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Managing Liquidity and Financing Relations Med Tech Strategies for Perilous Times

Learn how to navigate the challenging economic conditions and secure financing in the medical technology industry. Tatum LLC, the largest and only Executive Services firm with expertise in the Office of the CFO, will provide insights on maximizing the CFO's role in solving financial and operational problems.

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Managing Liquidity and Financing Relations Med Tech Strategies for Perilous Times

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  1. Managing Liquidity and Financing Relations Med Tech Strategies for Perilous Times Lee Steele, Partner, Tatum LLC MassMEDIC Meeting March 5, 2009

  2. Who Is Tatum? “Tatum, LLC is the largest and only Executive Services firm in the U.S. with a singular focus on leveraging the “Office of the CFO” to solve problems, accelerate business performance and create more value™. We work with companies of all sizes who need decisive leadership, talent, capacity, and execution on an urgent basis. Tatum understands the urgency of NOW and responds quickly to deliver the right executive and a highly flexible team of resources to address the client’s most pressing financial and operating problems.” 37 Offices 1,000+ professionals 6,000+ clients Executive Leadership, Consulting, and Search Strategic, Finance, IT, and Execution Expertise “Velocity, Objectivity, and Focus” Maximize the “Office of the CFO”

  3. How distressed is the economy? Chicago Fed National Activity Index • Measures the economy based on 85 indicators • Has accurately predicted the past six recessions

  4. What’s it like out there? • Financing Market is Tighter Than We’ve Ever Seen… >> BUT << • Access to credit depends, in part, on size of deal • Mid to large middle market (deals $25 million to $250 million): there is a market, but still difficult • Lower middle market (deals $5 million to $25): some are getting done • AND – only the most creditworthy need apply • New Venture Financing Rounds? • Highly relationship-driven; still takes forever • Reserved for only the most promising, quickest time-to-money ventures • Aggressive pricing; “take it or leave it;” prepare for down round • M&A Market? • Don’t count on it unless already in the partner’s deal pipeline

  5. Ten questions to ask your CFO • Explain our bank covenants. How close are we to default? • Show me your rolling 13-week and 4-quarter cash projections, plus your prospective covenant tests. • If we can’t raise another dime, how long can we make our cash last? • Fully explain the implications of a loan default. Could this threaten the company's existence? What discussions have you had with our bank and investors re: our current credit relationship? • Can the bank call our loan? • What would be the covenant forbearance fee? $100,000 or more? • What are the terms of a loan reset? Could they raise our interest cost by +2 – 5%? • How invasively would we be monitored? Would our line be reduced? Would our VCs be asked for guarantees?

  6. Ten questions to ask your CFO (cont’d) • What reports and forecasts are we showing our bank? The same we’re showing to our Board? To our investors? • Is our current spending budget reality-based? Do you have a downside scenario? Would THIS trip our covenants? • What products make us money? How do you know? • How involved are you in pricing and customer credit decisions? • What metrics do you use to make such decisions? • What’s the basis for these?

  7. Ten questions to ask your CFO (cont’d) • How much cash is tied up in working capital? What would it take to cut that by 25%? By 50%? • Give me a list of everything not mission-critical we could sell, shut down, mothball, defer, slow down or whatever. How much would each save us? • Has your team ever been through this before? Are you keeping other members of management fully informed and holding them accountable? Do you feel it’s your job to worry these issues for the company?

  8. Conclusion: Plan for the Worst and Good Things Might Happen • Take charge of the situation – LEAD! Get out ahead • Don’t let events overtake you • Survival doesn’t happen by accident • Hope is not a strategy! • Now more than ever, cash is king • Focus obsessively on your core business • Eliminate all distractions from the main mission • Use this time to get stronger and be better positioned for the (eventual) recovery • Surround yourself with the best: • Best team; Best suppliers; Best customers; Best advisors; Best investors

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