Ascension Point CapitalAn Entrepreneurial Investment Firm

Table of Contents

I. Background InformationII. Investment StructureIII. Deal Flow GenerationIV. Screening CriteriaV. Closing & Transition PeriodVI. Key Risks & Mitigants

Appendices

A. Example Deal EconomicsB. Focus Industry Score Cards

I. BACKGROUND INFO

I. IntegrityII. Diligence

III. PerseveranceIV. Accountability

Philosophy

Guiding Principles

We are in the early stages of the largest generational wealth transfer in US history triggered by the retirement of the “baby-boomer” generation.

Ascension Point Capital was formed to take a majority investment in and operate a sole, privately owned US business. Our model is built to assist the

wealth transfer process by providing owner’s a unique and customizable liquidity option, whether it is partial or full. Business continuity is paramount

as we carry on a legacy that has taken entrepreneurs many years of hard work and dedication to create. A meaningful partnership with investors is the first step towards capitalizing on this economic shift. Leveraging the experience and knowledge of a diverse group of Limited Partners and Advisors, we will

identify and create value through accelerating growth.

Background Info

Andrew Panico graduated from Loyola University in Maryland with a degree in Finance. While at Loyola, he began his career at Legg Mason's Private Client Services group assisting with the management of $200M in retail assets mainly allocated in Legg Mason Mutual Funds. Next, Andrew assumed the role of Junior Research Analyst within a newly formed equity fund under CBRE Investor's umbrella of products. Prior to attending the USC Marshall School of Business, Andrew worked for JPMorgan Chase’s Investment Bank in their Global Rates division focusing on municipal and inflation-linked derivative strategies.

Andrew earned his MBA at the USC Marshall School of Business with a concentration in Finance and Entrepreneurship. While at Marshall, Andrew undertook an internship as a Summer Credit Associate at City National Bank where he performed credit analysis for senior tranche primary and syndicated leveraged loans and revolving credit facilities for financial sponsor backed middle-market companies across various industries. During the two-year MBA program, Andrew was a Fixed Income Fund student manager in the USC Graduate Student Investment Fund Program, board member of USC’s American Finance Association chapter, and active member of the Entrepreneurial and Venture Management Association. Andrew was also a member the Silicon Valley Region’s Venture Capital Investment Competition winning team and participant in the 2013 International Finals at the University of North Carolina in Chapel Hill.

The Search Fund Model

Search Funds are single purpose vehicles used by entrepreneurs to obtain commitments from investors interested in making micro middle-market investments.

The purpose of the investment vehicle is to purchase a single privately owned business in which the managing partner signs on as the new President to run and grow the business, ultimately striving toward a liquidity event for investors. A Search Fund is

structured as a long-term, two-stage investment for which stage one provides funding for the Search Phase and stage two provides the equity financing of the acquisition.

Investors in the Search Phase have the right, but not the obligation, to participate on a pro-rata basis in the Acquisition Phase with a 50% step-up meant to compensate

investors for the increased risk of investing in the first round of financing.

Driven, dedicated and entrepreneurial Managing Principal at lower cost then

current owner with plan to reinvest in business growth.

Diverse operational, financial and

industry experience to advise in the

discovery, closing and growth of a

target.

Identifiable industry tailwinds will increase the

probability of increasing value

through expanding sales.

Investment in a class of firms too

small for LBOs, too mature for VC

funds, and too large for individual acquisition.

Four Pillars of the Search Fund ModelEntrepreneur Limited Partnership Growth Industry Niche Investment

Recent Results

Ex. Top 5

Ex. Top 3

All Funds

0.0x 5.0x 10.0x 15.0x

1.9x

2.5x

13.5x

Avg. Search Fund Asset Class Cash Return Multiple

Ex. Top 5

Ex. Top 3

All Funds

0.0% 10.0% 20.0% 30.0% 40.0%

19.0%

20.2%

37.3%

Avg. Search Fund Asset Class IRR

Return results based on a 2009 study by the Stanford Center for Entrepreneurial Studies of 79 funds of which 38% of funds representing 56% of invested capital produced a gain for investors. Two funds returned investor capital to pursue a

different model. The remaining 59% of funds that resulted in a loss accounted for only 44% of invested capital as a result of the benefits from a staged investment

approach.

