HOW DO YOU SELECT AN APPROPRIATE INVESTMENT BANKING PARTNER?

Charting a profitable path to your corporate development future is one of the most important decisions you will make.

In the article below, “Your Corporate Development Business Strategy: Five Questions to Ask When Selecting an Investment Banking Partner,” Rick Rickertsen, Managing Partner, Pine Creek Partners, proposes five specific and practical questions business owners should consider when selecting an investment banking firm.

Rick Rickertsen -- author of two books, Buyout: The Insiders Guide to Buying Your Own Company and Sell Your Business Your Way: Getting Out, Getting Rich, and Getting on With Your Life -- is Managing Partner of Pine Creek Partners, a private equity firm based in Washington DC. Founded on the belief that entrepreneurs are unique leaders whose vision and energy is the core of a successful company, Pine Creek offers capital and guidance for growing companies and the executives who currently or in the future will run them.

Please feel free to forward this newsletter to friends, colleagues and networking contacts. (Go to www.focusbankers.com for newsletter archives.)

Active FOCUS Deals

• Asset Management
• BioScience
• Building Materials
• Business Process Outsourcing (multiple assignments)
• Business Services
• Call Center Software and Services
• Construction (Infrastructure)
• Consulting
• Distribution
• Electrical Transmission Equipment
• Financial Services
• Food Processing
• Food Service Management
• Government Contracting (multiple assignments)
• Healthcare Business Services
• Home Automation
• Information Management
• IT Outsourcing (multiple assignments)
• IT Services (multiple assignments)
• Library Services
• Leisure
• Manufacturing
• Maritime Shipping
• Market Research
• Media
• Medical Devices (multiple assignments)
• Medical Diagnostics
• Medical Staffing
• Security
• Software (multiple assignments)
• Sports Apparel
• Transaction Management Services
• Truck/Transport Capital Equipment

Our transaction process provides us with up-to-the-minute market knowledge in these sectors. Are any of them of corporate development interest to you? Give us a call or drop us a note.

Inquiries should be addressed via e-mail to info@focusbankers.com, by telephone to 202-470-1973 or by fax to 202-785-9413.

FOCUS Closes Ninth Deal and Fifth IT/Systems Transaction of 2006:

Comm-Works, a Morgenthaler Partners Portfolio Company, Has Acquired Intelex

FOCUS initiated the transaction, acted as financial advisor to, and assisted with the negotiations as the representative of Intelex, a firm specializing in the installation of advanced voice, data, and technology systems – with particular expertise in large, multi-location roll-outs for sizeable retail organizations. The combined company expects to have revenues of approximately $75 million in 2006. Comm-Works Holdings LLC is a leading North American provider of enterprise voice and data solutions, providing service and support for over 175,000 customer sites. Morgenthaler is a leading, national buyout and venture capital firm. For more information, go to http://www.focusbankers.com/tombstones/deal_Intelex.asp

Your Corporate Development Business Strategy:
Five Questions to Ask When Selecting an Investment Banking Partner

By Rick Rickertsen, Managing Partner, Pine Creek Partners

Most corporate executives fully understand the “strategic planning” process that projects the enterprise’s corporate objectives and initiatives over a five to seven year period. Many corporate management teams employ a strategic planning firm to facilitate the planning process which levels the playing field and results in the most objective and targeted strategic plan.

Corporate owners and investors, however, may not fully understand the investment banking business and may not have fully thought through and considered their numerous corporate development options.

This article examines five specific questions that you should consider when selecting an investment banking firm to help you guide your company’s corporate development plan and financial future:

1. Does the investment banking firm you are considering offer strategic advisory services? These discussions normally revolve around the alternatives of your firm raising outside capital, completing acquisitions, sourcing debt capital, recapitalizing your firm, selling your firm, and/or other strategic alternatives.

2. Does the firm have a proven transaction methodology for delivering results?

3. Does the firm have experienced partners who will bring years of experience to your transaction? Will a senior partner of the investment banking firm directly work with you throughout the entire transaction process?

4. Does the firm have a professional research department dedicated solely to the success of its corporate finance department?

5. Does the firm you are considering specialize in the transaction size you are pursuing?

Does the Investment Banking Firm You Are Considering Offer Strategic Advisory Services?

An experienced investment banking firm has been involved in almost all conceivable alternatives for enhancing shareholder value and then monetizing that value. While you may have a specific transaction in mind, such as selling your company, an effective investment banking partner should be in a position to discuss all alternatives with you before you make a decision to pursue a particular path.

For example, if you are willing to wait just a few years to sell your firm, you may want to consider a strategic acquisition that would, when fully integrated, improve your corporate valuation. Another example could be the “second bite of the apple” approach. This approach suggests that you recapitalize some portion of your company now, “taking some chips off the table,” continue to manage your company’s growth over the next few years, and then sell the balance of your shares later, which should then be valued higher.

These are but a few alternatives that your investment banker should discuss with you when considering how to maximize shareholder value. You need to work with an investment banker who can provide sound advice and not just complete the easiest transaction.

