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Presidio Financial Partners LLC
Presidio Financial Partners corporate advisory activities are performed through its subsidiary Presidio Merchant Partners LLC. Member FINRA, SIPC.
Mergers & Acquisitions: A Practitioner's Perspective
101 California Street, Suite 1200 San Francisco, CA 94111 415-733-0000
Agenda
I II III IV V
M&A Market and Industry Overview An M&A Practitioner's Career Path Case Studies of an M&A Practitioner M&A Deal Studies Appendix: Overview of Presidio
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M&A Market and Industry Overview
M&A Industry Overview

What is a merger?

In business, economics or law, a merger is a combination of two companies into one larger companyi.e. the companies merge to form a new entity Not always significantly different from an acquisition May be used to soften an acquisition to make it more palatable to the target Mergers are typically friendly
What is an acquisition?

An acquisition, also known as a takeover or a buyout, is the buying of one company (the target) by another (the acquiror) The acquiring company establishes itself as the clear owner and typically the target company then ceases to exist An acquisition may be friendly or hostile
What does Mergers & Acquisitions, or M&A mean?
The phrase mergers and acquisitions refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling and combining of different companies that can aid, finance, or help a growing company in a given industry grow rapidly without having to create another business entity
In very simple terms, M&A is the buying and selling of assets, companies or businesses that enables companies to expandi.e. growor contract (through divestitures)

M&A at its core is highly strategic, especially for corporations M&A execution is highly tactical
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M&A Industry Overview (contd)

While there exist a number of different structures and ways to consummate different M&A transactions, there are three main types:

Acquisition: the purchase of a company, assets, business or division Divestiture: the sale of a company, assets, business or division Recapitalization: the change in the ownership / capital structure of a company

Majority: over 50% of the ownership is changed in a transaction or series of transactions Minority: less than 50% of the ownership is changed in a transaction or series of transactions
Most M&A transactions share a number of key characteristics:

Public versus private Consideration (cash, stock, like kind exchange) Terms Valuation Structuring Negotiation
However, a host of other issues may also be applicable and are transaction dependant:

Fairness opinions Hostile or friendly Going private transactions Cross-border implications Tax-driven structures Wall Street reactions
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M&A Industry Overview (contd)

Who executes or consummates M&A transactions? There are a number of key principal participants in the industry, including:

Corporations Private equity firms Venture capital firms (typically involved in minority transactions)
There is also a group of professional advisors and practitioners that advise on and structure M&A transactions for companies and other institutions:

Accountants Attorneys Consultants Commercial bankers Investment bankers
Todays presentation will focus on this last group, and more specifically from an Investment Bankers point of view
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The M&A Market was Less Active in 2009

Deal volume in 2009 was at its lowest since 2002, driven by numerous wide-reaching issues

Would-be acquirors have been largely focused on driving internal efficiencies Buyers have had limited access to leverage Stock as an acquisition currency has mostly been undervalued
Many transactions have been larger companies selling non-core businesses or distressed sales Several deal trends were prevalent in M&A transactions in 2009

Reduced leverage and valuation multiples Strategic buyers represented a larger percentage of deals Stock consideration represented a larger percentage of deals U.S. Middle Market EV / EBITDA Multiples
$12.0 10.6x 4,517 4,448 4,521 $10.0 4,472 8.2x $8.0 6.9x 4,223 7.4x 8.5x 9.6x 9.2x 8.2x 7.1x
Total U.S. Middle Market M&A Volume (# deals)

4,800 4,619 4,600 4,712
4,400
4,200 4,009 4,000 4,044
$6.0
$4.0
3,800
$2.0
3,600 2001 2002 2003 2004 2005 2006 2007 2008 2009
$0.0 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: Dealogic as of 12/31/2009
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Private Equity Activity Fell With Credit Conditions

The economic downturn caused many PE portfolio companies to fall short of expectations, triggering covenants in highly levered deals

There were 74 PE-backed bankruptcies in 2009 Many private equity firms spent 2009 refinancing debt terms
Given the limited financing available for transactions, financial engineering is no longer enough to drive strong returns
There will likely be a renewed focus on growth strategies and / or acquiring companies that require significant operational improvements Average Total Debt / EBITDA Multiples
$7.0 $646 $6.0 5.2x $5.0 $4.0 $332 3.3x $3.0 $213 $2.0 2.8x 2.8x 2.9x 3.2x 3.4x 3.2x 5.8x
Total U.S. Private Equity M&A Volume ($ billions)

$700.0 $600.0 $500.0 $400.0 $300.0 $200.0 $134 $100.0 $0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
$578
4.4x
$252
$133 $87 $98
$133 $1.0 $0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
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But Recent Deals Signal a Potential Thawing of the M&A Market

Several large transactions have been announced in the past few months Cash rich consolidators should continue to drive M&A activity after recent efficiency focus
Announced September 5, 20091 Enterprise Value: $21.4bn2 EV / LTM Sales: 2.2x EV / LTM EBITDA: 13.1x/9.3x3 60% cash / 40% stock Hostile tender offer 47.9% premium4 Transaction received significant scrutiny from U.K. authorities Final offer reduced stock component, increasing certainty of value and eliminating KFT shareholder approval requirement Cadbury agreed to a $193.5mm inducement fee (1% equity value) Creates worlds dominant confectionary company
Announced January 14, 2010 Enterprise Value: $1.9bn EV / LTM Sales: 3.5x EV / LTM EBITDA: 11.5x All cash (excl. Leslie Blodgett) Friendly tender offer 39.9% premium5 $43.5mm break-up fee (2.5% EV) Standard reps and warranties Standard fiduciary out No financing contingency Leslie Blodgett, CEO and spokeswoman, agreed to roll 40% of her holdings (~$40 million in value in a Shiseido subsidiary in an illiquid security that is redeemed over three years)
Announced February 25, 2010 Enterprise Value: $615.0mm EV / LTM Sales: 2.5x EV / LTM EBITDA: 11.5x All cash Stock purchase
Announced December 21, 2009 Enterprise Value: $2.2bn EV / LTM Sales: 4.8x EV / LTM EBITDA: 13.3x All cash Friendly tender offer 33.6% premium6 Primary driver of transaction was the Allegra Rx to OTC switch $64.5mm break-up fee (2.9% EV) Standard reps and warranties for a public target Standard fiduciary out No financing contingency
Financed with new $600mm credit facility and $150 stock offering 4.5x Pro Forma Debt / EBITDA Diamond guarantees specific performance with no condition Indemnity capped at total consideration No break-up fee or MAE clause Unique seller price protection provision
Sources: Company filings, equity research 1 September 5, 2009 was the first public announcement of Krafts intent to tender for Cadbury shares; the Final offer and Cadburys Board support were announced on January 19, 2010 2 Assumes an exchange rate of 1.63 $USD for each GBP 3 13.1x assumes $1,636.5mm of EBITDA excluding synergies; 9.3x assumes $2,311.5 EBITDA including $675 of expected synergies 4 Represents premium to Cadbury ordinary shares trading on the LSE on September 4, 2009, the day prior to the announcement Krafts initial offer 5 Represents premium to Bare Escentuals closing price on January 13, 2009, the trading day prior to the announcement Shiseidos initial offer 6 Represents premium to Chattems closing price on December 18, 2009, the trading day prior to the announcement Sanofis initial offer
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Agenda
I II III IV V
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An M&A Practitioner's Career Path
The Various Levels of M&A / Investment Banking

Analyst (2-3 years)

Typically hired right out of undergraduate programs Most junior level (but much higher in importance!) on the transaction team Responsible for information and data collection, financial modeling and analysis, preparation and management of pitch books and materials Limited client interaction
Associate (3-4 years)

Typically hired out of MBA programs (some are promoted 3rd year Analysts) Working in tandem with Analysts on projects across most all aspects Key role is to check work of the Analyst while adding value to basic analyses and drawing conclusions from data and information Limited to moderate Client interaction
Vice President (2-3 years)

Day-to-day management of all projects / assignments Direct Analysts and Associates on analyses Often a significant interface with clients on assignments May have some primary client responsibility for developing key relationships Ultimately responsible to senior bankers for quality of work product Significant client interaction
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The Various Levels of M&A / Investment Banking (contd)

Director / Principal (2 or more years)

Day-to-day management of all projects / assignments Often the primary interface with clients on assignments Ultimately responsible to senior bankers for quality of work product Typically beginning of primary client relationship rolelikely to be given an industry sector/sub-sector to cover and develop relationships Significant client interaction; heavy travel
Managing Director / Partner

Senior deal team member and business originator Responsible for developing relationships and monetizing those relationships, often within a specific industry sector Key role is to work with team and other firm professionals, as needed, to deliver the firms resources to clients Responsible for all aspects of transaction team and clients relationships / engagements Heavy client interaction and travel
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An M&A Analysts Perspective A Day in the Life

