introduction to darkhorse partners

Introductory Overview

LinkedIn Document

February 2015

www.DarkHorsePartners.net

SUMMARY

DarkHorse Partners (DHP) is an independent private equity sponsor in the lower middle

market which…

Is led by former operating executives who are adept at rapidly delivering capital efficient

profit while building intrinsic organizational capabilities

• Philosophy is grounded in McKinsey & Company’s strategic thinking combined with

Toyota’s humble yet powerful principles for “flawless execution” and “respect for people”

Seeks to acquire and operate manufacturing or “value added” distribution businesses

which meet our minimum criteria and possesses one or more key characteristics

• Targeting stable and established businesses with strong management teams generating

a minimum EBITDA of $3.0 M

Offers business owners and investors a proven value creation strategy that uniquely differs

from typical private equity firms

• We see how to capture opportunities others do not

• We deliver faster results with greater confidence

• We create highly sought after investment opportunities

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OUR BACKGROUND

Lean practitioners

• Worked in Toyota and Nissan’s supplier development to

improve Quality, Delivery, & Cost of Tier 1 supply base

DHP is led by former operating executives who are adept at quickly delivering capital

efficient profit while building intrinsic organizational capabilities

Leverage operations to create

competitive advantages in terms

of quality, delivery, & cost

Identify opportunities & “size the

prize” quickly (days vs. weeks)

Develop & execute successful

value creation strategies that

return 6-8 times fees

Proven value creation while

positioning middle market

businesses for sale

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Management consultants

• Helped form the manufacturing practice at McKinsey &

Company (top 3 strategy firm) and served Fortune 500 clients

on strategy/operations

• Consulted with a myriad of private equity groups to enhance

“top” and “bottom” line performance (e.g., Arcapita, WHI

Capital, Sentinel Capital Partners, etc…)

Operating executives

• Held senior level positions while leading privately held

companies through large scale transformations


OUR LEADERSHIP TEAM

Our experience covers the full spectrum of acquiring, managing, and successfully

exiting closely held businesses

Stephen Chun

Managing Director

Michael Ferrell

Managing Director

Rick Lequieu.

Managing Director

Michael Schopin

Senior Adviser

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25 years of business building expertise which includes considerable experience as

an operating executive & consultant for a number of private equity firms (e.g., WHI

Capital, Arcapita, Riverside Partners, Brightwater Partners, Catalina Capital, etc.)

17 years experience strategically enhancing the performance, capabilities, and

culture of both family owned and private equity (e.g., Vestar Capital, and Norwest

Equity) controlled businesses to attain higher shareholder value. Served as a

mergers and acquisitions adviser over the last 7 years to lower middle market

business owners.

20 years experience leading strategic and operations transformations to create

value while working as an Operating Executive and consultant in the public sector

and for numerous private equity firms (e.g., Sentinel Capital Partners, The Harbour

Group, Brightwater Partners, and Norwest Equity).

15 years as a principal investor while also serving as an active participant in the

development and growth of the portfolio companies operating as everything from an

active Chairman of the Board to working as a C-level executive at the businesses.

Completed over 40 private control equity, minority equity, and direct debt investment

transactions during his career across a variety of industries. Prior to this, worked at

both hedge funds and mutual funds investing into public securities through both

traditional stock purchases and privately structured direct investments.


OUR VALUE PROPOSITION

Combining McKinsey & Company’s strategic thinking with Toyota’s humble yet

powerful principles for “flawless execution” and “respect for people” yields a

refreshing and distinctive approach to partnering with private equity firms

Respectful partners with a “let’s roll up our sleeves” collaborative style

Flexible deal structures which wisely uses a combination of debt and equity to achieve

the optimal capital structure and minimize the after tax cost of capital

Healthy value creation through executable business strategies and effective change

management, e.g.,

• Sales growth (e.g., expanded distribution, incremental sales through improved service,

etc…)

• Margin enhancement (e.g., pricing strategy, procurement, waste elimination, supply

chain optimization, etc…)

• Efficient use of capital (e.g., order to cash leadtime, inventory optimization, etc…)

Extraordinary professional contacts providing unique access to key decision makers

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ACQUISITION CRITERIA

DHP seeks to acquire/operate manufacturing or “value added” distribution businesses

which meet our minimum criteria and possesses one or more key characteristics

Basic acquisition criteria:

• $3 M EBITDA

• Minimum 5 years in business (no early stage businesses)

• Stable/growing sales and profits

• Strong management team in place

• Significant value creation opportunities can be realized within the first 12 months

(33% of EBITDA minimum)

Preferred characteristics:

• Significant market “head room” (>50%)

• Defendable competitive advantage

• Repeat sales to a diversified customer base

• Fragmented industry

• Independence from owner (personal contacts, technical capability, etc…)

• Limited exposure to commodity price volatility

• Non-cyclical customer demand

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DISTINCTIVE APPROACH…

DHP offers business owners and investors a proven value creation strategy that is

differentiated from traditional private equity firms

Vision Velocity Value

We see how to capture

opportunities others don’t

We deliver faster results

with greater confidence

We create high value

investment opportunities

• Define an executable

business strategy that:

- Meets unfulfilled

customer needs & wants

(e.g., functionality,

quality, service)

- Leverages untapped

latent capacity to fuel

growth & efficiencies

- Eliminates “waste” while

capturing opportunities

to enhance margins

• Implement business

strategy & help

orchestrate change

- Strategic investment of

growth capital

- Emphasize

opportunities the

business largely

controls

- Rigorous performance

management (e.g.,

cascade metrics/goals

throughout organization)

• Sustain business

enhancements through:

- Systems implementation

- Capability building

- Continuous improvement

culture

• Augment enhancements

with bolt-on strategy as

applicable

• Execute a defined exit

strategy from “Day 1” until

the liquidity event

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…YIELDING EXCEPTIONAL RESULTS

Rapid value creation at a $250 M general aviation aircraft company fuels strategic

growth

Company’s growth was constrained due to delays in order fulfillment

and long product development cycle times

• Throughput constraints & inconsistent quality led to long delivery

leadtime (18 months vs. industry average of 6 months)

• Long product development cycle times

Business systems were implemented to fuel innovation and achieve

“flawless” execution

• Redesigned the organization to connect dedicated support functions & disciplines to the frontline to

enhance problem solving speed

• Redesigned the process to eliminate waste and free up latent capacity

• Developed a formal product development process to cover “concept to production”

A dominant market position was achieved which generated significant capital efficient profits which

was then used to fund expansion into a new product segment

• Achieved repeatable on-time delivery and quality

• Attained #1 top sales aircraft in its class displacing

the incumbent of 70 years

• Transitioned from negative to positive cash flow

in less than 2 years

• Enabled capital investments to develop a product for

the Very Light Jet market

Metric Before After Delta

Sales $50 M $250 M +500%

Gross Profit -0.1 +0.3 +400%

Leadtime (Months) 18 6 -66%

Productivity (Labor

hours per aircraft) 3,600 1,800 -50%

Order Changes (%) 95 <5% -95%

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introduction to darkhorse partners

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