Opportunity

$4.8 Trillion of Net Worth to be

transferred by 2030

7.7 million business owners expected to seek an exit within 10 years.

Over 75% business owners have no exit

or transition plan30% of

owners plan to sell to a third-party

buyer

* Sources: American Family Business Survey by MassMutual; PWC Family Business Survey; The Ten Trillion Dollar Question, A Philanthropic Gameplan.

Large market is underserved as an asset class and

provides an opportunity for excess IRR.

Robust deal flow increases probability of finding sound businesses with clear and

actionable growth prospects.

Opportunity to drive proprietary deal flow from

unsure owners that have not started a succession plan.

Committed and motivated sellers will increase screening efficiency and improve odds

of closing a deal.

II. INVESTMENT STRUCTURE

Two-Stage Investment

$25K$160K

to $625K

Stage 1 Stage 2Going Long a Call Option

on a Small Business

Search Capital

Exercise the Call;Right of First Refusal

Acquisition Capital

Investment figures listed per unit. Acquisition capital range is an estimate based on purchase price range of $5 - $20 million and a 50% equity contribution.

16 Units Issued

½ & ¼ Units Available

Long Term Investment

Raise Search Capital

Search for Target

Fund and Close Transaction

Operation of Target

and Value Creation

Exit

Stage 1 Stage 2 Stage 3 Stage 4

2-6 months 1-30 months 4-7+ years 6 months6 months

Average Time to Liquidity Event: 7 YRS

Given the nature of the investment, the average time until a liquidity event is 5-7 years after the close of the acquisition. This allows the Managing Principal

to fully implement a growth strategy that will allow Limited Partner’s to experience an excess IRR. Dependent on the Limited Partner’s needs, the

acquisition financing can be structured with the use of Subordinated Debt that will allow investors to extract value from their investment as debt is serviced.

*See Structure B - Fund Economics in the Appendices for a detailed example of how this structure returns capital to investors.

Limited Partner Group

Passive Roll• Receive weekly update letter• Option to participate in bi-weekly

teleconference• Option to screen all deal flow• Access to online database of up-to-

date search information• Right-of-first-refusal to participate in

acquisition round• 50% Step-Up in search phase note

Active Roll• All options of passive investor in

addition to:• Opportunity to present deal flow• Input on search strategy• Input on target industries• Opportunity to speak with potential

sellers.• Opportunity to join the Investment

Advisory Board.

Limited Partners of Ascension Point Capital will have the opportunity to take a passive or active roll in the search phase of the fund. Regardless of their involvement, investor’s will receive weekly updates on the search process and the option to participate in a bi-

weekly teleconference discussing current deal flow and provide insight on strategy.

Access to Limited Partner’s investment and operating experience is ESSENTIAL to the success of the partnership.

Investment Advisory Board

Comprised of 3 to 5 members of the Limited Partnership Investment Group.

Open to serve as a mentor to

the Managing Principal

Willing to actively assist

with the search and acquisition

phase

Relevant experience in sourcing deal flow and investing in private companies.

Open to sharing

professional network

Transactional experience

with financing contacts

Serves as a sounding board for Managing Principal.

Reviews prospective investment theses and

offers guidance

Establishes credibility with potential sellers

River Guides & Advisors

Professional Associations

Business Valuation Firms

Professional Network

Private Co. Databases

Alumni Network

The term River Guide refers to an industry expert who agrees to assist the Managing Principal through strategic industry introductions that may lead to

viable acquisition targets. These guides may be former consultants, bankers or industry executives. The use of a River Guide will bring years of focused industry

experience and contacts to Ascension Point Capital. The goal is to form meaningful relationships with River Guides in each of our focus industries. Possible River Guides & Advisors will be sourced from the below network.

