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- 1. Presentation to Toronto Chapter Financial Executive International Canada Jim Leech Senior Vice President, Private Capital October 19, 2004 Your First Call
2. Overview
- Teachers Private Capital
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- Our business
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- Representative transactions
- Overview of Private Capital market in Canada
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- Private Equity
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- Mezzanine
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- Venture Capital
- What you should know when dealing with Private Capital providers
- Questions from you
3.
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- Teachers in Ontario have had pensions since 1917
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- Run by government ministry
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- OTPP created in 1990 by transferring $17 Billion
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- Sponsors:
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- Government of Ontario and Ontario Teachers Federation
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- Independent Board of Directors
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- Responsible for retirement income of:
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- 154,000 teachers
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- 93,000 retirees/families
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- 91,000 former teachers
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- Assets of $79 Billion (June 30, 2004)
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- Equities 49% including Teachers' Private Capital
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- Fixed Income 21%
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- Inflation Sensitive 30% including real estate
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Ontario Teachers Pension Plan Board 4. Teachers' Private Capital Portfolio Total - $4.4 Billion (plus $1.77 Billion unfunded commitments) June 30, 2004 $1.50 B $0.28 B $0.52 B $0.67 B $0.61 B $0.71 B $0.15 B $0.003 B 5. Types of Transactions
- Private Equity
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- Primarily Buyouts or Expansion Capital
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- LBO/MBO/MBIs: non-core divisions of large companies
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- Growth capital for private companies, including acquisitions
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- Add-on acquisitions for existing portfolio companies
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- Private Investment in Public Equities (PIPEs)
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- Strategic block investments
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- Going Private Transactions
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- Undervalued public companies
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- Balance Sheet Recapitalization
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- Good business; Bad balance sheet
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- Venture Capital
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- Early stage companies
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6. Components of our Business
- Private Equity(Direct, Funds & Co-Investments)
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- Equity
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- Mid-cap and larger investments - $40M to $500M
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- Exercise control with like minded investors
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- Target returns:20-30%
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- Mezzanine
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- Flexible structuring - $40M to $100M
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- Adjunct to equity investment or structured equity
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- Target returns:15-20%
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- Funds
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- Access to markets we cannot source internally
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- Private equity and mezzanine fund investments - $50M to $500M
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- Target returns: 20-30%
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- Venture Capital
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- Fund and co-investment strategy:Funds - $10M to $50M
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- Co-investments - $3M to $5M
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- Target returns: 30% plus
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7. Private Equity What do we look for?
- Partners
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- Invest with like minded partners
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- Management
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- Experienced, strong team
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- Financial commitment
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- Stable Industry
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- Real Economy industries with stable or growing cashflows
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- Niche
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- Industry leader with sustained competitive advantage
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- Governance
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- Appropriate practices
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Alignment of Interests 8. Private Equity Selected Investments 9. Private EquitySelected Transactions
- Shoppers Drug Mart
- Maple Leaf Sports and Entertainment
- Osprey Media
- LBO: non-core asset of IMASCO in 2000
- Invested $150M in equity as part of $2.6B buyout with KKR
- Taken public in late 2001 (continue as shareholder)
- Public to Private: invested in 1994 buyout of Toronto Maple Leafs / Maple Leaf Gardens
- Add-on investment to purchase Toronto Raptors and Air Canada Centre in 1998
- Restructured ownership (58%) in 2003
- MBI: in 2001 invested $45M as part of a group led by Michael Sifton to buy Hollingers local Ontario newspapers
- Funded prorata share ($27M) of add on acquisition of Canwest newspapers
- Taken public in 2004 (continue as shareholder)
10. Private EquitySelected Transactions
- Yellow Pages Group
- Trimac Corporation
- Vincor
- LBO: non-core asset of BCE in 2002
- Invested $320M as part of $3B buyout
- Taken public in 2003 (continue as shareholder)
- Public to Private: privatization of large publicly traded trucking company in 2000
- Committed $60M as part of $540M transaction alongside management
- MBI: management led buyout of public company division in 1993
- Taken public in 1996
- Exited in 2002, after 9 years invested in company
11. Private EquitySelected Transactions
- Samsonite
- Worldspan
- Parmalat Canada
- PIPE to recapitalize: acquired control with Ares and Bain
- Invested US $42.9M in 2003 (subsequently increased to US $48M)
- LBO: acquired non core asset of three airlines in 2003. Co-led with CVC
- Invested US $137.7M as part of $1.1B buyout
- Recapitalization: Structured, underwrote and syndicated new capital structure ($610M)
