precision targeting document
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PrecisionTargetingDocument
1
1. AboutCognitive
2. FundTypes–Overview
3. FundTypes–Detail
4. InvestorNetworkStructure
5. ImportanceofPrecision–Geography
6. ImportanceofPrecision–Sectors
TABLEOFCONTENTS
2
7. ImportanceofPrecision–TransactionStrategy
8. ImportanceofPrecision–TransactionTicket
9. CaseStudy
10. OtherusesoftheCognitiveDatabase
Annex:CCFServices
1.ABOUTCOGNITIVE
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Cognitionis"thementalactionorprocessofacquiringknowledgeandunderstandingthroughthought,experience,andthesenses.”Itencompassesprocessessuchasknowledge,attention,memoryandworkingmemory,judgmentandevaluation,reasoningand"computation",problemsolvinganddecisionmaking,comprehensionandproductionoflanguage,etc.Humancognitionisconsciousandunconscious,concreteorabstract,aswellasintuitive(likeknowledgeofalanguage)andconceptual(likeamodelofalanguage).Cognitiveprocessesuseexistingknowledgeandgeneratenewknowledge.
• Cognitiveisacutting-edgeCorporateFinanceWirmfoundedwiththeobjectiveofprovidingnewandinnovativeWinancialservicesonaglobalscale.
• Theteamhasmorethan60years’combinedexperience,coveringeveryfunctionoftheC-suiteWinancialspecter,andhasmanagedpracticallyeverymajorWinancialeventinthelifeofacorporate,SPVorinvestmentvehicle.
• CognitiveCorporateFinanceaimstobethemostholistic,mostconnectedandmosteffectivecorporateWinanceadvisorintheworldintheWieldofPrivateEquity-liketransactions*.
• Usingourproprietaryinvestors’network,weaimtobesointimatelyawareoftheneedsofinstitutionalandcorporateinvestorsworldwidethatwecanmatch–inrealtime–awell-expressedfundingneedwiththemostrelevantsourcesofcapitalmostlikelytocompletethetransaction.
• WewanttobringourclientsthemostrelevantWinancialadvice,theoptimalWinancialsolutionandthebestandfastestserviceinWindingcapitalfortheircorporaterequirements.
*WedeFinePrivateEquity-liketransactionsasanytransactionexecutedoutsidetherealmofcapitalmarketsandlistedsecurities.
2.FUNDTYPES–OVERVIEW
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“PlainVanilla”PEFunds
CreditFund(Mezz-anine)
Internet&HighTech
TurnaroundFunds
GrowthFunds
CreditFund(SeniorDebt)
LitigationFunds
DistressedFunds
• Forthepastfewyears,therehasbeenasurplusofcapitalintheworld,meaningthatthereistoomuchmoneychasingtoofewdeals.
• Inordertodifferentiatethemselvesfromthecompetition,thevastmajorityofinvestmentfundshavereactedbyhoningandevolvingtheirownrazor-sharpinvestmentstrategy.
• Inaddition,astheimaginationofWinanciersknowsalmostnolimits,newinvestmentstrategiesconsequentlycomeonlineonaregularbasis.
• Findingtherelevantcapitalforone’sprojectorcompanyisthereforeanexerciseofgreatandgrowingcomplexity.
• ThisdocumentdescribeshowCognitiveCorporateFinancemapstheinvestmentuniverseonbehalfofitscurrentandfutureclientslookingtoraisecapital.
3.FUNDTYPES–DETAIL
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TransactionStrategy:Majorityorminorityequitywithcontrol.
TargetCharacteristics:StablecashWlows,strongmanagementteam,strongmarketposition,positiveEBITDA
TypicalSectors:Industrials,BusinessServices,Energy,Healthcare,Consumer&Leisure.
Avoid:Loantoown,Distressed,Non-PerformingLoans,Seed/EarlyStage/Venture.Financials,RealEstate
“PLAINVANILLA”PEFUNDS
TransactionStrategy:Majorityorminorityequity.
TargetCharacteristics:Strongmanagementteam,Nicheposition,Growth,InternationalGrowthposition,ReplacementcapitalTypicalSectors:SectoragnosticbutprefernottoinvestinbusinessthathavehighCAPEXrequirementssuchasindustrials.Avoid:Cashout,Seed/EarlyStage
GROWTHFUNDS
TransactionStrategy:MinorityEquitySeed/EarlyStage/SeriesA,B,C…
TargetCharacteristics:Disruptivetechnology,Growth,Strongmanagementteam.