Importance of Investors & Advisors

Investor Group

River Guides&

Advisors

- Years of industry and investment experience

- Potential industry introductions and deal flow

- Insights on search strategy and focus industries

- Transactional experience and relationships with lenders- Sounding board for deal

screening and analysis - Increases credibility of fund to

lenders and potential sellers- Potential Board Member of

acquired company

Manager Earned Equity

Tranche 1

5%

Vests at acquisition

Tranche 2

10%

Vests over 5 year period; accelerated

at liquidity event

Tranche 3

Up to 10%

Vests according to investor IRR hurdle

schedule

The Managing Principal will have an opportunity to earn a maximum of 25% of the common equity of the target. A

typical performance hurdle for the final restricted tranche (up to 10%) of the manager’s carried interest is net investor IRR,

but can be customized by the investor group.

III. DEAL FLOW GENERATION

Geographic Focus

Primary Region

North East – NY, NJ, MD, CT, RI, MA, PA, VA, DE

55% of Time

Tertiary RegionSouth West – TX, AZ, OK

10% of Time

Secondary Region

West Coast – CA, OR, WA

35% of Time

Sourcing Deal Flow – A Comprehensive Approach

“Out-Side” In• Independent Business Brokers• Professional Business Brokers• Venture Capital Firms• Middle Market Private Equity Firms• Professional service firms:

• Middle Market divisions of Bulge-Bracket Investment Banks

• Boutique / Regional Investment Banks• Accountants• Lawyers• Insurance providers• Financial planners / private bankers

• Personal network (100 bp finders fee)

“In-Side” Out• Generate lists on companies that fall within

focus industries• Capital IQ, FactSet, PrivCo.• Dun & Bradstreet• OneSource

• Scrub company list to filter on minimum target criteria

• Use of River Guides to gain introductions• Send formal introduction letter and sell

sheet to all potential sellers• Make contact with key aspects of supply

chain• Attend industry trade shows

A robust deal flow pipeline is essential to identifying and acquiring a potential target. Time will be devoted according to

the quality of the deal flow produced.

Typical Deal Flow Sources

Proprietary44%

Business Brokers36%

Other15%

Investor Group5%

Acquisition

Due Dilligence

Serious Discussion

Initial Approach

Identification

0 50 100150200250300350

1

7

39

175

306

Sources of Deal Flow Acquisition Funnel

According to the study Search Funds 2009 conducted by Stanford’s Center for Entrepreneurial Studies, search funds on average conducted a hybrid

approach to sourcing deal flow. This method results in a manageable number of potential targets for the Managing Principal to filter and

analyze in and effort to submit a Letter of Intent and enter due diligence.

IV. SCREENING CRITERIA

Minimum Target Attributes

Investment CriteriaFavorable Unfavorable

Industry

• Highly fragmented industry• Identifiable growth drivers• Positive macroeconomic tailwinds• Straightforward industry operations• Relatively early in industry life cycle• Numerous companies in $5-$50 million

sales range• Sizeable industry – both in revenues

and number of companies

• Highly concentrated industry; major players control > 50% of market

• Industry in secular decline• Intense company rivalry and low barriers

to entry• Customer base with high purchasing

power• Severe dependence on concentrated

supply chain

Compa

ny

• Healthy and sustainable EBITDA margins > 10%

• Competitive advantage within value proposition

• Historically proven recurring revenue• Diversified revenue streams• Multiple avenues for future growth• Strong middle management committed

to staying with firm• Lender friendly model• Reasonable valuation

• Turnaround / distressed situation• Poor or damaged reputation amongst

peers.• High customer concentration• High customer turnover rate• Small company - < $1M of EBITDA• Weak middle management team or plans

on leaving• High employee turnover• Sale for business reasons• Competitive auction sale

Industry Selection

Idea Generation

Initial Screening

Data Mining

Thesis Development

Select Industry

The focus industry will serve as another

screening criteria but will not limited

the scope of the opportunistic search

Companies within the focus industry

will be scored using the same Investment Scorecard as targets that fall out of scope

Industry Analysis

DemographicTrends

Technology Trends

Gov’t Reg. & Trends

SocialTrends

Macroeconomic Influences(stage of bus. cycle, growth trends, structural trends)

