Published on February 3, 2014
Asset Management Industry Focus 2013 1
Asset Management Industry Focus 2013 Table of Contents SECTION 1 Practice Overview SECTION 2 M&A Advisory SECTION 3 Portfolio Valuation SECTION 4 Restructuring SECTION 5 Financial Sponsor Coverage SECTION 6 About Madison Street Capital 3 6 10 13 16 18 2
SECTION 1 Practice Overview
Practice Overview MADISON STREET CAPITAL provides an integrated, full-service approach to both strategic and financial advisory that provides solutions to clients across the globe. Our industry specialists advise a wide array of Asset Managers on the entire spectrum of corporate issues including M&A Advisory, Portfolio Valuation (ASC 820 and IAS 39 compliant), Financial Restructuring, and Financial Sponsor Coverage. We cater to the following types of clients: -Hedge Fund Managers -Mutual Fund Managers -Private Equity Firms -Family Offices -CLO Managers -Business Development Corporations (BDCs) -Specialty Finance -Asset Management Arms of Financial Institutions -Pension Funds and Endowments 4
Company Overview – Asset Manager Industry Focus Madison Street Capital’s Asset Management Industry Focus group provides the following investment banking and valuation services to Asset Managers: M&A ADVISORY • Sell-side and Buy-side Advisory • Divestitures and Strategic Alliances • Capital Introductions • Due Diligence and Transactional Support • Seeding Transactions VALUATION •Portfolio Valuations (complex, hard -to-value securities) •Monthly, Quarterly, and Annual Pricing Reports •Management Company Valuations •Financial Opinions (Fairness, Solvency, and Transaction) RESTRUCTURING FINANCIAL SPONSOR COVERAGE • Restructuring (Wind Downs; Side Pockets; Fund Transfers) •Deal-flow generation through: • Recapitalization (Loan Workouts; Refinancing) -Private Placements -Debt Financings -Structured Debt/Equity • Asset Disposal and Liquidations • Distressed Debt • Management Company Reorganizations •Secondary Market Transactions • Access to Private/Public Company Portfolios and Transactions 5
SECTION 2 M&A Advisory
M&A Advisory MSC provides buy-side and sell-side advisory to asset managers that are looking to strategically enhance the value of their firms. Understanding that the most important asset our clients have are their people, we focus on structuring deals that make both financial and “cultural” sense. Aligning leadership, investment strategy, and growth initiatives leads to a successful combination. For sellside engagements, our deal team performs a comprehensive financial analysis that captures the firm’s pre-transaction value. We analyze the management company from multiple perspectives, incorporating sophisticated valuation techniques, current industry metrics, and other key data points. Our seasoned investment bankers negotiate and structure deals to maximize our clients’ short- and long-term objectives. We understand that to obtain the highest value there needs to be a path that rewards achievement of goals and help management with structuring earnouts and other forward looking compensation triggers, such as cash versus stock consideration, and mechanisms to allow our client to participate in the future growth of the firm. In addition, our experience enables us to provide strategic tax advisory pertaining to the allocation of a transaction’s proceeds in order to minimize the associated tax liabilities. 7
M&A Advisory (cont.) Furthermore, MSC’s extensive network enables access to a wide financial services industry universe which is currently filled with very opportunistic strategic and financial players. We interact with many clients on the buy-side, firms typically with greater than $10.0 billion AUM, as well as on the sell-side, firms ranging from $500 million to $5.0 billion AUM. Additionally, that network allows us to introduce parties interested in forming strategic alliances and partnerships to cross-sell niche products across multiple distribution networks. Also, if the traditional route of an M&A transaction is not the best choice, whether it be size or stage of the firm, MSC has helped introduce firms to capital sources in the form of allocations or seed capital. 8
M&A Advisory (cont.) Advisor/Management Company Valuation Advisors who need their management companies valued count on MSC to provide comprehensive, detailed analytical reports that capture the firm’s intrinsic value, whether it is for strategic or financial reporting purposes. MSC provides guidance to advisors regarding compensation and incentive structures that are strategic and can be supported by the firm’s existing capital structure and comply with federal and state laws and tax regulations. MSC’s proprietary advisor valuation model uses a fundamental approach to forecast future growth rates across each product/strategy. Other items taken into consideration include management, performance and other fees, current and projected AUM, and operating expenses. 9
SECTION 3 Portfolio Valuation
Portfolio Valuation MSC provides ongoing portfolio valuation services for a diverse set of asset management clients. Our team of valuation experts understand the severe risks caused by inadequate disclosure regarding complex and hard-to-value investments. Given the material impact that the measurement of certain riskier investments can have on the Net Asset Value, it is instrumental to have a well experienced professional firm like Madison Street Capital assist in providing the correct and accurate fair values. Investment management firms are heavily dependent on the validity and integrity of security pricing and portfolio valuation. MSC has decades of valuation experience providing companies with objective, independent, and defensible opinions of value that meet accounting and regulatory requirements. We combine technical expertise with best practice modeling techniques to perform complex financial instrument and portfolio valuation. Our experiences from both the audit and financial valuation world have established us as a service provider renowned for dealing with the most complex and hard-to-value securities. MSC’s senior leadership team has a clear understanding of the level of independent support that is required for auditors to issue a positive opinion, which overall leads to an efficient and more cost-effective period-end process. 11
