We have developed an extremely comprehensive and formal deal-sourcing program. GOING Ventures’ reputation as value-added and a successful buy and build investment company has made us an attractive partner for a wide range of owners, business brokers and other intermediaries.

Key aspects of GOING Ventures’ deal sourcing program include:

Extensive Intermediary Network
We use our network of active deal contacts to originate less competitive investment opportunities. In the past, over three-fourths of our transactions have been directly originated outside of an investment bank-driven auction process. A breakdown of the potential deal flow by source is as follows:

A. Deal Sourcing

GOING Ventures consistently generates between 1,000 and 2,000 potential investment opportunities each year. Our origination efforts include:

• Deal Intermediary Community. We communicate frequently with a number of intermediaries (attorneys, accountants, small business brokers, etc.) by leveraging our Database. We rank these intermediaries (e.g., A, B or C) according to their ability to consistently source attractive and proprietary deal flow. We communicate with each of the “A” contacts on a monthly basis, the “B” contacts on a quarterly basis, and the remaining contacts receive annual mailings. Our team members also take marketing trips to approximately 20 cities per year to visit “A” contacts and generate new relationships.
• Referral Fee Program. Historically we do not keep buy-side intermediaries on retainer. As appropriate, however, we do offer brokers contingent fee agreements that pay success fees based on the Lehman Formula. These brokers are actively managed through our database and follow the same calling program as described above.
• Industry Associations, Trade Shows and Networking Groups. A select group of key industries are closely monitored by our team members on an annual basis. We identify and join appropriate industry associations and attends relevant trade shows in efforts to locate attractive companies that are interested in discussing a potential sale. Our team members are also involved in a number of networking organizations.
• Cold Calling. A cold-calling effort is undertaken to target key industries. Industry research helps identify top companies within each strategic segment. In general, an associate contacts the targeted organization on two to three separate occasions. If the associate pre-qualifies and secures time with the appropriate member of the target company’s management team, a meeting or call is arranged with our transaction executives.
• Top Industry Executives. Our team members also manage relationships with active executive contacts with whom they have met over the years or those who contact them on a regular basis. Meetings are arranged with these executives as appropriate opportunities arise.

B. Efficient Screening and Initial Review

Sourced opportunities undergo a detailed screening process. An associate prepares a summary review containing key deal metrics and a brief business analysis for each proprietary opportunity.

Transaction reviews are distributed and presented to select members of the investment committee (the “Investment Committee”) prior to the weekly meeting.

Based on a favourable initial response of the Investment Committee, more analysis is conducted and a four to ten page “mini-summary” is prepared for review. If interest in the opportunity remains after the mini-summary is circulated, an indication of interest and preliminary valuation are prepared and submitted. Our transaction team then typically makes a facility visit.

If the process moves forward, a more detailed valuation, structure and letter of intent are prepared to secure exclusivity for the duration of the due diligence period. Each step of this streamlined investment process is tracked in the deal log system. A deal log is generated and presented on a weekly basis to track, prioritize and discuss each opportunity with the Investment Committee). In a given year, we typically screen between 1,000 to 2,000 opportunities that are narrowed down in each step of the investment review process.

GOING Ventures’ strategy is to pursue investments based on a variety of factors that include: management talent, price, growth prospects and a company’s potential for improved performance. We believe that in addition to experience, access to the resources that support the due diligence and decision-making process is a critical component of making sound investments. These resources are allocated within the due diligence milestone where responsibilities of each team member are detailed.

Once a target company has passed the initial screening process, our team assesses the potential for growth and performance improvement. This strategic approach to due diligence before valuation allows the Investment Committee the ability to make more insightful and educated investment decisions. Key elements of the investment review process are outlined below:

C. Comprehensive Direct Investment Process

• Source Deals
• Perform Detalied and Efficient Screening
• Select Target Markets and Attractive Industries
• Evaluate Management
• Perform Industry Analysis
• Conduct Detalied Financial Reviews
• Determine Investment Structure
• Review Control Systems
• Use Prudent Financial Leverage
• Set Valuation
• Negotiate Terms
• Control Investments
• Active Monitoring
• Professional Advisors
• Management Support

