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LBO of Alarm Services

LBO of Alarm Services. Balancing Risk and Reward. Nicolas Lindstrom Samuel Nadeau Franco Perugini. Mandate. North Village Capital purchase of AlarmServce Inc. Debt Structure. Strategic Fit. Return. Recommendation.

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LBO of Alarm Services

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  1. LBO of Alarm Services Balancing Risk and Reward Nicolas Lindstrom Samuel Nadeau FrancoPerugini

  2. Mandate North Village Capital purchase of AlarmServce Inc. Debt Structure Strategic Fit Return

  3. Recommendation Complete LBO of AlarmServe, utilizing 2.5x Debt/EBITDA at entry to realize a 25% IRR

  4. Mandate Industry is a good fit for an LBO

  5. How NVC can add Value Expand to new geographic areas Focus on higher-margin accounts $2 Million Dollars by year 4 Reduce operating cost Eliminate cost of being public NVC can add value to the company through their involvement

  6. Decision of debt Level

  7. Decision of debt Level Default risk is the deal-breaker

  8. Decision of debt Level Medium leverage is the best option

  9. How NVC can add Value Stable industry for LBO NVC can add $2 Value AlermServe is a good strategic investment investment for NVC Medium leverage is the best leverage level

  10. Valuation

  11. Valuation Introduction

  12. Assumptions

  13. Income Statement Margin expansion provided by synergies and operating leverage

  14. Working Capital Working Capital will require cash from the business

  15. Deal Structure Moderate debt levels to minimize risk

  16. Debt Schedule

  17. Cash Flow Debt repayment will be the major cash drain

  18. Return Profile 25% IRR with a 3x multiple on money

  19. Weak 2010 Return Check -5% Revenue growth in ‘10 leads to 19% IRR

  20. Return Sensitivity Exit EBITDA and Exit Multiple IRR Sensitivity Multiple contraction will still provide sufficient returns

  21. Implementation

  22. Acquisition Timeline Focus of due diligence will be on empolyee retention

  23. Debt 2.5x Total Leverage

  24. Leverage and Covenants All covenants are very comfortably respected

  25. Management Strategies New strategies will increase CF to pay down debt

  26. Management fees Management fees will add to returns

  27. Exit strategies decision matrix Returns will be the deal maker

  28. Sale Timeline A strong CIM will be crucial to strong exit valuation

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