8:00AM - Arrive at the office and scan the papers and news sources for any new deals that have been announced in Industrial or related industries 9:00-11:00AM Review comments on pitch book from Principal for the next days pitch; begin re-working presentation and editing pitch book 11:00AM Join due diligence conference call on trucking company to learn more about financial projections and operations; discuss with Principal potential follow-up from call 12:00PM Lunch at desk; scanning news to see if anything new has been announced transactions, market data, earnings releases; see how coverage companies are performing and scan for any significant news 1:00PM Update public comparables for the day and incorporate into pitch book; finalize pitch book and give revised draft to principal for final comments; pull M&A press releases for significant transactions 4:00PM-6:00PM Re-run scenarios on financial model (LBO) for oil services company and send to transaction team 6:00PM-9:00PM Incorporate final comments and print books for meeting; re-run LBO model based on feedback from team 9:00PM-Whenever Begin FactSet runs for M&A transactions, public comps and general research on new assignment for Consumer group
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Various M&A Assignments

Summary of M&A Assignments M&A Assignment Sell-Side M&A Commentary Very typical assignment; retainer and success fee based sale of a company through a marketing process that involves pitching, engagement, marketing and closing of a transaction; takes approximately 6 months from start to finish Less typical than sellside; can be single or multiple target assignments; retainer and success fee based; can involve evaluation of entire sector Similar to a sellside assignment but does not include the full sale of the company; can be minority or majority transactions; retainer and success fee based Very common assignments on buy or sell side; fixed fee based with no success fee; short in time duration as they are discreet assignments relating to a particular transaction(s); rendering of an opinion as to the fairness of a transaction Public assignments arising from a hostile situation where one advises the targets Board of Directors in a potential or threatened takeover; retainer and success fee based; can be very high profile and messy transactions Retainer based assignments working for companies or firms who do not have the capability themselves; structured more like a consulting arrangement
Buy-Side M&A
Recapitalization
Fairness Opinion
Defense Advisory
Outsourced Business Development
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Core M&A Deliverables / Analyses

Summary of M&A Deliverables / Assignments M&A Deliverable / Analysis Pitchbooks Valuation Commentary Presentations used to win business, present analysis, etc. Integral to most all M&A assignments; placing a value on a target, acquiror, business, asset; many different methods of analysis are used to arrive at a valuation of an asset or business - Public Comparables - Transaction Comparables - LBO Analysis - Premiums Paid Analysis - Discounted Cash Flow - Merger Consequences Analysis used for public companies to see whether or not a transaction is additive or dilutive; useful to know for Wall Street reaction Analysis used to show the combination of two companies or businesses and the effects of such a combination Provides the basis for most all analyses in M&A; typically include a 5year projections model with cash flow statements and balance sheets Key component of information in a sellside engagement; document sent to prospective buyers/investors
Accretion / (Dilution) Analysis
Merger Consequences
Financial Modeling
Confidential Information Memorandum
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Agenda
I II III IV V
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Case Studies of an M&A Practitioner
Case Study: Lindora LLC

Transaction Overview: On June 24, 2009, Lindora LLC (Lindora) completed a minority equity investment with Presidio Investors, enabling the company to secure the capital necessary to increase clinics in operation and to execute on a number of near-term strategic growth opportunities Presidio Financial Partners, through its Corporate Advisory division, acted as exclusive financial advisor to the fund with regard to its investment in Lindora, including target evaluation, due diligence, valuation, transaction structuring and terms Presidio Investors is now the largest outside investor in Lindora and the companys only institutional partner
has completed a minority equity recapitalization with
Transaction Process Overview: Presidio Investors Worked with Presidio Investors, management and Investment Committee to evaluate the industry, opportunity and consummate the investment Investment firmly establishes Presidios capability in, and commitment to, the Health & Wellness space, both from an investment and an advisory perspective Key Terms of Investment: Investment structure allowed family owners to secure an institutional partner, while maintaining significant upside in the business Secured growth capital for near-term growth initiatives Structured as a minority equity transaction (investment did not include debt) Lindora Overview: Located in Southern California, Lindora is a provider of comprehensive, medically-based weight loss treatments and products Lindora operates 35 stand-alone clinics in southern California and 8 in-store clinics in selected Rite Aid stores Founded in 1971, the Company is Americas leading medical weight control system and enjoys a reputation as the gold standard in weight management
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Case Study: Tree of Life

Divestiture Overview: Tree of Life is a $1.2 bn revenue company with ~$30 mm of EBITDA Strong #2 market position in natural/organic, with a stronger presence and focus on East Coast; less competitive in West On April 22, 2009 Royal Wessanen NV announced a strategic review to exit all of its North American branded and distribution businesses in order to focus on its European operations This followed its February announcement to divest its U.S. noncarbonated drinks business, American Beverage Corporation North American businesses include Tree of Life, PANOS Brands and Liberty Richter This formal announcement came as no surprise, as many, including company executives, had speculated that Royal Wessanen would make a move soon amid a challenging U.S. environment Transaction closed on December 23, 2009 with Kehe Food Distributors
December 2009
Has been divested by And acquired by
Presidios Role: Worked in a strategic and transaction advisory capacity with Taylor Companies, Royal Wessanens investment bank, regarding the divestiture process, strategy, financing and competitive landscape Presidio was selected by Taylor companies for its expertise in natural and specialty and food & beverage distribution, as well as its strong advisory capability in mergers and acquisitions Royal Wessanen NV Overview Royal Wessanen NV is a multinational food corporation based in the Netherlands. The Company produces, markets and distributes high-quality natural and specialty food products in North America and Europe Tree of Life Overview: Tree of Life, founded in 1970 and headquartered in Saint Augustine, FL, distributes natural and organic ethnic and gourmet food products. It sells through a network of supermarkets, independent retail stores, and drugstores and strives to meet the needs of retailers and suppliers through excellence in distribution, marketing and merchandising
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Case Study: Blue Horizon Foods

Transaction Overview: In late 2008, Blue Horizon Foods, Inc. (Blue Horizon) came to Presidio for assistance raising capital to fund its growing business with annual revenue growth of approximately 100% Following the extraordinary erosion of the capital markets in late 2008, Presidio advised the Company to modify its strategic plan and focus on raising an internal round of capital from current investors, including Greenmont Capital, as well as new investors In August 2009, Blue Horizon finalized its first close of $2 million on a first round of fundraising; the final close was in December 2009
December 11, 2009
Transaction Process Overview: Worked with management and the Board of Directors of Blue Horizon to balance high growth and profitability in a challenging economic and business climate Advisory work included a review of the companys full operations, including customers, distribution channels, inventory turnover, as well as gross margin and contribution margin analyses and a strategic plan overhaul to maintain growth and improve business metrics As a result of updated plan and managements solid execution, Blue Horizon is currently projected to grow by nearly 100% in 2009 Key Terms of Transaction: All key investors from Companys Series A round participating in current round; also includes a New Investor Group Blue Horizon Foods Overview: Blue Horizon is one of the leading suppliers of branded and private label seafood products sourced exclusively from environmentally responsible sources. The Company was founded in 2005 by John Battendieri and Tim Redmondpioneers in the organic and natural foods industry since the 1970swith a dual mission: to supply sustainably-harvested wild and certified chemical-free farmed seafood and prepared seafood products to the North American market, while at the same time helping to protect the health of aquatic ecosystems
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Case Study: New York Financial Institution

Background: In early 2009, a New York based investment firm came to Maher Presidio for assistance in valuing certain assets it owned in the wine industry The wine assets include a highly rated Sonoma County Pinot Noir producer and a large Central Coast vineyard operation The Sonoma wine producer is known for its super premium wines, sold primarily direct-to-consumer The large vineyard operation is located in the Central Coast and produces grapes for a number of other wineries
New York Based Hedge Fund
Assignment Overview: Central Coast Sonoma The investment firm came to Maher Presidio in order to understand the Vineyards Estate Winery current fair market value for its wine assets The firm would then use the analysis for general corporate purposes, including the possibility of granting options in the winery/assets to executives of the company In preparing our analysis, Maher Presidio conducted multiple interviews with management, visited all growing and producing sites, reviewed contracts, legal documents, appraisals and analyzed all company provided historical and projected financial statements Maher Presidio then utilized multiple valuation methodologies including: Analysis of publicly traded wine/beverage companies M&A transaction comparables in wine/beverage Discounted cash flow Adjusted book value The valuation was completed in September 2009 We are now engaged to work with the firm on a buy-side assignment to acquire a winery in the Napa Valley
Financial Advisor with regard to Wine Assets
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Case Study: Bare Escentuals

Transaction Overview: In 2006, with the capital markets heading to new highs for consumer products stocks and backed by the category-leading growth of the company, Bare Escentuals owners, Berkshire Partners and JH Partners, wanted to pursue an initial public offering of the company The BARE IPO represented the first time a leading beauty company had gone public since Estee Lauder almost a decade earlier (1995) The companys lead bankers had also received a significant amount of interest in acquiring the company from strategic buyers; however, the significantly higher valuation afforded by the equity markets at the time dictated that the company pursue an initial public offering Transaction Process Overview: Worked with the financial sponsors, management and Board of Directors to consummate a successful IPO and a subsequent follow-on offering
09/28/2006 - $404 million raised in an initial public offering 03/13/2007 - $476 million offered via a secondary offering
Key Terms of the IPO: Successfully priced an upsized $405 million IPO on 09/28/2006 Priced the deal at $22.00, or 38% above the top of its initial filing range of $15.00-$17.00 Post deal market cap: $1.9 billion Key Terms of the Follow-On: Successfully raised $476 million via a secondary offering on 03/13/2007; all secondary share offering Priced the deal at $34.50, or 38% above the top of its initial filing range of $15.00-$17.00 Bare Escentuals Overview: Bare Escentuals is one of the fastest growing premium cosmetic companies and both a pioneer and a leader in the mineral-based cosmetic market The company develops, markets and sells cosmetics, skin care, and body care products under its bareMinerals, bareVitamins, RareMinerals, i.d. and Bare Escentuals brands, and professional skin care products under its md formulations brand
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Case Study: Gilchrist & Soames