Existing Competitive Landscape

Type of Competition

Barriers to Entry

Threat of Substitute Products/Services

Purc

hasi

ng P

ower

of S

uppl

iers

Purchasing Power of Consum

ers

Number of FirmsIntensity of Competition

Brand Equity

Industry Score CardIndustry

Concentration

Market Growth

Degree of Rivalry

Degree of Cyclicality

Regulation

Capital Intensity

Barriers to Entry

Product/Service

Alternatives

(-1)(0)

(+1)

(-2)(0)

(+2)

(-1)(0)

(+1)

(-2)(0)

(+2)

(-1)(0)

(+1)

(-1)(0)

(+1)

(-1)(0)

(+1)

(-1)(0)

(+1)

High – 2-3 major players control > 60% of market.Moderate – Existence of a clear market leader, but several competing rivals.Low – High number of companies within target revenue band and one level above.

Low/No – Industry in secular decline. Unfavorable social, tech., and Gov. headwinds.Moderate – Average growth at or close to US GDP.High – Favorable macroeconomic and demographic factors. Mega trend. 20%+ CAGR.

High – Adversarial competition focused on price. Thin margins. Bad for business. Moderate – Competition focused on retaining market share. Little price competition.Low – Friendly competition that drives innovation. Focused on quality or service.

High – Majority of industry sales driven by both seasonality and business cycle.Moderate – <50% of industry sales impacted by seasonality and business cycle trends.Low/No – Revenue stream not subject to seasonal or cyclical factors.

High – Directly dictates how BAU is conducted. Creates litigation liability.Moderate – Regulation exists and requires specific processes that increase costs.Low/No – Regulation does not impact core business operations.

High – Greater than $0.33 of capital expense per $1.00 of labor expenseModerate – Between $0.125 - $0.33 of capital expense per $1.00 of labor expenseLow – Less than $0.125 of capital expense per $1.00 of labor expense

Low/No – No barriers to entry. Short lead time to entrance. Anyone can do it.Moderate – Some barriers exist. Difficult to compete at first. Low survivor rate.High – No competitive entrance possible. IP protection for product or service. Scale.

High – Many alternatives exists. Declining trends in use. High tech. replacement risk.Moderate – Established industry with several unproven or weaker alternatives.Low – Only one on the block. Low tech. replacement risk. Established industry.

Industries of Focus

• Superior industry growth due to

favorable demographic trends, healthcare reform, and government

sponsored program participation.

• Opportunity for claim diversification.• New technology can

streamline process.

Medical Claims Processing

Companion Pet Insurance

Alarm Security Services

Mobile Security Software

• Favorable consumer trends towards

treating their pets like family members.• Increased scope and

sophistication of veterinary services.• Increased cost of veterinary expenses.• Sponsorship for preventative health

awareness.

• Favorable trends in disposable income, unemployment, and

corporate profits.• New advanced full

service monitoring systems helping the

upgrade cycle.• New technology

allowing for product and service

differentiation.

• Increased use of mobile devices to

access sensitive data stored in the cloud.• BYOD policies at

businesses increases security threats.

• Increased adoption of mobile payments.• Internet accessed

via mobile set to outpace PC.

(+6) (+5) (+4) (+4)

The above listed industries have been selected due to favorable tailwinds that will help drive overall industry growth.

Each industry presents an understandable and executable strategy for future growth

*See Appendix for complete Industry Scorecards

Investment Score CardCompetitive Advantage

Growth Potential

Operational Complexity

Recurring Revenues Streams

Investment Entry Point

Financing Potential

Middle Management

Market Position

(-2)(0)

(+2)

(-2)(0)

(+2)

(-1)(0)

(+1)

(-1)(0)

(+1)

(-1)(0)

(+1)

(-1)(0)

(+1)

(-1)(0)

(+1)

(-1)(0)

(+1)

Low/No – Commoditized business model easily replicated. Low margins. High comp.Moderate – Advantage exists but is weak giving competitors an opportunity.High – Easily identifiable and defensible advantage over competitors.