Portfolio Valuation – Complex and Hard-to-Value Assets MSC provides extensive valuation services to hedge funds, fund advisors, fund administrators, and related financial services firms. Our reports are highly transparent, which ensures a deliverable that is well-accepted by clients and their auditors, such as: 12
Valuation – On-Going Experience / Client Communication MSC provides ongoing valuation services to several of its clients, especially as it pertains to the periodic updating of fair value estimates. MSC works with its clients to keep abreast of current developments. Although our approach takes into consideration changes to both internal and external factors, we understand the need for consistency and our senior reviewers ensure that there are no significant swings in the value (unless there are extraordinary causes that would warrant it). Upon completion of initial due diligence and conducting its independent valuation analyses, a draft summary of the valuation is provided to the client. This allows the client to provide initial feedback on the assumptions and preliminary conclusions, prior to sending the full report. The nature of feedback is typically potential factual inconsistencies versus subjective differences of opinion, which adheres to our independence policy. Our findings and analyses are well-documented in a written report with our assumptions and valuation methodologies clearly explained and supported. Additionally, our detailed reports and documentation increase management efficiencies throughout the audit and financial reporting processes. 13
SECTION 4 Restructuring
RESTRUCTURING MSC provides a comprehensive suite of restructuring services for investment firms seeking to restructure in the midst of the current market conditions. Asset Managers face continuing pressure to maintain platforms that adhere to the ever-changing accounting and regulatory standards that impact the industry. Also, continued consolidation within the investment industry will require a unique set of services and skill sets to serve the critical needs of funds looking to provide investors with a broad array of options. Our experience in advising investment managers looking to provide investors with choices, whether it be the lock-up of money, having funds placed in a liquidating trust where investments will be sold and the cash paid out over time, or splitting a fund into a liquid and illiquid master fund represented by different share classes is unparalleled. Our professionals have acted as an advisor on a number of fund restructuring engagements as we have an extensive network of alternative investment managers making markets across a wide variety of asset classes. The restructuring is designed to meet clients’ objectives to retain assets under management, while also creating synergies among trading platforms. 15
RESTRUCTURING (cont.) Rest r uct ur ing Ser vice Levels Asset Level Management Company Level • Structuring and Arranging the Sale of Securities • Maximizing the Value of Assets • • • • Portfolio Level Loan Workouts and Refinancing Recapitalization and Reorganization Advisory Related to Lock-Up Periods NAV Calculation, High-Water Mark Resets and External Valuation Opinions • Side Pocket Structuring and Valuation • Advising and Valuation of Dissolutions • Wind Downs for Both Onshore and Offshore Complex Hedge Funds • Evaluation of Alternative Restructuring and Remediation Proposals 16
SECTION 5 Financial Sponsor Coverage
Financial Sponsor Coverage MSC is networked with a large universe of asset managers across a wide variety of strategies and asset classes. As a trusted partner, funds can turn to MSC for access to our middle market deal flow. Our senior-level coverage professionals proactively manage the fund’s relationships and interaction with MSC to provide access to the firm's value-added advice and services. We are committed to: Delivering consistent, high-quality deal flow and actionable ideas Providing access to our industry experts and materials Advising companies on specific issues relating to illiquid and hard-to-value asset classes Access to Secondary Market Transactions and Pricing Data 18
SECTION 6 About Madison Street Capital
About Madison Street Capital MADISON STREET CAPITAL is an international investment banking firm committed to the highest standards of integrity and service in providing corporate financial advisory services, merger and acquisition expertise, financial opinions, and valuation services to publicly and privately held businesses. We have offices in North America, Asia, and Africa. We have specialized expertise in partnering with middle-market firms in hundreds of industry verticals and niche markets to achieve the best possible outcome through a variety of transactions. We analyze each client’s unique needs to obtain the best match between buyers and sellers, arrange appropriate financing, and create capitalization structures that optimize the client’s potential. Madison Street Capital is your trusted partner and leading provider of financial advisory services, M&A assistance, and valuations. 20
For more information please contact : Karl D’Cunha 105 W. Madison Street, Suite 1200 Chicago, IL, 60602 (312) 529-7000 firstname.lastname@example.org
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