- Retained $350M of mezzanine debt
- Fixed Income retained $180M of senior debt
12. Venture Capital What we look for?
- Strategy
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- Fund and co-investment strategy (only invest with Fund Partners)
- Fund Partners
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- Fund investments range from $10M to $50M
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- Targeted to telecom, information technology, biotech
- Co-Investments
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- Initial co-investment $3M to $5M up to $20M over life of investment
- Criteria:
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- Demonstrated history of above average returns over long term
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- Operational and financial expertise
13. Venture Capital Selected Investments Cambrian 14. Venture Capital Selected Transactions
- TimeStep
- Cambrian
- FastLane
- HotRail
- Extreme
- Packet
- Devices
- Initial investment made in 1997 alongside Newbridge Networks
- Invested $1.4 million over several rounds of financing
- Company acquired by Newbridge Networks in 1999
- Initial investment of $2.1 million made in 1998 alongside Celtic House
- Company acquired by Nortel Networks in 1998
- Initial investment made in 1998 alongside Celtic House
- Invested $6.3 million over several rounds of financing
- Company acquired by Quest Software in 2000
- Initial investment made in 1999 alongside Woodside Fund
- Invested $10.8 million over several rounds of financing
- Company acquired by Conexant in 2000
- Invested $0.5 million in 1999 alongside Celtic House & Kodiak Venture Partners
- Company was acquired by PMC Sierra in 2000
15. Venture Capital Selected Transactions
- Eyetech
- Ista
- Topspin
- Entrisphere
- Infinera
- Invested $1.6 million in 2001 alongside Alta Biopharma Partners
- Signed large partnership with Pfizer in 2002 and taken public in 2004 (continue to hold shares)
- Invested $4.8 million in 2002 in a PIPE transaction alongside Sanderling Ventures
- Sold significant portion of shares
- Invested $2.7 million in 2002 alongside Accel Partners (other investors include Redpoint Ventures, Meritech Capital Partners and Advent International)
- Signed reseller agreement with IBM in 2004
- Invested $7.1 million in 2002 alongside Accel Partners
- Other investors include Benchmark Capital and CrossPoint Venture Partners
- Invested $3.5 million in 2003
- Other investors include Kleiner Perkins Caufield & Byers, Benchmark Capital, Accel Partners and Sutter Hill
16. Teachers' Private CapitalUnderstanding Our Business Maximize Operating Value Exit VALUE CAPTURE(6+ months) VALUE CREATION(5+ years) Due Diligence &Negotiation Acquire IdentifyOpportunities Structure
- Strategy
- Management
- Governance
- Assure Implementation
- Monitor Ownership
17. Teachers' Private Capital Summary
- Large pool of capital (initial and follow on investments)
- Long-term investment horizon
- Independent (no secondary agenda)
- Not operators, supportive of management teams
- Add value at Board level
- Successful track record (over 25% return since inception )
18. Canadian Private Capital Market Total Capital Under Managementby Private Capital Market Segment; 2003 Total Amount $48.6 Billion 2004Macdonald & Associates Limited.All rights reserved. 19. Private Equity in Canada Private Equity Capital Invested 2004Macdonald & Associates Limited.All rights reserved. 20. Private Equity in Canada Continued * Excludes Teachers Private Capital % Years 2.9 10.7 10.4 16.4 2004Macdonald & Associates Limited.All rights reserved. 21. Private Equity in Canada Continued Private Equity Players Caisse TD Capital Callisto TeachersEdgestone Torquest > $50 Million $25 50 Million < $25 Million Schroders CAI 13 US Firms OMERS/Borealis Kilmer Onex Scotia Capital (?) Clairvest 22. Mezzanine Financing in Canada Mezzanine Capital Invested 2004Macdonald & Associates Limited.All rights reserved.
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- Mezzanine Players
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- TD Capital
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- McKenna Gale
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- Brascan
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- Edgestone
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- CCFL
23. Venture Capital in Canada $2.7B 815 $5.8B 1006 $3.7B 743 $2.5B 681 $1.5B 616 $0.8B 379 2004Macdonald & Associates Limited.All rights reserved. 24. Venture Capital in Canada Continued * Excludes Teachers Private Capital Years Investment Returns forVenture Capital June 30, 2004 2004Macdonald & Associates Limited.All rights reserved. 4.3 1.8 -10.3 -1.2 % 9.5 5 3 1 25. Venture Capital in Canada Continued
- Market Environment
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- Contrast to US Venture Capital
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- Not as badly hit in Internet / Telecom
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- No $ overhang
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- No succession issues
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- Fewer exit opportunities
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- Clusters of excellence
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- Montreal Biotech
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- Ottawa Telecom
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- Vancouver Fund cells
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- No experienced practitioners
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- Need to build new Canadian industry
26.
- Institutions have Alternatives
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- Real estate
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- Hedge funds
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- Commodities
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- Timberland
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- Infrastructure
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- Private equity
- Cannot build an industry on tax incented money
- Poorly conceived legislation E.g. business income trusts, QLP
Private Capital in Canada 27.
- Be prepared
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- realistic business plan
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- management team
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- governance
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- due diligence
- Understand return objectives
- Largely staffed by financial engineers
- Hate surprises / sudden changes in direction
- Treat them as a partner
What You Should Knowin Dealing with Private Capital 28. Questions 29. Teachers' Private Capital It all starts with a call So make us your First Call. (416) 730-5359 [email_address]
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