Low – Below industry average. Little opportunity for market and/or product expansion.Moderate – Possibility of product line and/or geographic expansion. Cross selling.High – Easily identifiable strategy to expand market and add ancillary/new products.

High – Large workforce of highly specialized PhD’s/engineers required to operate.Moderate – Difficult in practice, understandable and manageable in theory. Low – Managing Partner can confidently handle all business related tasks.

Low/No – Highly seasonal and cyclical.Moderate – Recurring revenue exists or there is no seasonality to revenue streams.High – Revenues are both recurring and not subject to seasonal fluctuations.

High – Little room for error. Growth potential must be realized to meet IRR hurdles.Moderate – Priced close to average industry multiple.Low – Priced below industry average. (Must be for non-business related reasons)

Low – Non-recurring, concentrated revenue stream. No proven financing track record.Moderate – Strong cash flow profile but highly leveraged. Declining asset base.High – Large A/R and Inventory base. Strong cash flow generation. Diversified.

Replace – Existing management team divided and shopping for other jobs.Retool – Competent team missing one or two pieces to the puzzle. Rockstars – Cohesive, hard working team incentivized to grow business.

Lager – Clear lager in market position and content with current practices.Follower – Emulates best practice of industry leader but always one step behind. Leader – In market share, brand equity, quality of product/service, customer service.

• Treat operating leases as rental expenses. Capital leases place asset and liability on the balance sheet.

Lease Accounting

• Avoids consolidation of assets and liabilities on the balance sheet which often understates leverage measures such as the debt-to-equity ratio.

Equity Method

• Determine whether return assumptions are appropriate given current environment. Uncover any potential investment losses that can be amortized.

Pension Accounting

• These contracts establish long-term liabilities if used and need to be accounted for when measuring a targets total leverage.

Take or Pay Contracts

• Ensure there are not current or future liabilities related to decommissioning liability, asbestos liability and carbon regulation. Can increase company leverage.

Environmental Liabilities

Deep Credit Analysis

Balance sheets will not be taken at face value. In depth credit analysis will be performed to understand a companies true liabilities and total

leverage including lease, pension, and contract obligations

V. CLOSING & TRANSITION PERIOD

Possible Deal Structure

Structure A100% - Nonredeemable Participating Preferred Stock with a 10% Preferred Return

Structure B• 50% - Subordinated Debt with

17% coupon• 50% - Nonredeemable

Participating Preferred with No Preferred Return

Acquisition capital will be structured to meet both the needs of the investors and the seller. Similar equivalencies can be calculated across a range of coupon combinations.

Acquisition Capitalization

First 100 Days Plan

A granular operational plan created during the due diligence process that outlines how the post-closing transition period

will be handled. During this period, the Managing Partner will refrain from implementing any large strategic initiatives and will become familiar with the business BAU and employees.

• Create a highly specific plan to

communicate with employees, customers,

suppliers, the industry, and

investors• Clear and consistent

message• Specific timeline• Best method

Communication Education Evaluation Governance

• Focus on learning the business

•Meet and interview all employees, customers, and

important members of the supply chain• Gain experience in

the “tranches” and areas that are core

to the business model.

• Evaluate every aspect of the

company•Management team

and employees• Systems and

controls• Core competencies

of the business• Processes in place•Work ethic and

environment

• Establish and or enhance current

governance mechanisms

• Put in place the Board of Directors• Create Board

Meeting schedule• Ensure appropriate checks and balances are in place for cash

management

Levers for Value Creation

Operations•Revenue growth

through increased sales and marketing efforts• Strategic initiatives

such as new products/services, geographic expansion, and pricing changes•Margin expansion

through cost reduction or operating leverage•Bolt-on acquisitions to

enhance scale, product/service offerings, or capabilities

Finance•Optimizing the capital

structure for future growth• Sustainable and

serviceable amount of leverage• Lower cost of capital•Capital intensity

reduction – fixed assets, working capital, and/or capital expenditures

Valuation•Reach next level of

EBITDA range that justifies higher multiples•Buy at trough business

cycle multiples and sell at peak business cycle multiples

Primary

Ancillary

Ancillary

True valuation creation will result from an improvement and

increased efficiency in business operations

Board of Directors

CEOSeniorMgmt

Member

InvestorGroup

InvestorGroup Independent

Potential 5-Member Board Composition

Structure & Composition• Balanced board with mix of deep operational

experience, specific industry or business model experience, and financial expertise.