TypicalSectors:E-Health,Digitalmedia,E-commerce,Ed-tech,Nanotechnology,Agri-tech.
Avoid:StablecashWlows,distressed,familybusinesses,Spinoffs,Replacementcapital.
INTERNET&HITECH
3.FUNDTYPES–DETAIL
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TransactionStrategy:fundingaClaimant’slegalcostsinordertoshareintheoutcomeofthelegaldecision(the“award”).
TargetCharacteristics:CommerciallitigationBreachofcontractclaimsInternationalarbitrationProfessionalnegligence§Professionalliabilityclaims§IntellectualPropertyinfringement§Patentinfringement§Businessdefama<ons
Typicalsectors:Claimantcanberepresentedbyeitheranindividualoracompany.Sectorisirrelevant.
Avoid:TypicalcorporateWinancetransactions.
LITIGA-TIONFUNDS
TransactionStrategy:Majority,needcontroloftheboardandmanagementinordertocarryoutextensiveturnaroundacrossthewholevaluechain.
TargetCharacteristics:StrongmanagementNegativeEBITDA,Nicheposition,Buyout,Familybusiness.
TypicalSectors:Completelysectoragnosticincludingrealestate.
Avoid:Cashout,Seed/EarlyStage
TURNAROUNDFUNDS
TransactionStrategy:Acquiringassetsoranoperatingbusinessinformalbankruptcyproceedings,witherthrough
TargetCharacteristics:NegativeEBITDA,Nicheposition,Buyout,Familybusiness.
TypicalSectors:Completelysectoragnosticincludingrealestate.
Avoid:StablecashWlows,disruptivetechnologies,Seed.
DISTRESSFUNDS
3.FUNDTYPES–DETAIL
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TransactionStrategy:Lendmoneyonaseniorbasis,takingguaranteesincaseofdefault.
TargetCharacteristics:Strongmanagementteam,stablecashWlows.
Sectors:Completelysectoragnosticincludingrealestate.
Avoid:Turnarounds,Restructurings,Distressed,NegativeEBTIDA,Seed
CREDITFUNDSENIORDEBT
TransactionStrategy:Lendbelowseniordebt,withWlexibleinterestratestructureoftenrolledupwithcovenants.
TargetCharacteristics:Spinoffs,Nichepositions,Successionissues.
Sectors:Sectoragnosticwithnopreference.
Avoid:Turnaround,Distressed,NegativeEBTIDA,Seed.
CREDITFUND
MEZZANINE
• TheinvestmentstrategiesdescribedinthepreviouspagesdrawonlybroadcategorieswhichrequirefurtherbreakdowntoreWlectthewidevarietyofcapitaltypesavailableintheworld.
• Moreover,wehavenotcoveredarangeofother–lesswell-known–investmentfundtypessuchas:agriculturalfunds,artandartlendingfunds,searchfunds,sportsfunds,illiquidfunds,etc.
• This“zoological”touroftheworldofinvestmentfundsservestosetthescenefortheneedforhigh-precision,technology-enhancedtoolstoidentifytherelevantcapitalforone’scompanyorproject.
4.INVESTORNETWORKSTRUCTURE
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Personalcontact:Whomdoweknow?
Geographicremit:Wheredo/cantheseinvestorsdeploytheirfunds?
Sectorpreference:Whichsectorsdotheseinvestorstarget?
Transactionstrategy:Howdotheseinvestorsdeploytheirmoney?Majority/minorityequity,senior/juniordebt,mezzanine,assetdeals,specialsits,etc.
Transactionticket:Whatistheminimum/maximumtransactiontheseinvestorswillconsider?
Puttingitalltogether…:Whatistheindicativeinvestmentappetiteforthetransactionproposedbyourclient?
• Ithasbeenestimatedthattherearebetween60,000and100,000institutionalinvestorsintheworld.
• Todate,CognitivehasmappedoverfourthousandoftheseWinancialandindustrialinvestorsandwegrowourcoverageonacontinuousbasis.
• TotheextentthatweareprimarilySellSideadvisers,wededicatesigniWicanttime,resourcesandtechnologytounderstandingtheseinvestors’detailedinvestmentspeciWications.
• AsaWirststep,ourmappingfocusesonthefourcriteriadescribedinthediagram,astheseallowustorapidlyidentifyrelevantinvestorsforagiveninvestmentopportunity.