Transaction Overview: In 2006, Gilchrist & Soames owners, E&A Industries, wanted to monetize their almost 10-year investment in the business Transaction Process Overview: Worked with E&A and company management to pursue a sale broad sale process aimed at maximizing value for the shareholders Contacted over 100 parties, both strategic and financial, over the course of several months Received a number of proposals from financial sponsors which varied widely in price and terms Invited nine parties to meet management and conduct due diligence investigations At signing in late 2006 a due diligence issue arose that tabled discussions for a number of months; restarted the process in early 2007 by contacting a select group of potentially interested parties Duration: ~6 months from start to initial transaction (~18 months from start to final transaction)
has been acquired by
$68,000,000
Key Terms of Transaction: Successful sale of the company to Swander Pace Capital at ~8x LTM EBITDA E&A monetized all of its holdings at a strong valuation; the management team remained in place under new ownership and a new incentive-based compensation structure Gilchrist & Soames Overview Gilchrist & Soames is based in Indianapolis, Indiana, and is a leading designer and marketer of fine English toiletries, as well as amenity solutions, to luxury hotels and resorts worldwide. The company offers both stock and custom collections to customers in primarily upper 3-, 4- and 5-star hotels and resorts worldwide. Swander Pace Capital Overview: Swander Pace Capital is a leading private equity firm specializing in buyouts of growth-oriented, lower middle-market consumer products companies based in North America
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Case Study: Ulta Salon, Cosmetics & Fragrance, Inc.

Transaction Overview: With robust capital markets, a strong economic climate, and consistent strong performance, ULTA had numerous tailwinds when the Company began the IPO process in early 2007 The offering was well received as investors focused on the potential for significant store expansion, ULTAs demonstrated ability to execute, its consistent comparable store sales growth and the attractiveness of industry dynamics (beauty channel shift from department stores) ULTA was owned by private equity firms GRP, Doublemousse, Oak Investment Partners and Credit Suisse Shares traded up significantly through the end of October, trading up as high as $35.00 per share before falling back to the mid-$20.00 range when the broader equity market began to fall in November 2007 Transaction Process Overview: Worked with the Board of Directors and management to access the capital markets through an initial public offering of common shares Key Terms of the IPO: Successfully priced a $154 million IPO on October 30, 2007 Priced the deal at $18.00, above its initial filing range of $14.00 $16.00 90% primary proceeds to the Company, 10% secondary proceeds to selling shareholders Net proceeds were used to pay $93 million of preferred dividends in arrears, $5 million for redemption of series III preferred shares and the remainder to repay debt ULTA Overview: ULTA is the largest beauty retailer providing one-stop shopping for prestige, mass and salon products and salon services in the United States The Company focuses on providing affordable indulgence by combining the product breadth, value and convenience of a beauty superstore with the distinctive environment and experience of a specialty retailer ULTA is differentiated by its broad selection of merchandise across categories, price points and brands in one retail format offers a unique shopping experience for a broad customer base
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10/30/2007 $154 initial public offering
Case Study: Physicians Formula

Transaction Overview: Backed by robust capital markets, strong growth in the Physicians Formula business and good forward visibility on new chain, door and SKU growth the company began to evaluate an initial public offering In late 2006, the companys management team and owners, Summit Partners, saw the successful pricing and performance of Bare Escentuals The company had also in 2005/2006 executed an M&A process, which yielded interested parties, but was not successful in achieving the valuations afforded by the public markets Transaction Process Overview: Worked with the financial sponsor, management team and the Board of Directors to consummate a successful IPO and a subsequent follow-on offering Key Terms of the IPO: Successfully priced an upsized $146 million IPO on 11/08/2006 Priced the deal at $17.00, or the top of its initial filing range of $15.00-$17.00 Key Terms of the Follow-On: Successfully raised $105 million via a secondary offering on 03/30/2007 100% secondary share offering Physicians Formula Overview: Physicians Formula is one of the fastest growing cosmetics companies in the mass market prestige, or masstige market, distributing its products to various retailers in the food retail, drug chain, mass volume, specialty retail, and wholesale channels The company differentiates itself by addressing skin imperfections through a problem-solving or solutionsbased approach, offering face powders, bronzers, concealers, blushes, foundations, eye shadows, eye liners, brow makeup, and mascaras
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11/08/2006 - $146 million raised in an initial public offering 03/30/2007 - $105 million offered via a secondary offering
Case Study: Golf Galaxy

Transaction Overview: In April 2007, Golf Galaxy was evaluating a potential follow-on offering and was preparing preliminary offering documents with the SEC Unaware of the pending offering, Dicks Sporting Goods made an unsolicited offer to acquire the Company in an all-cash transaction After a few weeks of discussion and negotiation the deal fell through due to valuation issuesthe broader consumer and retail markets had experienced a substantial correction In fall of 2007, Dicks once again approached the company and discussions began toward consummation of a potential transaction
$228,000,000
Transaction Process Overview: We worked with management and Board of Directors in evaluating their strategic alternatives, including a potential follow-on offering It was decided that, due to the high premium and the ability of Dicks to close a transaction quickly (no financing contingency), management, in tandem with its advisors should pursue a potential combination with Dicks Negotiated a go-shop provision in the transaction that allowed us to speak to a number of parties post the signing and announcement of the transaction No interested parties emerged during the go-shop period Key Terms of Transaction: Acquisition of Golf Galaxy at $18.82 per share, implied a premium of 19% and an ~11.9x LTM EBITDA multiple Key to the transaction was the continuing management of the key foundersRandy Zanatta and Greg Maanum The transaction was announced as accretive to Dicks 2007E earnings Golf Galaxy Overview: Founded in 1995 and headquartered in Minnesota, Golf Galaxy operates 79 golf specialty stores in 29 states The Company offers a wide range of branded golf equipment, apparel and accessories, including, GPS/range finders, golf wear products and accessories, as well as PGA professional instruction Dicks Sporting Goods Overview: Dicks Sporting Goods, Inc. is an authentic full-line sporting goods retailer offering a broad assortment of brand name sporting goods equipment, apparel, and footwear in a specialty store environment
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Case Study: Blu Dot

Transaction Overview: In 2007, the founders of Blu DotJohn Christakos, Maurice Blanks and Charlie Lazorwere looking to find an institutional partner to share in their vision and growth plan The founders desire was to secure growth equity capital to further build out the companys branded products division, with a potential future goal of building out a Blu Dot retail footprint The founders were also looking to monetize some of their hard work over the previous decadei.e.: take some money off the table and diversify their personal financial risk The preferred transaction was a minority recapitalization, but the founders also wanted to explore the full sale alternative
$31,000,000
Transaction Process Overview: Worked with management & the company to pursue a dual-track process Contacted over 100 parties, both strategic and financial Received a number of proposals which varied in price and terms; garnered both strategic and financial interest Duration: ~6 months from start to closing of a transaction (~12 months from initial discussions) Key Terms of Transaction: Successful minority recapitalization at ~7x LTM EBITDA Founders monetized a portion of their holdings at a strong valuation and maintained control of the company key to the success of the transaction was the continuing ownership and management of the founders Secured growth capital for founders, while retaining a second bite at the apple with continued ownership Blu Dot Overview Founded in 1997, Blu Dot is a Minneapolis, Minnesota based designer and marketer of modern furniture Founders, John Christakos, Charlie Lazor and Maurice Blanks, established the company to bring modern furniture to a wider number of peoplegood design for the masses CHB Overview: Denver, Colorado based private equity firm formed to provide closely held and family owned businesses with the equity capital and expertise required for ownership transitions and sustained growth Strong experience in branded consumer products across a number of industries
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Case Study: Chatham Village Foods

Transaction Overview: Chatham Village Foods founder and venture capital owners were interested in evaluating strategic and financial options for the company After a number of strategic discussions it was decided that the company would explore the sale opportunity, whereby shareholders would achieve full realization on their investment in the Company Transaction Process Overview: Worked with Company management and the Board of Directors as an advisor on a broad sell-side engagement Contacted 75+ parties, both strategic and financial and received indications of interest from more than 10 interested groups; valuation and terms varied widely among the various bidders Seven groups were invited to management presentations, out of which one was selected to perform final due diligence and consummate the transaction
$30,000,000
Key Terms of Transaction: Successful sale of the Company at a very attractive valuation in approximately 6 months time from initial meetings to closing of a transaction Chatham Village Foods Overview: Chatham Village Foods was Founded by Steve Bernard in 1990 as a manufacturer and marketer of natural, betterfor-you premium croutons, bread crisps and stuffing. Chatham Village was a pioneer in distribution, being one of the first consumer packaged goods companies to distribute shelf-stable products in the produce department via wooden racks. Steve Bernard also founded Cape Cod Potato Chips, which he sold to and bought back from Eagle Snacks, as well as Late July Snacks, which he co-founded with his daughter Lancaster Colony Overview: Lancaster Colony Corporation engages in the manufacture and marketing of consumer products in the United States. The company operates in two segments: Specialty Foods, and Glassware and Candles. The Specialty Foods segment includes brands such as T. Marzetti, Cardinis, Pfeiffer, Girards and Texas Toast
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Case Study: Dave & Busters

