApril Goldman Sachs, Carlyle Group, Riverstone, AIG, managementKinder Morgan Inc$27.5 billion EnergyMay KKRFirst Data Corp$27.0 billion Data processingSeptember TPG, Goldman SachsAlltel Corp$26.9 billion TelecomNovember The Blackstone GroupHilton Hotels Corp$26.7 billion HotelsOctober KKR, managementAlliance Boots PLC$19.4 billion Drug storesJune The Blackstone Group, Permira, Carlyle Group, TPGFreescale Semiconductor Inc$17.5 billion SemiconductorsDecember 2006 Source: Thomson Financial, Buyouts Source: Buyouts Magazine 7 out of the 10 largest closed deals ever took place in 2007

Norwest Equity Partners | 23 Current Middle Market Overview

Norwest Equity Partners | : The Year of the Credit Crunch The market has been erratic this week.

Norwest Equity Partners | 25 Buyout firms walking away from take-private deals  KKR and GS Capital: Harman International ($8 billion)  J.C. Flowers and Cerberus: Sallie Mae ($25 billion)  Cerberus: United Rentals ($100 million reverse break-up fee) The Break Up

Norwest Equity Partners | 26 Top Pending US “Going Private” Transactions TargetSpread ($)Spread (%) Myers Industries Inc Cumulus Media Inc Restoration Hardware Inc Mace Security Intl Inc Reddy Ice Holdings Inc Alliance Data Systems Corp Covad Commun Grp Inc Com Corp Critical Path Inc Penn National Gaming Inc

Norwest Equity Partners | 27 PE Slowdown? “Hoskins, try saying 'profits are up' without the finger quotes, okay?”

Norwest Equity Partners | 28 PE Market Slowing? LPs Seeing Early Signs Of An End To The Buyout Boom (Dec 07) Source: Coller Capital

Norwest Equity Partners | 29 Liquidity shortage finally catching up with middle market  Collapse of CLO and syndication markets  Sub-prime mess, recession fears, rogue traders  Consolidation and retreat  Funding challenges for BDC’s Middle Market Immunity?

Norwest Equity Partners | 30 Middle Market Immunity? Source: Buyouts Magazine

Norwest Equity Partners | 31 Middle Market Immunity? Source: Buyouts Magazine

Norwest Equity Partners | 32 Middle Market Immunity? Source: Buyouts Magazine

Norwest Equity Partners | 33 Middle Market Immunity?

Norwest Equity Partners | 34 Middle Market Woes  Harder time getting lenders to underwrite deals  Buyout Funds are seeking non-traditional lenders (Hedge Funds, etc)  Less Capacity  Lenders pushing for tougher covenants

Norwest Equity Partners | 35 Trends in Private Equity

Norwest Equity Partners | 36 “The private-equity industry is larger, more profitable and more global in scope than at any time in its roughly 40-year history.” David Rubenstein, co-founder of the Carlyle Group Globilization of PE Source: The Economist

Norwest Equity Partners | 37 Europe moving into U.S. PE Market? European Sponsors Grow More Active In U.S. Source: Buyouts Magazine

Norwest Equity Partners | 38 Industry/Theme Focus  Sector specialization –Energy, retail, clean technology, etc  Demographics –Baby boomers, Hispanic market, affluent market  Outsourcing –China and India strategies  PE organizational changes –Operating partners, role specialization

Norwest Equity Partners | 39 Convergence with Hedge Funds  Synergies between two areas  Leveraging sector talent, market knowledge, deep research, deal flow, fund raising  Debt markets are largest areas of convergence  Public to Private Deals  Significant cultural differences

Norwest Equity Partners | 40

Norwest Equity Partners | 41 Going Public BDCs, SPACs, Management Companies, etc

Norwest Equity Partners | 42 Tips for working with a private equity firm…  Start to prepare early -Get financials in order  Understand decision making process of PE groups  Do your homework -What is the firm’s track record? Reputation? -Call CEO’s of current and former portfolio companies  Think about taxes -Can single level taxation be preserved? -Changes in capital gains rates  Spend time with firm to understand personalities/good cultural fit