Does the Firm You Are Considering Have a Proven Transaction Methodology for Delivering Results?

The success rate of an investment banking firm often correlates to the type of transaction process that is executed. A well documented process that is project planned provides you, the client, unique visibility and accountability throughout the entire transaction. Generally, a well defined transaction process will expedite the closing of a deal on time and on budget, thus contributing to overall success.

Look for a company with a proven transaction process for helping reach their clients’ goals. It may look something like this:

Planning meeting – At this first meeting, which is organized by the investment banking firm, project milestones will be specified, including when deliverables will be completed. Fact gathering will occur and the investment banker will have a list of questions used to elicit the types of answers that will assist in creating the best possible transaction milestone targets.

The investment banking team should work closely with you to understand the assignment context and to develop a “scope of work document” which defines the project’s parameters, including scheduling and cost estimates. You should expect a written report.

Research plan is developed – Based on the results of previous planning meetings and agreed upon strategic financial objectives, the research department will work closely with the senior banking partner and the client to create a detailed list of potential buyers, sellers and/or other transaction partners.

The Confidential Information Memorandum – This is the most effective selling document when raising equity capital, debt capital, sourcing a strategic partner, or selling your company. This document will be completed at the same time the research is finished.

Initial contact with buyers, sellers and/or investors – After the research phase is complete and the Confidential Information Memorandum is finished, the investment banker, working closely with you, should then contact companies and/or investment firms on the research target list to present your firm.

You should receive regular reports of company-by-company contact activity. Again, you should expect that your senior banking partner will always be in charge of target company contact and that appointments are always arranged on a very confidential basis.

Presentations to interested companies – Your investment banker should assist you with developing a high impact presentation about your company, be in charge of all presentations made to prospective firms, and be in attendance at all meetings.

Letters of Intent – Letters of Intent, draft partnership agreements, or investment “term sheets” generally are submitted to the client company within four months from the project start, with closing of the arrangement or transaction occurring 30-60 days later.

Your investment banker also should be a team leader. On the team are the accountants, the lawyers, the research analysts, and the administrative staff.

Does the Firm Have Seasoned Partners Who Will Bring Years of Experience to Your Specific Situation?

It is critical that you select a firm where the senior partners have years of experience completing the types of transactions you are looking to do. Look for partners that have been CEOs, COOs, and CFOs. They have “stood in your shoes” and can bring empathy and understanding to the process as they have deep insights into management issues, strategic planning considerations for acquisitions, divestitures, strategic partnering, capital raising, and post-transaction integration matters. They have experienced and overcome all of the same business issues that you will experience during the transaction and the post transaction integration process.

The typical investment banker has only a financial background and cannot understand the operating nuances of your business or serve your needs with a consultative transaction approach. It is more difficult to find an investment banker with business operations and financial experience, but well worth the effort.

Make sure that the veteran investment banking partner you are considering working with has completed numerous transactions similar to the one you are contemplating. There is no substitute for repetition. If the investment banker has achieved desired business goals for other like firms, they will be able to achieve similar goals for you.

Finally, select a firm where the senior partner is actively involved in every stage of your transaction. Make certain that the firm does not delegate any portion of the engagement execution process to junior colleagues. You need, and deserve, a partner who will provide personal attention throughout the process; one who will be there at the beginning of your engagement; study the operations and strategies of your business; make all phone calls personally; arrange all meetings; negotiate all terms and conditions; and communicate with you on a regular basis.

Does the Firm Have a Professional Research Department Dedicated Solely to the Success of the Corporate Finance Department?

Many investment firms that serve much larger market clients have dedicated research functions. These departments, working for larger firms, usually identify publicly traded companies with which they may want to enter into a transaction. Research information in this up-market segment is very easy to come by as all information about public companies is a matter of public record and readily available.

It is unusual, however, for an investment banking firm serving the middle and sub-mid market to have a separate research department, but those that do are able to delve deeper and identify most privately-owned firms which would otherwise not be available for you to consider.

Attempting to identify information about private companies through commercial databases yields incomplete results. You will be best served by a firm with a formal research department that will listen to the exact specifications of companies and/or investors you are seeking and generate a target list of 100 to 150 companies to be reviewed.

You must ask your prospective investment banking partner what data sources they use to identify target businesses. They need to have access to the appropriate commercial databases, but additionally they need supplementary sources, including their own private database of contacts.

Experience has shown that many of the best transaction candidates have not yet formally entered the marketplace. Only firms with professional research departments have the capability to uncover even the most obscure, but possibly the perfect, business or investor for you to consider.

Does the Firm Specialize in the Size Transactions You Are Pursuing?
You must ask whether or not your potential investment banking partner specializes in transactions of your size. For example, if you are a small business or a middle market company, it is important that your investment banking partner specialize in this space. They will leverage years of experience in this marketplace in order to maximize your chances for success.