Transaction Overview: In late 2005, Dave and Busters received an unsolicited offer to buy the company in a going-private transaction Transaction Process Overview: Worked with company to evaluate its strategic alternatives, vis--vis the unsolicited offer to acquire the company Key Terms of Transaction: Advised the company as it evaluated the offer and ultimately consummated a transaction at $18.05 per share in cash to DAB shareholders financed by new equity $53 million in a new senior credit facility $175 million in 11.25% senior notes
Has been acquired in a goingprivate transaction backed by $375,000,000
Dave and Busters Overview: Founded in 1982, Dave & Busters (DAB) is a leading operator of large-format, high-volume restaurant / entertainment complexes Headquartered in Dallas, Texas Operates 48 current locations Caters to adults and their families Offers high quality food and a wide variety of games Wellspring Capital Management Overview: Founded in 1995, Wellspring Capital Management is a leading middle-market private equity firm that manages more than $2 billion of private equity capital
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Case Study: Cornerstone Brands

Transaction Overview: Cornerstones private equity owners were interested in evaluating a realization of their investment in the Company Looking to take advantage of the high EBITDA multiples being paid for consumer companies at the time Transaction Process Overview: Worked with the Company as an advisor on a sell-side engagement Key Terms of Transaction: Successful sale of the Company at a very attractive valuation of ~12x LTM EBITDA Cornerstone Overview: Founded in 1995, Cornerstone Brands is a family of leading catalog companies for the home, leisure and casual apparel segments The Companys primary brands include:
Ballard Designs (home furnishings) Frontgate (home furnishings and leisure) Garnet Hill (home furnishings and casual apparel) Smith + Noble (window treatment) The Territory Ahead (casual apparel) TravelSmith (casual apparel) has been acquired by $760,000,000
IAC Overview: IAC is a leading internet company with more than 35 fast-growing, highly-related brands serving loyal consumer audiences; with more than 168 million unique visitors across 40 countries, IACs network of sites would rank as the 8th largest in the world
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Case Study: Maxwell Shoe Company

Transaction Overview: In February 2004, seeking to consolidate its holdings by acquiring the $386,000,000 rights to the Anne Klein license from its licensee, Maxwell Shoe Company, Jones Apparel initiated a hostile takeover for the company through the issue of a bear hug letter and an offer of $20.00 per share The Board of Directors of Maxwell Shoe quickly rejected the offer, saying it was too low and undervalued the company Frustrated that it wasnt getting the attention it deserved, Jones launched a tender offer at the same $20.00 per share After initial discussions fell apart over value and with a low amount of has been acquired by shares tendered after three months of an open tender offer, Jones increased its offer to $22.50 per share and hosted a conference call to discuss the proposal The Maxwell Shoe Board rejected the revised offer as inadequate as it announced record growth in earnings and profitability After weeks of protracted negotiations and posturing, Jones agreed to increase its bid to $23.25 per share and the Maxwell Shoe Board agreed to recommend the offer to shareholders This implied an LTM EBITDA multiple of approximately 9.0x Maxwell Shoe Company Overview: Maxwell Show Company is a designer, developer, and marketer of casual and dress footwear for women and children under multiple brand names, including AK Anne Klein, Dockers Footwear for Women, J.G. Hook, Joan & David, Mootsies Tootsies and Sam & Libby. The Company sold its shoes primarily through department stores and specialty stores in the U.S., and also manufactured private label footwear for certain retailers Jones Apparel Group Overview: Jones Apparel Group is a leading designer, marketer and wholesaler of branded apparel, footwear and accessories, as well as an operator of its owned specialty and value-based retail banners. Major brands include Jones New York, Nine West, Anne Klein, Gloria Vanderbilt, Kasper, Bandolino, Easy Spirit, EvanPicone, l.e.i., Energie, Enzo Angiolini, Joan & David, Mootsies Tootsies, Sam & Libby, Napier, Judith Jack, Albert Nipon and Le Suit.
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Case Study: Everlast Worldwide

Transaction Overview: On file with the SEC to complete a follow-on equity offering, Everlast Worldwide received an inbound unsolicited offer for the Company The Company and Board of Directors needed an advisor to partner with them on a strategic defense assignment Transaction Process Overview: Worked with company management and the Board of Directors to evaluate its strategic alternatives, vis--vis an unsolicited offer to acquire the Company Spoke to over 60 parties and received multiple bids for the Company Key Terms of Transaction: Successful sale of the Company to a division of a large UK branded products company and retailer, Sports Direct International plc, at an attractive valuation of ~17x LTM EBITDA Everlast Overview Founded in 1910, Everlast Worldwide is a leading designer, manufacturer and marketer of boxing and fitness related sporting goods equipment under the well-recognized Everlast brand name Sports Direct Overview: Sports Direct is the UKs leading sports retailer by revenue and operating profit, and the owner of a significant number of internationally recognized sports and leisure brands
$191,000,000
has been acquired by Brands Holdings Limited, a subsidiary of
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Everlast Worldwide: The Main Participants

Target: Everlast Worldwide Inc.
Everlast Worldwide Inc. is a leading designer, manufacturer and marketer of boxing and fitness related sporting goods equipment under the well-recognized Everlast brand name and a worldwide licensor of the Everlast brand for apparel, footwear, sporting goods equipment and other active lifestyle products and accessories. Since 1910, Everlast has been the preeminent brand in the world of boxing and among the most recognized brands in the overall sporting goods and apparel industries
Initial Transaction: The Hidary Group

The Hidary Group is a New York-based family office investor group The firm's portfolio consists of companies in various industries, including consumer goods, real estate, technology and financial services M.Hidary is an affiliate of the Hidary Group and is a sublicensee of Everlasts U.S. Mens apparel licensee
Ultimate Acquiror: Brands Holdings Limited

Brands Holdings Limited is a wholly-owned subsidiary of Sports Direct International plc, a $2.6 billion public sports retailer based in the UK and the owner of several internationally recognized sports and leisure brands Sports Direct International plc provides sports apparel and equipment through the following brands: Antigua Carlton Donnay Dunlop Kangol Karrimor Lilywhites
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Everlast Worldwide: Situation Overview

In early 2007, Everlast Worldwide Inc. (Everlast or the Company) was planning to do a $40 million follow-on equity offering to secure capital to execute on its global brand strategy, pay down debt and increase its liquidity
Filed with the SEC on March 22 Received initial comments on April 20 SEC response expected week of April 23
On April 26, Everlast received an unsolicited acquisition proposal from The Hidary Group (Hidary) to acquire all of the stock of the Company for an implied range of $21.40 to $23.27 per share
Board met to discuss the offer Responded to Hidary that the Company was not for sale
On May 1, Everlast received a revised per share value of $24.96 to $25.90

Everlast engaged its exclusive financial advisor to work with the Company and its legal advisors to evaluate the proposal
From May 3 to June 29 the advisory team worked with the Company and is legal advisors to evaluate its alternatives, including:
Continued evaluation of the potential follow on offering Evaluation and negotiation of the Hidary offer that resulted in a transaction being announced on June 1, 2007 at $26.50 per share, or 14x LTM EBITDA Conducting of a go shop post the announcement of the Hidary transaction that surfaced another interested party, Brands Holdings Limited (Brands Holdings), and resulted in a superior offer $30.00 per share, or 16.1x LTM EBITDA Entertaining a bidding war between Hidary and Brands Holdings that was ultimately won by Brands Holdings and ended in a transaction at $33.00 per share, or 17.5x LTM EBITDA
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Everlast Worldwide: Timetable of Events