• However,inordertobeasaccurateaspossiblewhenpresentinganinvestmentopportunitytothemarketonbehalfofoneofourclients,westrivetogointoasmuchdetailaspossible,aswedescribeinthefollowingslides.
5.IMPORTANCEOFPRECISION–GEOGRAPHY
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NorthAmerica1,601investors
Europe1,804investors
Asia517investors
LatinAmerica434investors
Africa472investors
Worldwide433investors
- Whiletalkingtoinstitutionalinvestorsonadailybasis,Cognitivetakestheopportunitytounderstandtheexactcountrieswheretheseinvestorsarepermittedtoinvest,aswellaswheretheyactivelyseektoinvest.Thesemaydiffer.
- ThediagramtotherightshowsthenumberofinvestorsperregionofinterestmappedbyCognitivetodate.Wearealsoabletopinpointtheexactcountriesofeach.
- Ourdetailedunderstandingofeachinvestor’sgeographyofinterestallowsustooptimizetheclosureofadealastheopportunitywillonlybepresentedtoinvestorswithamatchinggeographyofinterest,therebyincreasingtheprobabilityofsuccess.
5.IMPORTANCEOFPRECISION–GEOGRAPHY(Cont’d)
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Europe{1,804investors}
• Withineachcontinent,CognitiveseekstoidentifyaspreciselyaspossiblethespeciWicregion(s)andcountriesoffocusforeachinvestor.
• Somefundsclaimtobepan-European,butinfact–althoughallowedtoinvestallacrossEurope–onlyinvestinselectedcountries.
• Otherfundshaveclearlydelineatedregionswhereintodeploytheircapital:WesternEurope,SouthernEurope,DACHcountries,CentralandEasternEurope,orNordics.
• Otherwaysofbreakingdowngeography–likethoseofLitigationFunds,forexample–includethenatureofthelegalsystem:Civillawcountries,Commonlawcountries,countrieswherebilateralinvestmenttreatiesareinforce,etc.
• Otherfunds–likeRealEstatefunds–focusonprimarycities/gatewaycitiesvs.secondarycities,cityvs.beach,premiumareasvs.low-incomeareas,etc.
• Thereisnolimittothedegreeofprecisiononecanreach.
Switzerland{963}
Poland{890}
Germany{1,107}
Italy{985}
France{1,055}
Sweden{912}
UnitedKingdom{1,195}
Spain{1,124}
RealEstateIndustrials
Retail&FMCGEnergy&RenewablesBiotech&LifeSciencesEducation&e-learning
Media&ContentFinancialServicesAgriculture&Food
TelecomInternet&DigitalMedia
BusinessServicesArt
NaturalResourcesInfrastructureLogistics
Construction&Development
Tourism&LeisureAircraft&Shipping
Other
6.IMPORTANCEOFPRECISION–SECTORS
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• InitiallyCognitiveWilteredinvestorsbytargetsectors,asoutlinedintable1totheleft.Withtimeandexperience,CognitivequicklyrealizedtheneedtobemorepreciseinreWlectingthespeciWicsub-sectorstrategyofeachinvestor.
• Asshownintable2totheright,Cognitiveisnowabletopinpointtheparticularsub-sectorfocusofeachinvestorwithinitsnetwork.
• EnhancinginformationtothislevelofdetailhasmeantthatCognitivehasincreaseditsnumberofsectorsfromatotalof20to108,therebyallowingustopinpointtherelevantsourceofcapitalforclientsinanyparticularindustry.
• Suchdetailedunderstandingofeachinvestor’ssectorofinterestallowsustooptimizetheclosureofdealastheopportunitywillonlybepresentedtoinvestorswithamatchingsectorofinterest.
Internet&DigitalMedia
InternetSoftware
Fintech
IoT
Software
Hardware
ITServices
BigData
Ecommerce
OtherIT
SECTORS
SUB-SECTORS
7.IMPORTANCEOFPRECISION–TRANSACTIONSTRATEGY
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MajorityequityMinorityequityLoan–MezzanineLoan–SeniordebtLoan–JuniordebtProjectWinanceSpecialsituationsLoantoownAssetdealsLitigationStructuredWinanceRealestate–CoreRealestate–CoreplusRealestate–ValueaddRealestate–Development
• Inadditiontothetransactionstrategy,itisimportanttoknowwhatassetclassestheinvestorsareallowedtoenterinto.• ThemajorityofPE-likefundsarenotallowedtoinvestinpooledinvestmentsorotherinvestments.• FundsofFundstypicallycannotmakedirectinvestmentsintoacompanyorprojects.• Corporateinvestorsusuallylookfor100%straightacquisitions.