A firm not specifically targeting the specific space you are in will lack the necessary experience required to service your needs. If you are a middle market company and engage a firm that deals primarily in bulge bracket deals, you rarely will be provided the comprehensive, personalized service you deserve.

Consider the Firm’s Core Competencies and Then Move Forward with Confidence
It all comes down to the core competencies of the investment banking firm you are considering:

• Does the firm have the capability, track record, and references to support the fact that they provide superior corporate development advisory work?
• Does the firm you are considering execute on transactions using a precise, project-driven transaction methodology where you, the client, are kept informed all along the way?
• Will the banker who leads the assignment be an extremely experienced and senior individual in the firm and will he be involved in all aspects of the assignment?
• Do the investment bankers at the firm that you are considering have the right background and experiences to serve your situation in the best way?
• If you are a small company, does the investment banker you are considering have lots of business experience operating a firm like yours?

As effective research is the key to a successful transaction, you need to learn whether the firm you are considering has a full time and dedicated research staff. And, if you are considering a “private company transaction,” does the research staff have the expertise to uncover and analyze the right private companies?

Finally, there needs to be chemistry between you, your management team, and the lead senior investment banker that you will hire. The process of raising institutional financing, selling your company, completing an acquisition, or developing a strategic partnership will take five to seven months. You will work very closely with your investment banking team and your joint work and cooperation will provide a greater chance for success.

I encourage you to visit the website of any firm you are considering, read the biographies of the partners, look at the recent transactions managed by the firm, and schedule a meeting to talk face-to-face with the people who will become your business partners.

Charting the path to your corporate development future is one of the most important decisions you will make. It is best to work with an investment banking firm that can provide everything you need to ensure your goals are met.

About Rick Rickertsen: Rick Rickertsen is the Managing Partner of Pine Creek Partners, a private equity firm based in Washington DC that offers capital and guidance for growing companies and the executives who currently or in the future will run them. Pine Creek was founded on the belief that entrepreneurs are unique leaders whose vision and energy is the core of a successful company. Through constructive and confidential partnerships with them, Pine Creek provides advice and capital for funding for business expansion, acquisition, or shareholder liquidity. Pine Creek focuses on companies with at least $5 million in revenues.

Rick Rickertsen also is the author of two well known books, Buyout: The Insiders Guide to Buying Your Own Company and Sell Your Business Your Way: Getting Out, Getting Rich, and Getting on With Your Life. Learn more about Pine Creek Partners at www.pinecreekpartners.com.

FOCUS SE Managing Partner, George Shea, Joins Atlanta Venture Forum’s Board of Directors
FOCUS Managing Partner, Southeast Region, George Shea, has been named to the Atlanta Venture Forum’s (AVF) Board of Directors. Membership in the AVF is limited to venture capital and private equity investors and those groups that provide products or services to these investors. The Board is comprised of an elite group of 25 managing partners from venture capital and private equity firms.

“The Atlanta Venture Forum is pleased to have George Shea join our Board of Directors. He brings years of solid investment banking and business operating experience to our organization as well as a new mezzanine fund to the region. George is a welcome addition to our Board,” said John Huntz, founder and President of AVF and Executive Director of Arcapita Ventures, a major international private equity group…more

Eric Oganesoff Joins FOCUS as Partner

FOCUS Enterprises, Inc., a national middle market investment banking firm providing merger, acquisition, and corporate finance services, is adding anew Partner, Eric Oganesoff, who will be based in the firm’s headquarters in Washington, DC.

“Eric has been a very good friend of our firm for many years. We are delighted that we have finally been able to convince him to take on a full-time role with FOCUS. He not only has managed a significant venture capital portfolio in past years, but also has completed numerous high profile transactions,” said Marshall Graham, FOCUS Chairman.

About Eric Oganesoff

Before joining FOCUS, Mr. Oganesoff served as the CEO or President of nine companies and conducted over forty M&A, debt, and capital raise transactions with an aggregate value of over $300 million. Previously, Mr. Oganesoff served as President and CEO of TracerNet, was Chairman, CEO, and Founder of Greenstone Industries; and also was President of Washington Resources Group, Inc. (WRG), a diversified investment company with a total of 22 operating subsidiaries and high-tech venture capital investments…more

About FOCUS Enterprises, Inc.

Headquartered in Washington DC, with offices in Atlanta, Chicago, and San Francisco, FOCUS provides a range of investment banking services tailored to the needs of middle market companies. FOCUS specializes in serving businesses with revenue or transaction sizes between $5 million and $300 million, serving entrepreneurs, corporate owners, public companies, private companies or operating units, and various types of investors.

For 24 years, FOCUS has successfully integrated corporate development consulting and transactional expertise with its extensive research capability. The firm has long standing experience in completing mergers, acquisitions, divestitures, capital formation assignments, corporate development consulting projects, and financial advisory engagements.

Over twenty FOCUS Partners and Principals provide over two centuries of C-level operating experience in a variety of industries.

Please contact us at: info@focusbankers.com