April 26 April 27 May 1 May 1 30 May 30 June 1 June 1- 30
June 8 June 18 June 21 June 29 June 29 June 29
June 1 August 3 August 3 August 16 Sept. 19
The Hidary Group initially submits letter of intent regarding the purchase of Everlast at a purchase price ranging from approximately $21.72 to 23.76 per share. Board of Directors determined that EVST was not for sale at the time and tha t the purchase price range proposed on behalf of the Hidary Group would be inadequate. EVST received a revised letter of intent from the Hidary Group with an increased price ranging from approximately $24.50 to $25.50 per share. Negotiations commenced regarding a potential acquisition of EVST by the Hidary Group. Several meetings with various financing sources and business advisors in conjunction with the Hidary Group were held. Hidary Group increased its offer to a price of $26 .30 per share. Major deal terms were finalized. Transaction was announced at a price of $26.50. Began go shop period in which the advisors contacted potential purchasers that might be interested in acquiring EVST. Advisors identified and contacted a broad list of 31 potential strategic purchasers in the apparel, footwear, sporting goods and branded consumer goods manufacturing and retail industries. Additionally contacted 25 financial buyers that it believed could be interested in ac quiring EVST based on the size and focus of their funds, past and present portfolio companies, as well as EVSTs business model, financial characteristics and industry focus. EVST received a letter from Brand Holdings its intention to offer to purc hase the Company. No confidentiality agreement was signed and the Brand Holdings solely relied on publicly available information in its assessment. Following a management presentation of publicly available information to Brand Holdings, Brand H oldings expressed a desire to make a superior proposal on essentially the same terms as the Prior Merger Agreement. EVST received a revised offer letter and draft Merger Agreement from Brand Holdings, which offer included a price per share of $30. 00. Hidary Group Acquisitions, LLC, increasing their offer to $31.25 per share and providing for the right of all EVST stockholders to elect to rollover up to 50.0% of their shares into equity interests in the new acquisition vehicle of Hidary Gro up Acquisitions, LLC. Brand Holdings increased their offer to $33.00 per share with a corresponding proportionate increase in the fee and expense provisions in the Merger Agreement. EVST board of directors determined that Brand Holdings cash offer of $33.00 per share was better than an offer of $31.25 per share in cash from the Hidary Group which remained subject to financing letters containing financing contingencies, and included - rollover option that was devoid of key details which precluded a meaningful evaluation of a the value of such roll over option. Number of legal actions by Hidary Group and shareholders were in progress against EVST, the board and selected members of management and Brand Holdings. A settlement agreement was agreed upon between the Hidary Group, EVST and Brand Holdings. A settlement agreement was agreed upon between shareholders and Brand Holdings/EVST. Special meeting of stockholders to be held to vote to adopt t he Agreement and Plan of Merger with Brand Holdings
(1) Refer to definitive proxy statement dated August 16, 2007 for complete detail regarding the background to the transaction.
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Everlast Worldwide: Valuation

Everlast was acquired by Brands Holdings at a premium of 42.6% to its closing stock price prior to announcement and a 17.5x LTM EBITDA multiple Initial transaction with The Hidary Group was announced on June 1, 2007:
$26.50 per share Transaction value of $146.0 million Implied premium of 14.5% EV / LTM Revenue: 2.7x EV / LTM EBITDA: 14.0x
Final transaction with Brands Holdings Limited was announced on June 29, 2007:
$33.00 per share Transaction value of $182.3 million Implied premium of 42.6% (based on closing price prior to announcement of Hidary transaction) Increase of 24.5% over initial Hidary offer EV / LTM Revenue: 3.4x
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Everlast Worldwide: Stock Price Reaction

6/29/07: Brand Holdings offer price increased to $33.00 per share Brand Holdings $33.00 $23.15 42.5% $20.35 62.1% $19.47 69.5% $18.58 77.6% $23.21 42.2% $11.30 192.0% 9/20/07: Brands Holdings completes acquisition for $33.00 per share
1,000
$40 $38 $36 $34 $32
900
800
700
Stock Price Premium As of 05/31/07 1-Month Average 3-Month Average 6-Month Average 52-Week High 52-Week Low
6/28/07: Received counter-offer from the Hidary Group on June 28, 2007 for $31.25 per share 6/28/07: Announced superior proposal from Brand Holdings at $30.00 per share 07/12/07: Hidary Group files lawsuit against Company for breach of buyout agreement
600
08/03/07: Settlement of lawsuit with Hidary Group
$30 $28 $26 $24
500
400
7/13/07: Aquamarine Capital urges Company to re-enter negotiations with Hidary 7/25/07: 14.3% Holder Burlingame expresses preference for Hidary offer
$22 $20 $18
300
5/31/07: Announced transaction with the Hidary Group at $26.50 per share with a 30-day go-shop period 06/04/07: Aquamarine Capital issues press release claiming Hidary offer undervalues Company
$16 $14 $12 $10 $8 $6
200
100
0 9/20/2006
10/23/2006
11/24/2006
12/29/2006
2/1/2007
3/6/2007
4/9/2007
5/11/2007
6/15/2007
7/18/2007
8/21/2007
9/24/2007
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Everlast Worldwide: Key Issues / Take-Aways

An Unsolicited Offer
Hidary offer was unsolicited and demanded a swift response Key to beginning discussions were the not for sale speech and a confidentiality agreement with a strong standstill agreement
Structure: Tender Offer versus Merger

Had a number of different discussions regarding the structure of the transaction Main issue was speed to close, which favored the tender; however, the merger structure was chosen due to financing considerations and it allowed Board of Directors to conduct a market check through a go-shop Extensive discussions with Delaware counsel
The Go-Shop Provision

Negotiated a 30-day, broad go-shop, under which the numbers of parties was not limited, and a tiered break-up fee A properly structured go-shop can allow the Board to fulfill its fiduciary duties through a postsigning market check Can lead to the receipt of a superior proposal, as it did in this case
A Superior Proposal at a Lower Nominal Value

Three parties expressed interest, one executed a confidentiality agreement, one met with management and ultimately submitted a proposal Proposal of $30.00 was deemed superior due to certainty of closure to counter-offer of $30.50 by the Board of directors and Hidary was notified Required hiring of Delaware counsel Everlast paid the $3MM break-up fee, terminated the Hidary agreement and entered agreement with Brands Holdings
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Everlast Worldwide: Key Issues / Take-Aways

Activist Shareholders
Two major shareholders issued press releases chastising the Company and the Board of Directors for accepting the initial Hidary offer Pressured the Company to build a strong transaction record and obtain the highest and best price for the Company Same two shareholders joined the Hidary group and were publicly vocal against the Brands Holdings offer
Shareholder Lawsuits
Two lawsuits were filed claiming that the board of Directors did not adequately fulfill its fiduciary obligations Hidary filed a lawsuit in Delaware to enjoin the merger with Brands Holdings
The Jilted Suitor Turns Hostile

Hidary group unhappy with Boards decision to deem the Brands Holdings offer superior and would not accept delivery of break-up fee Contacted Brands Holdings in an attempt to participate with Brands holdings or get financial compensationHidary was rebuffed Issued public statements and sent letters to the Board and advisors outlining why they believed their offer to be superior Filed lawsuit in Delaware to enjoin the merger Ultimately withdrew lawsuit (weak case against a strong record) on legal counsels advice Everlast released Hidary from standstill allowing them another opportunity to make a superior proposal
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Case Study: Sears / Kmart

Transaction Overview: On November 17, 2004, Kmart Holding Corp. (Kmart) and Sears, Roebuck and Co. (Sears) announced the signing of a definitive agreement to combine Sears and Kmart to create one of the largest retail companies in the United States Valued Sears at $14.5 billion (including $3.6 million of debt) Second largest retailer at 3,400 retail locations Third largest retailer with approximately $57 billion in revenues The combined company was renamed Sears Holdings Corp., although each brand continued to operate under its own name
$15,000,000,000
has merged with
Transaction Process Overview: Worked with Kmart and its board of Directors to consummate a merger with Sears Performed separate valuation analyses including valuation of the Companys Land Ends, Kenmore, Diehard and Craftsman Brands. Also evaluated the divestiture of Sears Canada and Orchard Supply Hardware (in which Sears subsequently sold a minority stake to Ares Management) and performed real estate portfolio analyses to evaluate underlying asset value of extensive real estate portfolio Key Terms of Transaction: After analyzing potential divestitures, Kmart elected to keep all brands under the Sears umbrella at the time of the transaction close Sears Holding Corp. Overview: Holding company created through the merger of two large mass retailers Kmart Holding Corporation and its subsidiaries offer customers quality products through a portfolio of exclusive brands that include Thalia Sodi, Jaclyn Smith, Joe Boxer, Martha Stewart Everyday and Route 66 Sears, Roebuck and Co. is a leading broadline retailer providing merchandise and related services with the following proprietary brandsLands End, Orchard Supply Hardware, Kenmore, Diehard and Craftsman Brands
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Case Study: Sears / Kmart (contd)

Valuation Statistics (as of prior close)
Blended value of cash / stock offer: $50.34 Implied Sears LTM EBITDA multiple: 7.3x Implied premium to close on 11/16/04: 11.4% Implied premium to 30-day average price: 31.7% Reflects lower share price prior to the 11/5/04 announcement of Vornados stake in Sears
Equity Market Reaction

Equity market reacted very favorably to the transaction, bidding up both Sears and Kmart stock on the day of announcement (11/17/04) Sears stock closed at $52.99, up 17.2% Kmart stock closed at $109.00, up 7.7%
Pro Forma Company Structure

Shareholders of Kmart Holding Corp. Shareholders of Sears, Roebuck &Co.
~63.2%
~36.8%
The combination was achieved through a holding company structure (under 351) a double dummy transaction Ensured that stock component of consideration was to be tax-free to Sears shareholders Allowed for survival of the Sears legal entity Sears Holdings acted as the holding company for the Sears and Kmart businesses, which were expected to continue to operate separately under their respective brand names It was expected that over time, a significant number of Kmart off-mall stores would be converted to Sears
Sears Holdings
100%
Kmart Holding Corp
Sears, Roebuck & Co.
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Agenda
I II III IV V
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M&A Deal Studies
Diamond Foods / Kettle Foods Case Study

Financial Summary ($mm, unless otherwise noted)
Announcement Date Equity Value Add: Net Debt Assumed Enterprise Value Enterprise Value / LTM Sales Enterprise Value / LTM EBITDA Price / LTM Earnings Accretion / Dilution All Cash Deal FY1 Accretion / Dilution - $ FY1 Accretion / Dilution - % Accretion / Dilution Cash & Stock Deal1 FY1 Accretion / Dilution - $ FY1 Accretion / Dilution - % February 25, 2010 $350.2 264.8 $615.0 2.5x 11.5x n/m
Key Terms Summary ($mm, unless otherwise noted)

