WINSLOW DOUGLAS AUGUST 10 TH 2009 1 Private Equity in Trinidad & Tobago Presentation
Jul 31, 2015
WINSLOW DOUGLAS
AUGUST 10TH 2009
1
Private Equity in Trinidad & Tobago Presentation
Agenda2
Why is Private Equity Investment Important? The Importance of a Private Equity Operation Favorable time for Private Equity investing Private Placement Process Current Challenges Important Goals To Achieve Accomplishing Goals Risk to the Investor Risk to the Company Due Diligence Exit Strategies Conclusion
Why is Private Equity Investment Important?
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Current sources of capital private companies utilize include: direct bank lending private placement of debt
Local capital market still lacks liquidity, but gaining strength
Conclusion: Equity financing is an important source of funding for private companies
The Importance of a Private Equity Operation
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A private equity group will enable Investment Banks to build longer-term and closer working relationship with clients beyond the typical Borrower/Lender relationship
Opportunity to take private equity clients public and or provide M&A and other investment bank services
Strengthen client’s balance sheet enabling expansion
A private equity operation will help Investment Banks develop a disciplined and experienced team of investment analysts
Favorable Time for Private Equity Investing
5
Stock prices and valuations are low
Many companies have limited access to new financing sources
No IPO’s on TTSE since Prestige Holdings
In short, if you believe in the adage “buy when there’s blood in the streets,” now may be a good time to be in the private equity business
Private Placement Process
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Draft the offering memorandum
Prepare the road show
Manage investors' due diligence
Structure the transaction
Negotiate the terms
Current Challenges
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Lack of interest in Equity financing
Many family run companies gravitate towards commercial loans for expansion and growth
Fear of takeover of the business, dilution of ownership
An unwillingness to open up the books to public scrutiny and or a fear of divulgence of trade secrets
Level of disclosure required may be perceived as burdensome
Important Goals to Achieve
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Make business owners fully aware of the benefits of utilizing Equity financing
Divert borrowing from commercial lending
Promote Equity financing as alternative source of funding
Accomplishing Goals
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May require aid of specialist in transaction advisory services with the aim of:
Strengthening a culture for information disclosure
Provision of adequate intermediary support
Addressing issues of proper corporate governance to achieve transparency
Succession planning and exit strategy for business owners
Risks to the Investor
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Investors may incur “illegality risks” by being tarnished with illegal or unethical activities of companies in which they invest. Examples: tax fraud, money laundering, etc
Lack of a reliable legal framework for the protection of minority rights, investors may be unable to protect their rights as a minority investor
However, considerable progress has been made recently in the areas of transparency, corporate governance, shareholder rights, enforcement procedures (arbitration, etc.)
Risks to Companies
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Companies may be subjected to (at least in their view), excessively intrusive and offensive influence by the private equity investor in the operations and management of the company
The company’s culture may change
The original owners, especially if a family group, may lose operational control of their company which they view as a family right or heritage
Due Diligence
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Conduct careful and extensive due diligence to reduce risk
Financial Statements – Assess the accuracy of a company’s “official” financial statements What is the real financial picture of the company
Discovering illegal activities and conduct: Bribery of local officials Environmental misdeeds Labor law violations
Assuming the foregoing problems can be cleared up, what impact will this have on the company’s profitability?
Exit Strategies
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Possible Exit Strategies:
Acquisition of the investor’s shares by a strategic investor
An IPO offering
A put option to sell shares back to the company or to certain principal shareholders at a specified time or upon a particular event
Tag-Along and Drag-Along Rights
Conclusion
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Private equity investment an important source of funds for companies
Private equity is an important product and service for commercial and investment/merchant banks
Timing may be right for private equity
Do due diligence to reduce risk and to exercise some control
WINSLOW DOUGLAS
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Thank You