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Case Study and Sample Slides Canada: Packaging and Facility Supplies

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Disclaimer

The sample contains excerpts from a study conducted by Sutherland Global Services for a client. the sample may not contain all the pages of the original document. THIS sample has been prepared by Sutherland Global Services, Inc. or its associates or affiliates (“Sutherland Global Services�) exclusively as an illustrative sample only and is sent to authorized recipients solely for the purpose of evaluating Sutherland Global Services' support service capabilities. THIS sample should not be considered as an offer to sell, a solicitation to buy, or an endorsement or recommendation of any company. Sutherland Global Services does not guarantee the accuracy, completeness or other characteristics of the data / information of the report. This Sample may not be reproduced or distributed (in whole or in part) to any third party without the express prior permission of Sutherland Global Services.

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Wide Format Digital Ink Supply – Canada Client • The client is a leading distributor of packaging and facility supplies, with operations primarily in the US and Canada

Client Ask • The client required assistance in identifying acquisition targets (distributors) in Canada across three different business segments: – Safety supply – Medical supplies, and – Wide format printing supplies

Sutherland’s Solution • An overview of the industry, market size, growth drivers, supply chain dynamics, major players and future outlook • An overview of practices followed in the distribution space and its attractiveness based on various parameters such as distributor intensity, competition, margins and regulations • A comparison of short-listed target distributors on pre-defined parameters such as revenues, geographical operations, operational excellence and possible synergies

• Benefits to the Client • This report was an important input for the client : – To gain key insights into major trends in the Ink industry – To gain key insights into the functioning of distribution channels through the industry – To take an informed decision in short-listing proposed targets for acquisition – To identify synergies with few select target companies

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We filtered distributors based on the key rationale to arrive at the potential acquisition targets… Filter

Rationale

I – Nature of offerings

II – Geographical operation

III – Revenues

IV – Willingness

V – Profiles

Compiled a list of more than 46 relevant distributors from proprietary databases such as OneSource, Factiva and other public sources like “Profile Canada” and business directories

Eliminated companies with low focus on wide format equipment and supplies 37 companies

Eliminated distributors largely operating in provinces with comparatively low market potential 34 companies Eliminated companies with revenues of less than USD10 million 10 companies The ones already acquired and not interested to get acquired were removed 6 companies Based on willingness to get acquired, we curtailed the list to 4 companies*

* For rest companies, key personnel were not available for discussion either due to busy schedule or travel. Note: We have not included the companies operating only in Yukon, New Foundland & Labrador, Northwest Territories, Nunavut and Saskatchewan provinces

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…which were then evaluated to best fit our predefined parameters Parameter

Definition • Under this parameter, we have benchmarked revenues of the company against the pre-

Size of the Company

set criterion of USD50 Million. • For a majority of the players, wide format equipment and supplies is the only or the largest business segment, and hence, we have considered total revenues of the company, i.e. from all the segments.

Geographical Presence

• This parameter considers physical presence of the company across the states • It would help us in mapping the presence of a distributor across the country

Scale High Med to High Med Low to Med Low

-

USD150-250 Mn USD100-150 Mn USD50-100 Mn USD25 - 50 Mn < USD25 Mn

• Distributors with regional presence are rated medium • Distributors with strong national or regional presence are rated high

• The possible synergies of a potential target with XXX are considered under

Synergies with XXX

this parameter. We have considered factors such as location of warehouse and back-end

HIGH - Higher synergies

operations • Overlap of warehouse, integrated/computerized support functions and dedicated team

LOW - Lower synergies

for support functions for a target indicates possibilities of better synergies with XXX

Operational Excellence

• Operational Excellence is gauged from the business culture or value proposition of the company. The companies providing a mix of price, quality, and ease of purchase are operationally better than others

HIGH - Higher operational excellence LOW - Lower operational excellence

Source: SGS Research

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Relatively higher revenues, a national reach… Acquisition Criteria Geographic Presence

Size of the Company

Target Companies

ON

QC

Company A

Company B

Company C

Company D

Ratings

Low 1

Low- Medium Medium 2

3

BC

AB

MN

Synergies with XXX

SK

NS

Operational Excellence

Final Rating

Rating

3.75

3

2.75

2.5

Medium-High High 4

5

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… and a high level of direct customer interaction Rationale Acquisition Criteria Target Companies

Company A

Company B

Size of the Company

Geographic Presence

Synergies with XXX

Operational Excellence

The company reported revenues in the range of USD45-50 million in 2006. It has three warehouses having automated Inventory Management System in Montreal, Toronto & Winnipeg, and sales offices in Edmonton, Vancouver, Saskatchewan & Nova Scotia.

