M&A market update

1. M&A market update STEVE WOOLMER & jamesfieldhouse OCTOBER 2013

2. What we will cover M&A Market Update

3. DEAL METRICS • UK deals in 2013 Who were the buyers Who were the sellers Population of 56 deals M&A Market Update

4. Spread of deals by sector UK deals in 2013 M&A Market Update

5. KEY DEALS LAST 12 MONTHS £2.8mJune 2013 Management buyout of backed by ISIS PE LLP £n/dmDecember 2012 Management buyout of • Backed by • Baird Capital Europe £n/dJuly 2013 Acquisition of • by Pinstripe Inc £234mOctober 2012 • Acquisition of • by Graphite Capital to • AEA Investors £n/dOctober 2012 • Sale of by Palatine Private Equity to LGV Capital • Management buyout backed by ISIS PE LLP • Specialist executive search and intelligence consultancy • Investment will allow further international expansion and help to develop the infrastructure further • MBO backed by Baird Capital Europe in a BDO led process • Unitranche debt financing was provided by Beechbrook Capital • SR owns a number of leading brands operating globally with a focus on the legal services market • Sale by UK PE to overseas private company • The sale by NBGI Private Equity represented a 4x return on their original investment • Independent provider of RPO and talent management solutions • Graphite backed the £86m management buyout in 2006 • The transaction represents an estimated EBITDA multiple of 12.4x • Created 20 new offices under PE ownership & now has 32 locations around the world • Palatine backed the £30m management buyout in 2009 • Debt financing of £61.5m was provided by HSBC. • Services to the oil & gas sector, operating from 35 offices worldwide in over 50 countries M&A Market Update

6. NEXT 12 MONTHS... Figure A: Trend of working hours and vacancies • Key factors: • “confidence” • availability of debt (?) • private equity landscape • strategy of corporate • acquisition v organic growth • activity in niche sectors Source: Datastream, Shore Capital Stockbrokers M&A Market Update

7. SIMPLE VALUATION OF YOUR BUSINESS • In 'asset light' companies, valuation focuses on the earnings/cash generation potential EARNINGS MULTIPLE ENTERPRISE VALUE • x • = EnterpriseValue plus cash less debt (includes invoice discounting) = Equity value M&A Market Update

8. MAXIMISING THE VALUE DRIVERS EARNINGS MULTIPLE CASH GENERATION • Presentation is key • ‘Quality’ of the earnings: • Sustainable • Contract element. • Cost of investment: • In branches • In new teams • New consultants • New systems • Run-rate of earnings/growth prospects. • Recruitment sector valuations • Quoted multiples • Other transactions • M&A activity in the sector • Sector dynamics − high growth, niche etc • Scale − Not dependent on key individuals, breadth of management. • Business sold on a debt free/cash free basis • Balance between investing for future growth and short-term cash generation • Efficient tax planning − corporation tax, indirect taxes, employee tax. M&A Market Update

9. ESSENTIAL STEPS • Planned sale process • Competitive tension • Targeted buyers. • Business Plan • Add backs/exceptionals • EBITDA bridge historic to forecast. Buyers and saleprocess Profitability/growth VALUEMAXIMISATION • Exit − personal/ strategic • Partial exit. • Withstand sale process • Anticipate buyers needs • Create confidence • Systems − robust and scalable. Rationale Information Cashgeneration People • Succession • Aligned • Incentivisation. • Working capital • Taxation • Contingent liabilities. M&A Market Update

10. summary • Buyers • Know your market and targets • Understand the people agenda – you’ve bought the company, how about the people? • What do you bring that will enhance your chances of success • Can the synergies really be achieved and enhance value? • Sellers • When do you want to sell? • Plan your strategy for the business accordingly • Be realistic in your expectations • A growth company is more valuable than a lifestyle company • Exit or retirement sales can be difficult to achieve without sales and succession planning • A lot of businesses have three year exit plans. M&A Market Update