D. Rigorous Due Diligence

We perform detailed industry analyses (growth expectations, competitive analysis, etc.) and general company analyses (SWOT analysis, operational efficiency evaluations, etc.). While the background elements of a potential investment are reviewed, we believe that competent and experienced management is crucial to the success of the investment. Therefore, we conduct multiple meetings with management to understand their experiences, operating philosophies and growth plans. Moreover, management normally is subject to reference checks and, where appropriate, investigative firms may be engaged to perform background checks. As part of the evaluation process, our team also analyzes the target company’s industry. We conduct an independent analysis, which typically includes discussions with the target company’s customers, suppliers and competitors and a review of external research. Through this process, we are able to form a view of the industry trends, the drivers of growth and the general attractiveness of the opportunity.

In general, our team focuses on the following factors with respect to each proposed investment:

Management

• Depth at executive and operating levels
• Experience and references
• Incentive structure

Industry

Size

• Projected growth rates
• Competitive landscape
• Product cycles
• Regulatory climate
• Margins

Company

• Product and customer base
• Distribution channels
• Cost structure
• Capital intensity
• Supplier relationships
• Financial controls and systems
• Historical financial performance
• Growth plans, cost of growth and potential stress points
• Competitive positioning

At GOING Ventures, we believe that careful negotiation of transactions and bank financing are essential elements of successful private equity investing. In structuring lower-middle market transactions, the terms of a transaction are often as important as the price. We, therefore, focus significant time and attention to the negotiation process, both with sellers and with lenders. Terms for the transaction are negotiated with the intermediary or with the target directly. We negotiate the financing terms of the lender in parallel. We always seek to incorporate capital structures that provide significant flexibility and offer investors the benefits and equity enhancement of leverage. All legal documentation is completed and executed by the end of this stage (e.g., credit agreement, intercreditor agreement, definitive agreement, employment agreements, etc.).

We believe our team members are very skilled at negotiating private equity investment transactions. We are able to identify the key drivers of investment returns and risks in evaluating the attractiveness of the investment and is able to negotiate the appropriate terms in an effort mitigate these risks.

F. Operating Oversight and Post-Investment Activities


Throughout our existence, we have demonstrated that returns can be significantly enhanced by the implementation of successful growth strategies and operating efficiencies. Our post-acquisition operating formula includes the following elements:

• Develop Detailed Business Plans. In conjunction with management, we oversee the preparation for each portfolio company of a business plan, capital plan and strategic plan that are tailored to address the company’s primary objective of maximizing long-term performance. These plans help target the areas in a company’s organizational structure, operation and strategy that represent potential latent growth opportunities.
• Provide Appropriate Management IncentivesManagement teams are encouraged to make meaningful investments in their companies in the form of cash equity or full-recourse loans. GOING Ventures’ strategy also calls for structured incentive plans, such as time and performance options, that reward these management teams for improved operating performance and long-term value creation.
• Establish Operating and Financial Controls. We work to ensure that necessary operating and financial controls are in place at each portfolio company, focusing in particular on cash management and improved operating efficiency. We also utilize our internal operating expertise to work hands-on with management teams to establish better financial controls and make operational improvements.
• Oversee the Board of Directors. Typically each portfolio company is required to formally review its performance with the board of directors on a quarterly basis. Moreover, the individual overseeing the investment generally maintains close contact with the portfolio company’s senior executives. As with all of the operational oversight measures that are taken, this frequent communication between GOING Ventures and its portfolio investments helps to ensure that the long-term performance goals are achieved.
• Provide Growth and Acquisition CapitalWe also believe that providing incremental equity and debt capital for continued portfolio company growth and add-on acquisitions is an important success factor. Accordingly, the Investment Committee typically allocates additional capital where appropriate and seeks to have an investment professional take a lead role in structuring and arranging credit facilities, bank debt, mezzanine debt and other types of financing for the portfolio company.
• Optimize Exit Strategies.We believe a successful investor maintains a patient, long-term approach toward private equity investing, concentrating on maximizing the return and capital gain from each portfolio investment. At the appropriate time to pursue liquidity, we work closely with a portfolio company’s management to realize the value that has been created. GOING Ventures generally seeks to exit investments through an IPO, strategic sale, or recapitalization on favourable terms and targeted investment returns of 25% per annum.