• Complementary skill set to those of existing middle management and Managing Partner.

• Five Member, staggered structure with one independent third party.

• Term of board seat determined before service begins.

• At a minimum, all Board Member expenses will be covered by the company. An annual fee will be assessed according to the company’s cash flow structure.

General Responsibilities• First Board Meeting held 2-weeks after

closing. Three follow up board meetings to be held within the First 100 Days.

• Four Board Meetings annually at the end of each fiscal quarter. Schedule TBD.

• Participation at Board Meetings at minimum via phone.

• Establish Audit Committee and Compensation Committee as a subset of current board members.

• Deep understanding of companies business model and ability to contribute to strategy.

• Monitor company capital structure.

Potential Liquidity Events

• Pool of financial and strategic buyers will increase as size of company EBITDA increases.

Sale of company

• An attractive model for investors to cash out while retaining ownership given the cash flow profile of potential targets and ability to pay down/service debt.

Dividend Recapitalization

• If present in the deal structure, investor subordinated debt will be paid down second only to Senior Credit Facilities and offers investors access to cash prior to a major liquidity event.

Repayment of subordinated debt

• Investor equity may be sold to either other investors in the group or be repurchase from the management team of the company.

Share Buy-Backs

VI. KEY RISKS & MITIGANTS

Key Risks and Mitigants

Risk: Not being able to find an attractive company to acquire during the Search Phase.

Fragmented IndustriesSearching for targets in industries

with low levels of concentration will help produce a robust pipeline of

potential deal flow.

Sizeable IndustrySelecting industries with sizeable

revenues and number of operators will increase the odds of finding a

target that meets our criteria.

Comprehensive SourcingApplying both the “in-side” out and “out-side” in approach to sourcing

deals increases the odds of finding a quality proprietary deal.

Detailed Deal/Target CriteriaMinimum company requirements, deal criteria and an industry and

target scoring matrix increase search efficiency and instill discipline.

Mitigating Factors

Key Risks and Mitigants

Risk: Not being able to complete the acquisition after an attractive target is identified.

Willing and Motivated SellerNegotiations will be continued only with sellers that have shown a clear and proven desire to liquidate their

stake in the company.

Limited Partner GroupA successful Search Fund leverages

the experience, knowledge and network of its partners. Selecting the

right investor group is crucial.

Attractive Financing ProfileBank loans play an important part in many deal structures and increase

potential IRRs. Companies with proven cash flows are a prerequisite.

Reasonable ValuationBuying a good company at a bad

price can destroy potential IRRs. The partnership must understand valuation drivers and trends.

Mitigating Factors

Key Risks and Mitigants

Risk: Being unable to manage and grow the company to provide an attractive return for investor group.

Growing IndustryChoosing a growing industry with a tailwind allows companies to grow without stealing market share or

entering into aggressive price wars.

Straightforward OperationsAllows the MP to scale the learning curve quickly and identify business fundamentals and levers for growth

and profit improvement.

Competitive AdvantageA defensible competitive advantage increases profit margins and allows

for company to, at a minimum, maintain current market share.

Strong Middle ManagementA strong management team highly capable of executing BAU activities will allow the MP to focus on the

strategic direction of the company.