The 55,000-square feet facility in Montreal is the company’s flagship location and houses bright modern showrooms, twin-house training facilities and two walk-up counters where customers can consult directly with technical or parts specialists.

The company offers a high level of ongoing service, from product demos before the sale through installation to training, support and supplies, partnering with the customer every step of the way.

The company reported revenues in the range of USD20-25 million in 2006. Revenues have increased more than 10 times in the last 15 years

The company has a national reach as it works with dealers outside Ontario. It has physical presence all over Ontario with a centralized warehouse having automated Inventory Management System in Mississauga.

The company entertains customized orders for its key clients. It supplies best-value, large format imaging design graphic solutions with an intent of seamless workflow improvement via integration of manufacturers with leading media and software vendors.

Source: SGS Research

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… makes XXX the most attractive acquisition target Rationale Acquisition Criteria Target Companies

Size of the Company

Synergies with XXX

Operational Excellence

The company reported revenues in the range of USD40-45 million in 2006. Headquartered in Alberta, the company has other centers in Toronto, Saskatoon, Vancouver and Whitby.

The company has a centralized system of functioning as it routes all inquiries through the head office regardless of whether customers are requesting information about a particular product or service, or simply wish to get in touch with someone at CIP regarding a general inquiry.

The company generally delivers on-demand and customized orders to its clients. It believes in providing turnkey imaging solutions that can be deployed with maximum efficiency, and thereby providing maximum return on customer investment -- from software and supplies to hardware and technical support.

The company reported revenues in the range of USD10-15 million in 2006. It is present all over the Ontario region including Ottawa, Concord, Toronto, Waterloo, Cambridge and London.

It has been an acquirer company that expands through acquiring small players. It is presently focusing on the Ontario region but has plans to expand beyond the Ontario region.

The company generally delivers on-demand and customized orders to its clients. It provides customers with a comprehensive list of “document services”. These services include Equipment sale, lease or rent for clients who choose to print “in house”.

Company C

Company D

Geographic Presence

Source: SGS Research

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… while some potential targets either refused the proposal or were not available for the discussion Other Companies

Description of the Companies  Established in 1953, XXX is reportedly the largest independent distributor of graphic arts products and services in Canada with revenues of about USD70 million in 2006.

XXX

 Headquartered in Ontario, the company has a nationwide reach with other offices in Edmonton, Calgary, Vancouver, Ottawa. Montreal, Quebec, Winnipeg, Saskatchewan and Nova Scotia. The company has wide format equipment demo facilities at Mississauga, Vancouver and Montreal.  The company has enjoyed a continuous growth on the back of its reputation for unmatched customer service in combination with the highest quality of graphic equipment and supplies available. The company’s superior service and support ensure that its customers’ production rooms are always operational.

 Established in 1992, XXX is a national distributor of wide format printers and cutters and accessories like Ink and Inkjet Media with revenues of about USD14 million in 2006.

XXX

 The company currently serves throughout Canada, the United States and abroad. Its offices, showrooms, training & service centers are located in Mississauga-Ontario (Head Office), Calgary-Alberta, Halifax-Nova Scotia & Vancouver-British Columbia in Canada.  The company is committed to continually provide leading-edge technologies, training, supplies and support to the ever-changing marketplace. It endeavors to deliver on this commitment in a prompt, efficient and friendly manner so as to create long-term relationships with both customers as well as suppliers.  Established in 1982, XXX has been a major player in the Canadian sign and screen-printing business. In addition to selling equipment and materials, ND Graphics offers financing and support, through field service engineers and technical support staff, to clients who purchase equipment from the company.

XXX

 The company has a national reach with nine stocking locations in Dartmouth, Montreal, Ottawa, Toronto, London, Winnipeg, Calgary, Edmonton and Vancouver.  ND Graphics fosters a culture of customer service throughout the entire organization, from Sales & Marketing, Tech Support to Operations as well as Credit and Finance.

Source: SGS Research

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Thank You

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Mergers & acquisitions identifying acquisition targets in the packaging & facility supplies industry