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Corporate Finance Professional Interest Forum

Corporate Finance Professional Interest Forum. “Navigating your way through Venture Capital Terms and Conditions: Advice from the Coal Face” Chairman: Frank Moxon CF FSI. Corporate Finance Professional Interest Forum. Mark Storey, Alcuin Capital Dee Sian, Marriott Harrison.

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Corporate Finance Professional Interest Forum

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  1. Corporate Finance Professional Interest Forum “Navigating your way through Venture Capital Terms and Conditions: Advice from the Coal Face” Chairman: Frank Moxon CF FSI

  2. Corporate Finance Professional Interest Forum Mark Storey, Alcuin Capital Dee Sian, Marriott Harrison

  3. Navigating your way through Venture Capital Terms and Conditions: Advice from the Coal Face 6 October 2009

  4. Financing • Type of financing required • PE/Venture or business angel or bank debt or vendor • What is it for? • Start-up • Growth capital • Buyout • acquisition • Differences between PE and Venture • Minority / majority stake • Size of deal

  5. Financing • Know your investor • VC house • Investment style / philosophy • Investment executives • Chemistry / reputation • Portfolio track record • Added value ? • Funds and amounts invested • Follow-on money

  6. What have you signed up to? • Commonly known as: • Heads of Agreement • Offer letter • Term sheet • Commitment letter • A gentleman's agreement to fund • It is not the final agreement

  7. What have you signed up to? • What does it mean for an Investor • Exclusive arrangement to fund • (Near) Certainty of key deal terms • What does it mean for a company • Near certainty of funding • (Near) Certainty of key deal terms

  8. What have you signed up to? • What conditions need to be met • Investor approvals and process • Due diligence • Financial • Legal • Customer • Tax clearances and ITEPA elections • Key man insurance • Banking & other finance

  9. What should you look out for? • When will funding be available and what will it look like • In one go or tranched • Certainty / conditions to drawdown • Equity / Debt / Combination • Secured / Unsecured - priority arrangements • Maintaining shareholder value • Investor holding vs. incentivising employees and management • Employee shareholder leavers

  10. What should you look out for? • Control • Board composition vs. shareholder composition • Business decisions / vetos • Confidentiality • Deal team at the Investor and within the company • Access to papers and staff for due diligence • Information sharing • Personal undertakings from management • Warranties/disclosures • Covenants post deal and post employment • Service agreements

  11. What should you look out for? • Costs • Abort fees (unlimited or capped) • Deal fees • Upfront negotiation fee • Ongoing monitoring fee • Investor director fee • Adviser fees

  12. What should you look out for? • What if things go wrong? • Default rights • Exit • Investors expectation vs. management’s expectation • Returns on investment and priority • Exit ratchets • Forced exits

  13. Back to reality • 2007 was the exception • 2009 is the reality • Is 2010 the brave new world ? • Themes: • Banking • Hedging • Growth • Know your investor! • Tax ?

  14. Mark Storey, Partner +44 (0)20 3178 4089 Mark@alcuincapital.com Dee Sian, Partner +44 (0)20 7209 2004 dee.sian@marriottharrison.co.uk Contacts:

  15. Corporate Finance Professional Interest Forum Thank you for attending today’s session. Please return your badge after the session

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