Transaction Type Transaction Attitude Tax Attributes Consideration - Cash / Stock % Stock Consideration Details Financing Contingency Employment Agreements Break-Up Fee % Equity Value % Enterprise Value Reverse Termination Fee % Equity Value % Enterprise Value Go-shop Provision Duration (months) Tiered Break-Up Fee Top-Up Option Minimum Condition Stock Purchase Friendly Fully Taxable 100 / 0 N/A No No $0.0 0.0% 0.0% $0.0 0.0% 0.0% No N/A N/A N/A N/A
$0.15 8.2%
($0.10) (5.4% )
Sources: Company reports, public filings, Bloomberg, Factset, Presidio estimates Note: Accretion / Dilution based on the change from consensus EPS estimates on the day before announcement 1 Consideration to Kettle Foods shareholders is all cash; this scenario reflects the effects of a potential stock issuance used by Diamond Foods to fund the acquisition
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M&A Deal Studies
Diamond Foods / Kettle Foods Case Study (contd)

Key Terms of the Stock Purchase Agreement
Announcement Date: Effective Date: Proposed Transaction: February 25, 2010 Pending Acquisition of 100% of the outstanding capital stock of Lion/Stove Luxemburg Investment S.a.r.l. (parent company of all US and UK Kettle operating entities) and all outstanding convertible preferred equity certificates (CPECs), which are being redeemed at face value 100% cash consideration of approximately $350 million ($615 million Enterprise Value less $265 million Net Debt at 1/31/2010) with standard working capital adjustment Diamond Foods (Diamond or DMND) will finance the transaction with a newly secured $600 million credit facility, a ~$150 million equity offering and cash on hand Closing should occur prior to April 30, 2010, and if DMND raises $150 million of equity prior to March 30, 2010, then Closing should occur prior to March 31, 2010 None Transaction will be taxable to Kettle Shareholders None Light warranties from all parties. Diamond warrants that it will have sufficient funds to satisfy its obligations under the Agreement Diamond unconditionally and irrevocably guarantees payment and specific performance without condition, set-off or counterclaim Diamond is indemnified for claims served in writing on or before the first anniversary of the Closing Date. The Sellers aggregate liability is capped at the total consideration received by the Seller under the Agreement Includes interim business conduct provisions for Kettle including ordinary course operations, stock issuance, indebtedness, changes in accounting principles, employment arrangements and other items Standard non-solicitation None If Diamond accepts an offer from a third party within six months of the Closing Date to sell all or a portion of the Company securities at a price higher than the price per share paid under this Agreement, Diamond must pay an amount equal to the excess price per share times the number of shares sold to the third party
Confidential 42
Total Consideration: Financing: Timing: Drop Dead Date: Tax Treatment: Material Adverse Effect: Reps & Warranties: Specific Performance: Indemnity:
Covenants:
Non-Solicitation/Fiduciary Out: Break-Up Fee: Seller Price Protection:
M&A Deal Studies

Key Terms of Diamonds Credit Agreement
Credit Facilities: Maturity: Collateral: $400 million Term Loan $200 million Revolver (expected $174 million drawn at closing of Kettle Foods acquisition) February 25, 2015 Secured by substantially all assets with subsidiary guarantees and cross-default provisions. Collateral may be released if (i) there has been no Default, (ii) Consolidated Leverage Ratio has been at or below 2.50x for at least two consecutive quarters and (iii) less than $100 million of the Term Loan remains outstanding Base Rate (highest of (i) Fed Funds Rate + 50 bps, (ii) Prime Rate, and (iii) LIBOR + 100 bps) + Applicable Rate (sliding scale from 125 bps to 250 bps based on the Leverage Ratio) Commitment Fee: Sliding scale from 37.5 bps to 50 bps based on the Leverage Ratio Ticking Fee: 50 bps on the Aggregate Commitment ($600 million) Arrangement and administrative agency fees Optional: Pre-payable at any time prior to maturity without premium or penalty Mandatory: Excess cash flow recapture and proceeds from asset sales, equity issuances, indebtedness and any other extraordinary receipt of cash Quarterly principal payments of $10 million with a $210 million bullet at Maturity Standard affirmative covenants, including reporting, notices, maintenance of properties and insurance, compliance, use of proceeds, guarantee and security and others Standard negative covenants with a $25 million new indebtedness bucket, a $10 million restricted payments bucket (See next page for Financial Covenants) Total consideration paid for acquisitions in each four quarter period must not exceed 50% of Consolidated Excess Cash Flow (used for excess cash flow recapture) and there shall be at least $50 million of availability under the Revolver after making any acquisition
Pricing: Fees:
Prepayments:
Term Loan Repayment: Affirmative Covenants: Negative Covenants: Permitted Acquisitions:
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M&A Deal Studies

Key Terms of Diamonds Credit Agreement (contd)
Financial Covenants: Consolidated Leverage Ratio, defined as Debt / EBITDA, based on the following schedule: Date Funding April 2011 April 2011 April 2012 April 2012 April 2013 April 2013 April 2014 April 2014 Maturity Max Ratio 4.75x 4.25x 3.75x 3.50x 3.25x
Consolidated Fixed Charge Coverage Ratio, defined as (i) EBITDA less (ii) capex and (iii) cash taxes divided by the sum of (i) interest expense, (ii) debt principal payments and (iii) Restricted Payments, based on the following schedule: Date Funding October 2012 October 2012 October 2013 October 3012 Maturity Max Ratio 1.10x 1.20x 1.25x
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M&A Deal Studies
Shiseido / Bare Escentuals Case Study

Financial Summary ($mm unless otherwise noted)
Announcement Date Close Date Offer Price/Share % premium to Pre-Announcement Price % premium to 52-wk High FD Shares Outstanding (millions) Equity Value Add: Net Debt Assumed Enterprise Value Enterprise Value / LTM Sales Enterprise Value / LTM EBITDA Price / LTM Earnings Accretion / Dilution Accrual EPS FY1 Accretion / Dilution - $ FY1 Accretion / Dilution - % FY2 Accretion / Dilution - $ FY2 Accretion / Dilution - % Accretion / Dilution Cash EPS FY1 Accretion / Dilution - $ FY1 Accretion / Dilution - % FY2 Accretion / Dilution - $ FY2 Accretion / Dilution - %
Sources: Company reports, public filings, Bloomberg, Factset Note: Assumes 20 year amortization of Goodwill Assumes 100% of cash proceeds financed with debt Accretion / Dilution based on changes from IBES EPS Estimates
Key Terms Summary ($mm unless otherwise noted)

Transaction Type Transaction Attitude Tax Attributes Consideration - Cash / Stock % Stock Consideration Details Financing Contingency Employment Agreements Break-Up Fee % Equity Value % Enterprise Value Reverse Termination Fee % Equity Value % Enterprise Value Go-shop Provision Duration (months) Tiered Break-Up Fee Top-Up Option Minimum Condition Stock Purchase Friendly Tender Fully Taxable 100 / 0 N/A No Yes $43.5mm 2.5% 2.3% $0.0 0.0% 0.0% No N/A No Yes 50.0%
January 14, 2010 Pending $18.20 39.9% 22.4% 95.585 $1,739.6 132.0 $1,871.6 3.5x 11.5x 20.8x
5.41 7.6% 7.09 9.6%
18.36 25.7% 20.04 27.0%
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M&A Deal Studies
Shiseido / Bare Escentuals Case Study (contd)

Summary of Key Terms
Announcement Date: Effective Date: Proposed Transaction: January 14, 2010 Pending Acquisition of 100% of the outstanding capital stock of Bare Escentuals, Inc. (BARE) for $18.20 per share via an all-cash tender offer; implies a 39.9% premium to BAREs closing price on January 13, 2009, the last trading date prior to announcement 100% cash consideration of approximately $1.7 billion; implies $1.9 billion in enterprise value, assuming cash of $98.7 million and debt of $230.7 million Tender offer to commence 10 days post signing of the transaction (1/25/2010) and be open for 30 days (until 3/8/2010) May 31, 2010 Transaction will be taxable to BAREs shareholders Any change, event, circumstance or occurrence that (a) is or is reasonably likely to be materially adverse to the business, results of operations or financial condition of the Company and its Subsidiaries taken as a whole or (b) would prevent or materially delay consummation by the Company of the transactions contemplated by the Merger Agreement or otherwise prevent or materially delay the Company from performing its obligations under the Merger Agreement. BARE-specific exclusions include changes in the beauty or cosmetics industry, distributions channels in which the company operates, credit rating, stock price and/or trading volume Other exclusions include acts of war or terrorism, natural disasters, changes in regulations, the signing of the agreement, unless, in certain cases, there is a disproportionate effect on BARE and its operations Reps & Warranties: Both Shiseido and BARE made standard public company representations and warranties, largely qualified by MAE clauses and some knowledge qualifiers; Shiseido required to have financing in place at the time of initial expiration of the tender offer and at the effective date Includes interim business conduct provisions for BARE with regard to capital stock or other securities or rights, dividends, indebtedness ($1million per; $5 million aggregate), contracts, CAPEX, acquisitions (over $3 million), employment, accounting methods and other items
Total Consideration: Timing: Drop Dead Date: Tax Treatment: Material Adverse Effect:
Covenants:
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M&A Deal Studies