Mitigating Factors

APPENDIX A – EXAMPLE DEALECONOMICS

Example Deal Economics

Optimistic Base Case Pessimistic

Revenue Growth 17.5% 12.5% 0.0%

Annual EBITDA Margin Expansion 50 bps 25 bps 0 bps

Exit Multiple 5.5x 5.0x 4.5x

Increase in NWC 20% of Revenue Growth

Cash Tax Payments 40% of Earnings Before Taxes

Depreciation & Amortization $500K in Year 0; fixed margin thereafter

Capital Expenditures Equal to Deprecation & Amortization

Transaction Assumptions• $15.0M in sales and $3.0M EBITDA• 5.0x EBITDA purchase multiple ($15.0M purchase price)• 1.5x traditional Senior Credit Facility• 1.0x Seller note (Total Leverage 2.5x Purchase EBITDA)

Earned Equity IRR Hurdles of Final Tranche

Investor IRR Third Tranche Earned Equity

≥ 30% 10.0%

≥ 25% 7.5%

≥ 20% 5.0%

≥ 15% 2.5%

< 10% 0.0%

Structure A Economics – Upside Case

Structure A Economics – Base Case

Structure A Economics – Downside

Structure B Economics – Upside

Structure B Economics – Base Case

Structure B Economics – Downside

APPENDIX B – FOCUS INDUSTRY SCORECARDS

Medical Claims Processing Industry - (+6)

Industry Concentration

Market Growth

Degree of Rivalry

Degree of Cyclicality

Regulation

Capital Intensity

Barriers to Entry

Product/Service

Alternatives

(+1)

(+2)

(-1)

(+2)

(+0)

(+1)

(0)

(+1)

LOW – The largest player in the industry, HMS Holdings, commands 14.3% of the market. Small businesses will increase in the space as the number of industry claims increase and present an opportunity to take market share.

HIGH – Overall industry growth expected to continue at a 6.7% CAGR. The three major factors driving industry growth are demographic trends, healthcare reform, and government sponsored program participation rates.

HIGH – Providing customers with a cost-saving service is essential in the industry. Price is an obvious competition point and must clear the cost-savings hurdle for the customer to be a viable option. Customer service is also a key to success.

LOW – Industry growth drivers will mitigate negative factors tied to unemployment and the health of the overall economy. However, all else equal, number of people insured and physician visits is inversely correlated with the unemployment rate.

MODERATE – Each operator must be licensed in the state in which it wishes to provide services in. Also, there are regulations around the processing of medical claims that must be followed. Government sponsored programs and reform trends are increasing.

LOW – $0.08 of capital expense for every $1.00 of labor expense. Wages account for approximately 26.1% of revenues due to current manual nature of claim processing. New technology presents an opportunity to streamline the process.

MODERATE – Operators must be licensed and abide by state-set regulations in order to operate. Also, the complexity of medical claims as a result of reform and government sponsored programs requires a highly knowledgeable workforce.

LOW – In-house claim processing is the only alternative to outsourcing the process. The in-house model is viable until a certain level of business. As volumes increase, potential customers will turn to outsourcing to cut costs.

Companion Pet Insurance Industry - (+5)

Industry Concentration

Market Growth

Degree of Rivalry

Degree of Cyclicality

Regulation

Capital Intensity

Barriers to Entry

Product/Service

Alternatives

(-1)

(+2)

(0)

(+2)

(0)

(+1)

(0)

(+1)

HIGH – The industry’s top 4 players control over 90% of the market with VPI Pet Insurance commanding a 61% share. Although a negative factor, these large players could present a strategic exit opportunity for a smaller, growing business.

HIGH – The total industry is expected to grow 6% annually through the year 2017. Favorable trends in consumer disposable income, pets per household, and the treatment of pets like family members known as humanization will support growth.

MODERATE – Firms compete on price, scope of product offering, and brand image. Although consumers are price sensitive to the product, the high end of the market can be enticed with quality of service, customer service, and overall experience.

LOW/NO – Aside from being tied to consumer spending and disposable income, the industry is fairly resilient in terms of revenue growth. Through the economic downturn of 2008-2009, the industry grew 4% in the face of declining consumer spending.

MODERATE – Industry is subject to the regulations of any insurance provider. Providers require licensing in all 50 states and governed by the National Association of Insurance Commissioners. The State Department of Insurance investigates financials.