FundsofFunds(239)
PrivateEquity-likeInvestors(3,449)
TargetCompanies/Assets/Opportunities
CorporateInvestors(401)
Endowments(32)
FamilyOfWices(236)
• Through itsdaily contactswith institutional investors, Cognitivehas identiWied15broad transaction strategies implementedby theseinvestors,furthersegmentedbysub-strategies,e.g.minorityinvestorvsminorityinvestorwithaneedforacontrollingstake.
• Foreachofthe≈4,000institutionalinvestorsinCognitive’snetwork,wenotonlyseektounderstandtheprecisetransactionstrategyforeach,butseektocaptureasmuchdetailaroundthemetricsanddynamicsofeach:e.g.distressedwithminimum50%IRR.
• Thisinformationiscrucial,asthecriteriaforrejectionarenumerous,andthereisnogreaterwasteoftimethantalkingtothewrongperson.
• Bywayofexample,adebtfundprovidingjuniordebtwouldneverconsideranopportunitywheretheclientisseekingtoexitthebusinessbysellingamajoritystake.Itisimportanttoknowthisinformationpriortomakinganycontactwithinvestors.
7.IMPORTANCEOFPRECISION–TransactionStrategy(Cont’d)
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• Cognitivedoesnotseektomaptheentireinvestmentuniverse,onlythatrelevantforourclients.• Asweoperateinthemid-market,ontransactionsrangingfrom€1mto€100m,wefocusonacertainnumberoffunds.• Investorsthatwedonottypicallystudyinclude:
• Becausetheirinvestmentticketsaretoolarge:hedgefunds,fundsexposedtocapitalmarketsorlistedcommodities,sovereignfunds,etc.
• Becausetheirinvestmentticketsaretoosmall:businessangels,privateindividuals.
€1m
€100m
PEFunds
VCFunds
Seed
Funds
Angel
Investors
€10m
€1bn
CCF’stargetmarket
Special
Sits
etc.*
LitigationFunds RealEstate
Funds
Infrastructure
Funds Hedgefunds&
cap.markets
InvestmentTicket
8.IMPORTANCEOFPRECISION–TRANSACTIONTICKET
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• TheamountofcapitalaninvestmentfundputstoworkisadirectfunctionofitsAssetsUnderManagement,combinedwithitsneedtodiversifyitsinvestmentsacrossaportfolio.
• Forcorporates,theinvestmentticketsizevariesaccordingtocriteriathatareamixtureofhardandsoft:thesizeofitsownbalancesheet,thestrategicimportanceofagivenmarket,cashavailablecombinedwithavailabilityofacquisitionWinance,etc.
637
1954
2372
1265
446
InvestmentSizes
MicroSmallMediumLargeMacro
• AninvestmentfundwithA.U.M.of,say,€50mwillmakearound10to15acquisitionsof€3mto€5m.• Conversely,aninvestmentfundswithA.U.M.of€5bnisunlikelytomaketransactionsbelow€100m(ifthat“small”).• Otherconsiderationscanimpactthetransactionticketafundiscapableofexamining:
• A“small”fundmayhaveco-investorswhocaninvestalongsidethemand“beefup”theamountofcapitalitcanputonthetable
• Similarly,a“large”fundmaybeabletoenterintoa“small”transactionbecauseoneofitsLimitedPartnersislookingtodosmallertickets.
• Priortomakingcontactwithinstitutionalinvestors,itisimportanttoknowhowdeepthepocketsare,andmostimportantly,whetherornotthetransactionthecompanyproposesmatcheswithitsrangeofpossibleinvestmentcriteria.
Macro
Medium
Large
Small
Micro EUR.1-1m
EUR1-10m
EUR20-50m
EUR50-200m
EUR200m+
9.CASESTUDY
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AGermansupplierofAutomotivepartshasjustappointedCognitivetoassistthecompanyinitsfundraisingefforts.ACognitiveemployeeworkswiththisclienttounderstandthedetailsoftheirfundingneeds:• Howmuchisthecompanylookingtoraise/investmentticket:€15m
• FormofWinancing:minorityequity• Sector:Automotive• Geography:Germany,EuropeOncethisinformationisgatheredtheCognitiveemployeeinformsinreal-timetheclientofthenumberofrelevantinvestorswithintheCognitivenetworkwhocouldpotentiallybeinterestedinparticipatinginsuchatransaction.AsaWirststep,theCognitivedatabaseisWilteredaccordingtothe4maincriteriadescribedinthepreviousslidesandexpressedintheWiguretotheright.SubsequentadhocsearchesarethenusedtoreWinethatnumber,eitherupwardsordownwards.