Summary of Key Terms (contd)
Non-Solicitation: The Company has agreed that neither it nor any Subsidiary shall, directly or indirectly, through any officer, director, agent or otherwise, (i) solicit, initiate or knowingly facilitate or encourage (including by way of furnishing non-public information other than in the ordinary course of business) any inquiries regarding, or the making of any proposal or offer (including any proposal or offer to the Company's stockholders) that constitutes, or could reasonably be expected to lead to, a Takeover Proposal, (ii) engage in, continue or otherwise participate in any discussions or negotiations regarding a Takeover Proposal or (iii) enter into any agreement or agreement in principle with respect to a Takeover Proposal If at any time on or after the date of this Agreement and until the purchase of Shares by Merger Sub pursuant to the Offer, the Company or its Representatives receives an unsolicited, written, bona fide Takeover Proposal from any Person or group of Persons, which Takeover Proposal was made on or after the date of this Agreement and which did not arise or result from any breach of this Agreement, (i) the Company and its Representatives may contact such Person or group of persons to clarify the terms and conditions thereof and (ii) if the Board of Directors of the Company, or any committee thereof, determines in good faith, after consultation with its independent financial advisors and outside legal counsel, that such Takeover Proposal constitutes, or could reasonably be expected to lead to, a Superior Proposal, then the Company and its Representatives may (A) furnish, pursuant to an Acceptable Confidentiality Agreement, information (including non-public information) with respect to the Company and its Subsidiaries to the Person or group of Persons who has made such Takeover Proposal; provided, that the Company shall promptly provide to Parent any material non-public information concerning the Company or its Subsidiaries that is made available to any such Person, which was not previously made available to Parent or its Representatives; and (B) engage in or otherwise participate in discussions and/or negotiations with the Person or group of Persons making such Takeover Proposal Fiduciary Out: Standard fiduciary out in the event the Board receives a Takeover Proposal (threshold of 20%), deems it a Superior Proposal (threshold of 50%) and has notified Shiseido and complied with notice provisions Customary for a public merger; continued employment of Leslie Blodgett, BAREs CEO
Conditions to Closing:
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M&A Deal Studies

Contribution Agreement: Leslie Blodgett agreed (i) not to tender or cause to be tendered in the Offer, any Shares, (ii) immediately following the acceptance of shares of Common Stock of the Company for payment pursuant to the Offer, to contribute 4,710,963 Shares (~84% of her holdings) to Holdings in exchange for membership interests in Blush Holdings and a cash distribution from Holdings, (iii) that the 889,728 Shares not contributed to Holdings will be converted into the merger consideration pursuant to the Merger, and (iv) to vote (a) against any action, agreement (other than the Merger Agreement and the transactions contemplated thereby) or proposal that would result in a breach of any representation or warranty, covenant or other obligation of the Company under the Merger Agreement or that reasonably would be expected to result in any of the conditions to the Company's obligations under the Merger Agreement not being fulfilled and (b) in favor of any other matter necessary to the consummation of the transactions contemplated by the Merger Agreement that are voted on by the stockholders of the Company In sum, Blodgett will receive cash of approximately $61.2 million for 60% of her total holdings and three (3) Class II Units; Shiseido will receive 100 Class I Units in Blush Holdings LLC, a subsidiary of Shiseido This agreement was a condition precedent to entering into the Merger Agreement
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M&A Deal Studies

Blush Holdings LLC: Entity formed for the purposes of the Shiseido / BARE merger with ownership comprised of Shiseido (Managing Member with Class I shares) and Leslie Blodgett (Non-Managing Member with Class II shares) Blush Holdings LLC agreement outlines the purpose of the entity in the transaction; ostensibly it allows for indirect and continued ownership by Leslie Blodgett in Shiseido for a large portion of her current ownership in BAREapproximately 40% Liquidation of Blodgetts Class II Units can occur under a number of scenarios from 2010 to 2012 as follows: Automatic Redemption: Automatic annual redemption by Shiseido each year; Contribution Amount + annual 4% prorated return + Participation Amount (an additional amount equal to incremental EBITDA x Multiple x Ownership) Accelerated Redemption: Blodgett discontinues employment event; Contribution Amount + annual 4% prorated return + Participation Amount (formula pro-rated to reflect change from Automatic Redemption) Optional Redemption: Shiseido change of control event; Contribution Amount + annual 4% prorated return + Participation Amount (formula pro-rated to reflect change from Automatic Redemption) Change of Control Redemption: Bare Escentuals change of control event; Greater of Accelerated Redemption price or a percentage of the aggregate consideration EBITDA Threshold Amounts: Fiscal Year 2010: $170.5 million Fiscal Year 2011: $188.3 million Fiscal Year 2012: $195.7 million Shiseido granted an irrevocable option that will allow the number of shares owned by it to be one share more than 90% of fully diluted shares outstanding $43,528,152 (2.3% of equity value and 2.5% of enterprise value) payable by BARE under certain circumstances All options, restricted shares and any contingent rights to acquire or receive shares shall be cashed out at the transaction price, whether vested or unvested
Top-Up Option: Break-Up Fee: Options/Warrants:
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M&A Deal Studies
Sanofi-Aventis / Chattem Case Study

Financial Summary ($mm unless otherwise noted)
Announcement Date Close Date Offer Price/Share % premium to Pre-Announcement Price % premium to 52-wk High FD Shares Outstanding (millions) Equity Value Add: Net Debt Assumed Enterprise Value Enterprise Value / LTM Sales Enterprise Value / LTM EBITDA Price / LTM Earnings Accretion / Dilution Accrual EPS FY1 Accretion / Dilution - $ FY1 Accretion / Dilution - % FY2 Accretion / Dilution - $ FY2 Accretion / Dilution - % Accretion / Dilution Cash EPS FY1 Accretion / Dilution - $ FY1 Accretion / Dilution - % FY2 Accretion / Dilution - $ FY2 Accretion / Dilution - %
Sources: Company reports, public filings, Bloomberg, Factset Note: Assumes 15 year amortization Assumes 100% of cash proceeds financed with debt Accretion / Dilution based on changes from IBES EPS Estimates
Key Terms Summary ($mm unless otherwise noted)

Transaction Type Transaction Attitude Tax Attributes Consideration - Cash / Stock % Stock Consideration Details Financing Contingency Employment Agreements Break-Up Fee % Equity Value % Enterprise Value Reverse Termination Fee % Equity Value % Enterprise Value Go-shop Provision Duration (months) Tiered Break-Up Fee Top-Up Option Minimum Condition Stock Purchase Friendly Fully Taxable 100 / 0 N/A No Yes 64.6 3.5% 2.9% $0.0 0.0% 0.0% No N/A No Yes 50.0%
December 21, 2009 February 8, 2010 $93.50 33.6% 30.0% 19.850 $1,856.0 365.0 $2,221.0 4.8x 13.3x 29.4x
$0.02 0.2% $0.02 0.3%
$0.03 0.4% $0.03 0.5%
Confidential
50
M&A Deal Studies
Sanofi-Aventis / Chattem Case Study (contd)

Summary of Key Terms
Announcement Date: Effective Date: Proposed Transaction: January 21, 2010 Pending Acquisition of 100% of the outstanding capital stock of Chattem, Inc (CHTT) for $93.50 per share via an all-cash tender offer; implies a 33.6% premium to CHTTs closing price on January 18, 2009, the last trading date prior to announcement 100% cash consideration of approximately $1.9 billion; implies $2.2 billion in enterprise value, assuming net debt of $365 million Tender offer to commence January 2010 April 30, 2010 Transaction will be taxable to CHTTs shareholders Any change, effect, event, development, state of facts or occurrence that is or would reasonably be expected to be materially adverse to the business, assets, results of operations or financial condition of the Company and its Subsidiaries taken as a whole CHTT-specific exclusions include changes in the industry, general market conditions and inability of CHTT to meet any internal or published financial projections, forecasts or earnings predictions for any period ending on or after the date of the agreement Other exclusions include acts of war or terrorism, law or GAAP, natural disasters, changes in regulations, the signing of the agreement, unless, in certain cases, there is a disproportionate effect on CHTT and its operations Reps & Warranties: Both Sanofi and CHTT made standard public company representations and warranties, largely qualified by MAE clauses; Sanofi required to have financing in place for the transaction, including amounts to fulfill CHTTs obligations with regard to its Convertible Senior Notes, redeem its Senior Subordinated Notes and repay and discharge its Credit Facility Includes interim business conduct provisions for CHTT with regard to capital stock or other securities or rights, dividends, indebtedness ($500,000 in the aggregate), contracts, CAPEX ($750,000 in the aggregate), acquisitions, properties or assets ($500,000 individually; $1.5 million in aggregate), employment, accounting methods and other items Standard non-solicitation agreement; standard fiduciary out in the event the Board receives a bona fide, written Takeover Proposal (threshold of 20%), deems it a Superior Proposal (threshold of 50%) and has notified Sanofi and complied with all notice provisions
Total Consideration: Timing: Drop Dead Date: Tax Treatment: Material Adverse Effect:
Covenants:
Non-Solicitation/Fiduciary Out:
Confidential
51
M&A Deal Studies
Sanofi-Aventis / Chattem Case Study (contd)