LOW – $0.117 of capital expense for every $1.00 of labor expense. CAPEX is generally for running office space and other aspects of PP&E. Wages account for approximately 10.3% of revenues due to the sales related structure and improves with scale.

MODERATE – New entrants must comply with strict state and federal regulation to operate. Providers must obtain a Certificate of Authority in each state they wish to supply insurance. Also, major players market share could make it hard to compete.

LOW – Main alternative to pet insurance is having no pet insurance and paying out of pocket for any veterinary expenses that are incurred over the companion pet’s life including routine, preventative, and emergency services.

Alarm Security Services Industry - (+4)

Industry Concentration

Market Growth

Degree of Rivalry

Degree of Cyclicality

Regulation

Capital Intensity

Barriers to Entry

Product/Service

Alternatives

(+1)

(+1)

(0)

(+1)

(+1)

(+1)

(-1)

(0)

LOW – 80.5% of all industry enterprises are small businesses with nine or fewer employees. Large number of businesses at over 8.5K. Increased concentration over the past five years due to increased M&A activity.

MODERATE – Overall industry growth expected to continue at a 2.1% CAGR. Although the majority of the industry is mature, new technology is reviving consumer interests in upgrading old systems and purchasing ancillary products.

Moderate – Firms compete on price, scope of product offering, and brand image. Although consumers are price sensitive to the product, the high end of the market can be enticed with quality of service, customer service, and overall experience.

LOW – Residential revenue is tied closely to residential real estate values and crime rates. Although the industry does collect monitoring fees, installation and sales make up the majority of revenues. Business and government contracts are also more stable.

LOW – Aside from fire and building codes, regulation in the industry does not hamper industry growth. Instead, more strict government regulation around fire and security monitoring systems is likely to serve as a tailwind for the industry in the near future.

LOW – $0.097 of capital expense for every $1.00 of labor expense. Wages account for approximately 30.8% of revenues due to the manual nature of the installation and service aspect of the business. Employees also must be trained.

LOW – With a low level of capital intensity and a large portion of installation costs being pushed through to the consumer, barriers to entry into the industry are low. However, key large client accounts are won through years of relationship building.

MODERATE – In-person security services offer alternative solutions for larger commercial clients. Staying with out of date systems is also an alternative that could threaten future industry growth.

Mobile Security Software Industry - (+4)

Industry Concentration

Market Growth

Degree of Rivalry

Degree of Cyclicality

Regulation

Capital Intensity

Barriers to Entry

Product/Service

Alternatives

(+1)

(+2)

(-1)

(+1)

(+1)

(+1)

(-1)

(0)

LOW – Although large players such as SAP, Intel owned McAfee, and Symantec (Norton) dominate the PC and web-based security market, no player has taken majority share in the upcoming mSecurity market which is filled with smaller players.

HIGH – Demand for mobile security is expected to significantly increase as smartphone adoption levels increase, mobile payments takeoff, and more sensitive consumer and enterprise data is stored on the cloud and accessed via mobile devices.

HIGH – Constant product iterations, changing technology, multi-platform requirements and customizable solutions set the framework for competition. With low concentration, price is a factor, however increased security concerns may drive price.

LOW – According to a Galvin Consulting survey, current spend on mobile security accounts for 5% of IT budgets and is expected to increase to 10% next year. SaaS delivery models will stabilize cash flows but revenues are still dependent on IT spend.

LOW – Regulation for highly secured data and networks will provide a tailwind for operators who can garner these types of relationships. For consumer and small enterprise solutions the regulation threat is considered to be low.

LOW – $0.08 of capital expense for every $1.00 of labor expense. Wages account for approximately 26.1% of revenues due to current manual nature of claim processing. New technology presents an opportunity to streamline the process.

LOW – Developer talent is the largest barrier to entry into this market. Entering into Managed Solutions will require a sales force dependent on the size of the enterprise that is being targeted. Low concentration levels confirm lower barriers to entry.

MODERATE – Malware on mobile devices is in its infancy and as a result, mobile security adoption levels are still on the low side. Accordingly, the main alternative to the use of security software is not to use security software to protect devices and data.