Withasimpledatabasesearch,Cognitiveisabletoinformtheclientthatthereare72relevantinvestorswhohaveclearlyexpressedinterestininvesting€15mforaminoritystakeinanAutomotivecompanybasedinGermany.
CognitiveDatabase
TransactionStrategy CountryTransactionSizeSector
MinorityEquityMedium–€15m
Industrials-Automotive Germany
72Investors
Weillustratewithanexamplehowthecombinationofalltheabove-mentionedinformationallowsCognitivetomatchtheclientwiththerelevantsourceofcapital:
10.OTHERUSESOFTHECOGNITIVEDATABASE
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Company
Inv.Fund1
Inv.Fund2
Inv.Fund3
Inv.Fund4
Inv.FundN
PortfolioCompany1
PortfolioCompany2
PortfolioCompany3
PortfolioCompany4
PortfolioCompanyN
PotentialJVwithPartnerClientSupplier
Fundswithportfoliosintherelevantsectorsandgeographiesforthecompany:
CognitiveworksprimarilyasaSellSideadvisor,meaningweworkwithcompanieslookingtoraisecapital,andguidethemtothemostrelevantsourceofcapitalfortheirproject.Thisbeingsaid,ourdatabaseoffersotherfunctionalitiesforcompanieslooking1)toacquireothercompaniesor2)toWindcommercialorJVpartners.ForacompanylookingforJVpartnersorclients,orforaninvestmentfundlookingforopportunities,wecanWilterourdatabaseandidentifysuchopportunitiesintheportfoliosofthefundsintherelevantsectorsandgeographies.Inaninvestmentuniverseofover4,000investorsandwithanaverageportfoliosizeof5companies,ournetworkinfrastructurecoversaround20,000companies.
• CognitivecanassistanycompanylookingforJVpartners,clientsorsuppliersinagivencountry/sectortoWindrelevantmatches,aswellastoputthemindirectcontact.
• Thedynamicsofsuchanexercisearesubstantiallydifferentfromalltheabove-mentionedSellSideprecisiontargeting,butisequallypowerfulandfast.
ANNEX.CCFSERVICES
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• PracticallyeveryeventinthelifeofacompanyhasaWinancialdimension,impactorconsequence.• ThetablebelowgivessomeexamplesoftheworkwecarryoutandasampleoftheWinancialeventswehelpour
clientsaddress:
FinancialEvent Diagnose Design Deliver
Fundraising&Financing • FormalizeCorporateStrategy• ProWit&LossForecasts
• CashFlowForecasts• DesignFinancialInstrument
• Investorcontacts• Negotiationandclosing
CorporateDisposal • VendorDueDiligence• P&LandBalanceSheetrisksandimpactsonprice
• Pricingstrategyandmechanism• Buyersearch
• Investorcontacts• Negotiationandclosing
RealEstateDisposal • VendorDueDiligence• Documentation
• Investorreturnsandpricing• Buyersearch
• Investorcontacts• Negotiationandclosing
Acquisitions • Growthandacquisitionobjectives• Valuepropositionofbuyer
• Acquisitionandapproachstrategy• Shortlist
• Contactsandapproach• Negotiationandclosing
Mergers • Understandnatureofproposedtransaction• Calculateupsides&risks
• Negotiationstrategy• Acquisitionoptions
• Negotiationandclosing
Investment&BusinessCases • Targetreview • Solutiondesign • Execute• Negotiationandclosing
Restructurings • Natureofproblem• CashWlowforecasts
• Restructuringplan• Financialsolution
• Executeandrestructurebalancesheet• Negotiationandclosing
FinancingGrowth • Designmarketing&salesgrowthplan
• EstimateWinancingneeds:Capex,workingcapital,other
• DesignWinancialinstrument• Obtainfunding
OtherFinancialEvent • Understandnatureofproblem• Calculateimpact
• Designasolution• Calculateneedfornewmoney
• Execute
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