Conditions to Closing: Top-Up Option: Break-Up Fee: Options/Warrants: Standard conditions for a public tender offer Sanofi granted an irrevocable option that will allow the number of shares owned by it to be one share more than 90% of fully diluted shares outstanding $64,596,000 (3.5% of equity value and 2.9% of enterprise value) payable by CHTT under certain circumstances All options shall be cashed out at the transaction price, whether vested or unvested, and option holders to receive cash equal to the difference between the offer price and exercise price (net exchange feature)
Confidential
52
Agenda
I II III IV V
Confidential
53
Overview of Presidio
Who We Are
Presidio Financial Partners is a provider of capital and corporate and wealth advisory services to leading public and private companies, wealth creators and financial sponsors
We specialize in helping to create and protect wealth and shareholder value
The Firm is focused on establishing long-standing, deep relationships with its client base, spanning multiple services, multiple years and, at times, multiple client businesses

Presidios mission statement is Earning Clients-for-Life Presidio is dedicated to maximizing clients long-term financial health
Presidio serves its clients through three core businesses

Presidio Investors: $45 million private equity fund Presidio Merchant Partners: Corporate advisory, M&A and capital raising Presidio Wealth Management: Independent, unconflicted wealth advisory
Presidios corporate advisory value proposition consists of delivering excellent execution by senior bankers with deep transaction and capital markets experience

Strong relationships with the corporate and financial communities Extensive experience in representing private companies in a variety of advisory assignments, including buy-side and sell-side M&A engagements and capital raises Providing creative solutions and execution strategies enabling clients to build and/or realize long-term value
Founded in 1997, Presidio has grown rapidly to become one of the premier boutique financial advisory firms in the U.S.
Approximately 60 employees with a presence in San Francisco, Dallas, Los Angeles, Chicago and Ft. Lauderdale
Confidential
54
Business Model and Services

Presidio Financial Partners provides capital and advisory services to corporations, wealth creators and entrepreneurs across their corporate and economic lifecycles
Leading Corporations / Private Equity

Private Equity
Presidio Investors
$45 million investment fund Fund I Investing utilizing Presidios unique knowledge base, network and business model Primary focus: growth and private equity investing Hands-on execution by senior team Partnering with Clients by Providing Capital
Investment Banking
Presidio Merchant Partners
Investment banking and corporate advisory with emphasis on M&A advisory and private capital raising Focus on small to mid-market growth companies Deep relationships with the broader corporate and financial community Experienced senior banking team
Wealth Management
Presidio Wealth Management
Independent wealth management advisory Focus on 1st generation wealth creators $4 billion under advisement ~175 clients Personal CIO model
Corporate Strategic Advisory Services
Wealth Management and Preservation Services
Entrepreneurs / Wealth Creators
Confidential
55
Guiding Principles
We are the premier provider of independent financial advisory services and capital to public and private companies, financial sponsors, wealth creators and innovators At Presidio, our mission is to earn clients for life We strongly believe that each member of our team contributes to achieving our mission by adhering to our six guiding principles
Excellence: We take great pride in our professional performance. We relentlessly strive to achieve excellence in all of our business activities. Teamwork: The strength of many is greater than the strength of one. We work together as a team to best serve our clients. Commitment: Focus and dedication are critical to our success. We are passionately committed to our clients, firm, mission and guiding principles. Respect: We treat others as we would have others treat us. Meritocracy: Presidio is simply a merit-based firm. Those of us who place the interests of our clients and of the firm first will rise higher and faster through our organization. Purity of Heart: There is a distinct difference between doing what is right and doing what is wrong. We maintain the highest ethical standards and do what is right for our clients at all times.
Presidios adherence to these guiding principles has allowed the Firm to establish itself as one of the leading financial institutions in the U.S.
Confidential
56
Sector Focused Investment Banking
Consumer, Food & Retail
Industrial Growth
Digital Media & Marketing Services
Branded Consumer Products, Food & Beverage, Retail
Performance materials, manufacturing, alternative energy, industrial efficiency
Digital & Interactive Marketing, Online Advertising, SEO / SEM, Internet, eCommerce
Technology Enabled Business Services

Software, Lead Generation, CRM, BPO, IT Consulting
Automotive
Retail, dealer services, automotive technology
Confidential
57
Presidio Investment Banking Consumer, Food & Beverage

The Consumer Group is focused on service and product companies across a wide range of verticals and sub-sectors, including Food & Beverage, Beauty and Personal Care, Restaurants, Staffing and Sporting Goods Notable and recent Consumer transactions by our team members include the following transactions:

Blue Horizon Organic Seafood Companys minority equity recapitalization Tree of Lifes $190 million divestiture from Royal Wessanen NV Lindoras minority recapitalization and capital raise Kmart Corporations ~$15 billion merger with Sears Roebuck & Co. Blu Dots ~$30 million minority recapitalization and capital raise Ulta Cosmetics ~$170 million IPO Bare Escentuals ~$350 million IPO and ~$475 million follow-on Physicians Formulas ~$140 million IPO and ~$105 million follow-on Dave & Busters ~$375 million sale to Wellspring Capital Management Everlast Worldwides ~$200 million sale to Sports Direct Plc Golf Galaxys ~$225 million sale to Dicks Sporting Goods
Presidios lead investment bankers leverage over 30 years of transaction generation and execution to deliver high quality strategic and financial advisory to their clients We are in active dialogue with private and public companies, venture capitalists and private equity firms on buy-side and sell-side M&A and strategic advisory
Confidential 58
Presidio Investment Banking Consumer Client Companies
* Includes transactions completed by Presidio Merchant Partners LLC or by Presidio team members prior to joining the firm
Confidential
59
Presidio Investment Banking Strong Private Equity Relationships
Confidential
60
Selected Branded Consumer Transactions

Millbrook Capital Management Company has completed a minority equity offering to Initial Public Offering $228,000,000 $140,000,000 $173,000,000
has been divested by and acquired by
Strategic Advisor with Regard to Wine Assets
Presidio Investors
$191,000,000
$80,000,000
$105,000,000
$476,000,000
has completed a divestiture of 87 stores to Coventry Real Estate $352,000,000
has been acquired by Follow-on Offering $375,000,000 Follow-on Offering $190,000,000 $15,000,000,000 Initial Public Offering $350,000,000
has been acquired by Strategic Alternatives Review Initial Public Offering $215,000,000 $300,000,000
has acquired Lenox Group, Inc.
has merged with
$245,000,000
has been acquired by has merged with Home Choice Holdings, Inc. Valuation Opinion
* Includes transactions completed by Presidio Merchant Partners LLC or by Presidio team members prior to joining the firm
Confidential
61

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Presidio Financial Partners LLC

Mergers & Acquisitions: A Practitioner's Perspective

101 California Street, Suite 1200 San Francisco, CA 94111 415-733-0000

M&A Market and Industry Overview

M&A Industry Overview

What does Mergers & Acquisitions, or M&A mean?

M&A Market and Industry Overview

M&A Industry Overview (contd)

Most M&A transactions share a number of key characteristics:

M&A Market and Industry Overview

M&A Industry Overview (contd)

Accountants Attorneys Consultants Commercial bankers Investment bankers

M&A Market and Industry Overview

The M&A Market was Less Active in 2009

Total U.S. Middle Market M&A Volume (# deals)

4,200 4,009 4,000 4,044

Source: Dealogic as of 12/31/2009

Source: Dealogic as of 12/31/2009

M&A Market and Industry Overview

Private Equity Activity Fell With Credit Conditions

Total U.S. Private Equity M&A Volume ($ billions)

$133 $87 $98

Source: Dealogic as of 12/31/2009

M&A Market and Industry Overview

But Recent Deals Signal a Potential Thawing of the M&A Market

An M&A Practitioner's Career Path

The Various Levels of M&A / Investment Banking

Associate (3-4 years)

Vice President (2-3 years)

An M&A Practitioner's Career Path

The Various Levels of M&A / Investment Banking (contd)

Managing Director / Partner

An M&A Practitioner's Career Path

An M&A Analysts Perspective A Day in the Life

An M&A Practitioner's Career Path

Various M&A Assignments

Outsourced Business Development

An M&A Practitioner's Career Path

Core M&A Deliverables / Analyses

Accretion / (Dilution) Analysis

Confidential Information Memorandum

Case Studies of an M&A Practitioner

Case Study: Lindora LLC

has completed a minority equity recapitalization with

Case Studies of an M&A Practitioner

Case Study: Tree of Life

Has been divested by And acquired by

Case Studies of an M&A Practitioner

Case Study: Blue Horizon Foods

has completed a minority equity recapitalization with

Case Studies of an M&A Practitioner

Case Study: New York Financial Institution

New York Based Hedge Fund

Financial Advisor with regard to Wine Assets

Case Studies of an M&A Practitioner

Case Study: Bare Escentuals

Case Studies of an M&A Practitioner

Case Study: Gilchrist & Soames

has been acquired by

Case Studies of an M&A Practitioner

Case Study: Ulta Salon, Cosmetics & Fragrance, Inc.

10/30/2007 $154 initial public offering