1. 4 JULY 2006 TWIN TRACKS A BROKER’S PERSPECTICVE

2. © Copyright KBC Peel Hunt 2 Overview A marketing exercise to trade buyers and / or private equity buyers is undertaken at the same time as an IPO Accelerated IPO is a variant

3. © Copyright KBC Peel Hunt 3 Rationale Maximise value Maintain competitive tension Safety net

4. © Copyright KBC Peel Hunt 4 Requirements for benefits to exceed costs Company must be able to attract either Trade or Private Equity investors and also have the qualities required to achieve a successful IPO Expectation of equality of valuations or genuine uncertainty over which route will deliver most value Ambivalence of shareholders / management over outcome Management capacity to cope with additional workload

5. © Copyright KBC Peel Hunt 5 Methodology Single adviser takes responsibility for managing entire process Separate corporate finance adviser for IPO IPO is treated as a trade buyer Broker “bids” on basis of what they believe the pre-new money market capitalisation will be Submission of indicative bids and conditions required to progress through bidding rounds Due diligence is conducted alongside other trade / private equity bidders Lawyers & accountants for IPO can be same as those preparing the Vendor Due Diligence

6. © Copyright KBC Peel Hunt 6 Methodology (continued) Broker submits final “bid” on back of a pre-marketing exercise Assuming broker’s “bid” is still acceptable, a formal investor roadshow is undertaken to raise all funds Broker undertakes pricing on back of roadshow and submits final “offer” Completion on Admission

7. © Copyright KBC Peel Hunt 7 Key issues for the broker Level of confidence in valuation and overall achievability Who pays fees in the event of failure ? – Legal & accountancy fees as well as broker’s costs Access to “IPO” level due diligence Access to management Access to customers Full or partial exit for existing shareholders Exclusivity

8. © Copyright KBC Peel Hunt 8 Key issues for the broker (continued) Damage to institutional relationships if IPO is trumped by trade / private equity bidder at the last moment Reputational risk amongst other advisers Underwriting

9. © Copyright KBC Peel Hunt 9 Areas of complexity Competing bids are not comparable – Clean exit vs continuing involvement – Minimum working capital required for IPO compared to trade sale where business often sold on debt free / cash free basis or with an adjustment mechanism based on completion accounts Competitive process can make normal levels of director warranty caps and institutional lock-ins more difficult to achieve Synchronisation of key IPO and trade sale events means timetable slippage can have significant adverse consequences for IPO Availability of management for roadshow meetings can conflict with M&A process Success of aftermarket may be compromised if IPO “bid” price has exhausted all possible buyers Early IPO planning difficult to achieve

10. © Copyright KBC Peel Hunt 10 Fees Higher than normal to reflect risk Ability of broker to charge abort fees in event of failure depends on role within initial scoping of project Abort fees of lawyers and accountants is critical if not commissioned by Company Broker abort fees can be ratcheted to reflect work stages – On completion of Due diligence – On completion of pre-marketing – On commencement of formal marketing – On completion of formal marketing / submission of fully financed, firm offer

11. © Copyright KBC Peel Hunt 11 Case Study – Autoclenz Holdings PLC Sale by Yule Catto PLC of 100% of the shares in Autoclenz Twin track run by Gazelle Corporate Finance PLC formed to acquire Autoclenz and float in December 2005 Total consideration £18m – £13m placing – £5m debt – No new working capital required Advisory fees paid by Newco PLC. Placing commissions paid by Yule Catto IPO offered the vendors more certainty

12. © Copyright KBC Peel Hunt 12 Conclusions Effective method for ensuring competitive tension and maximising value but only appropriate in certain circumstances – Mature companies – Genuine uncertainty over which track will generate greatest value – Ambivalence of management / shareholders over outcome Not usually necessary to continue with twin track until final moment, although vendor may wish to in order to retain competitive tension