QE2 Slide Deck June
Our Growth Strategy: Mergers & Acquisi7ons QE2 Acquisi7on Corp. June 2013
Forward Looking Informa7on Certain informa7on in this presenta7on and in oral answers to ques7ons may contain forward-‐looking informa7on statements or forward-‐looking informa7on together, “forward-‐looking informa7on”. Forward-‐looking informa7on is based on current expecta7ons, es7mates and projec7ons that involve a number of risks which could cause actual results to vary and in some instances to differ materially from those an7cipated by QE2 Acquisi7on Corp. Forward-‐looking informa7on is based on the es7mates and opinions of management at the 7me the informa7on is presented. Actual results could differ materially from conclusions, forecasts or projec7ons in the forward-‐looking informa7on, and certain material factors or assump7ons were applied in drawing conclusions or making forecasts or projec7ons as reflected in the forward-‐looking informa7on. Readers are cau7oned not to place undue reliance on forward-‐looking statements as actual results could differ materially from the plans, expecta7ons, es7mates or inten7ons expressed in the forward-‐looking statements. Except as required by law, QE2 Acquisi7on Corp. assumes no obliga7on to update any forward-‐looking informa7on, should circumstances or management’s es7mates or opinions change, or any other reason.
QE2 Acquisi7on Corp: Confiden7al
2
Table of Contents § Execu7ve Summary § Mandate § Criteria for Mergers & Acquisi7ons § The Industry / Customer § Target Companies § Alberta’s 20 Year Strategic Capital Plan § Maximizing Efficiencies § Business Risk & Mi7ga7on § Growth Drivers § 2013-‐16 Outlook § Capitaliza7on § Our People § Contact QE2 Acquisi7on Corp: Confiden7al
3
Execu7ve Summary
Proven Low-‐Risk Business Model
Target Market Growth Strategy Integra7on
• Focused in Alberta -‐ the current economic landscape in Alberta has allowed us to recognize an opportunity for consolida7on of exis7ng service suppliers within certain sub-‐sectors • Predictable cash-‐flow and strong margins • Experienced Management team • We have iden7fied and verified a niche in the small to medium-‐sized enterprises involved in the Alberta Advantage without being directly 7ed to the Oil and Gas sector
• Our Growth Strategy is Mergers and Acquisi7ons (M&A) -‐ both horizontal and ver7cal
• Human integra7on and communica7on post M&A • 70% or more M&A fail due to the lack of understanding of the human integra7on aspect -‐ post M&A.
QE2 Acquisi7on Corp: Confiden7al
4
Mandate §
Backed by world class bankers, our mandate is to grow QE2 Acquisi7on Corp. to over $50 million in annual revenues by 2016
§
We are owners with a formula that will reward equity growth Es#mated Annual Revenues ($ millions)
Strong proven Management team
Ac7ve Board of Directors
QE2 Acquisi7on Corp: Confiden7al
Strong Corporate Governance
Aggressive M&A strategy
Backed by world class bankers
5
Criteria for Mergers & Acquisi7ons § § § §
Service companies headquartered in Alberta Demonstrated consistent earning power Businesses with healthy margins while employing lihle debt Management in place and willing to stay on for 12 to 24 months during transi7on “We will leverage our 20 plus years of M&A experience in capital markets to deliver solid yield and growth opportunity for ourselves and our investors.” CEO, QE2 Acquisi7on Corp.
QE2 Acquisi7on Corp: Confiden7al
6
The Industry/Customer
§
the municipali7es of Alberta Infrastructure, construc7on, maintenance, and service-‐ orientated companies servicing
QE2 Acquisi7on Corp: Confiden7al
7
Target Company 1: Highlights U#li#es Service and Maintenance, Flagging and Traffic Management § Company offers a niche service that plays a vital role for ci7es and u7lity companies in maintaining and extending the life of their light standard assets § Proven track record of 14 years of opera7on § Strong systems and team in place § Good contracts in place with u7lity companies § Plenty of new opportuni7es available via commercial/ industrial, parking lots, traffic lights, transmission boxes, etc. § Since 2009: Ø Revenues have increased nearly 80% Ø Gross profit has averaged 43% and increased over 125% Ø EBITDA has averaged approximately $460,000 per year Ø Assets have increased by 18% Ø Long term debt has averaged only $300,000 (currently at about $200,000)
QE2 Acquisi7on Corp: Confiden7al
8
Target Company 2: Highlights Traffic and U#li#es Construc#on, Service, Maintenance and Monitoring § Offer excep7onal service in the rapidly expanding traffic control industry with a full range of services related to the construc7on and maintenance of traffic signal and street light systems § Company has offices located in Sherwood Park, Calgary and Fort McMurray which provide service to customers in Alberta and Saskatchewan § Areas of exper7se include traffic signal and street light design, construc7on, system installa7on, coordina7on plan design, implementa7on, and maintenance § Since 2009: Ø Revenues have averaged over $12 million per year Ø Gross profit has averaged approximately 22% per year Ø EBITDA has averaged $1 million per year Ø Assets have averaged $7 million per year
QE2 Acquisi7on Corp: Confiden7al
9
Consolidated Summary Post-‐Acquisi7on of first 2 Targets §
Strong foothold on rural infrastructure service companies with a focus in the traffic management / construc7on/ servicing of traffic lights and light poles
§ § § § §
Revenues of nearly $15 million EBITDA of almost $1.8 million expected for 2013 Assets totalling nearly $9 million Gross profit of 30% expected for 2013 The QE2 team is confident that this consolidated business can be ramped and the scope for organic growth in Alberta is extensive
QE2 Acquisi7on Corp: Confiden7al
10
Alberta’s 20 Year Strategic Capital Plan
“The Alberta government has made a commitment to maintain and improve exis7ng infrastructure and has laid out aggressive plans to construct new infrastructure over the next 20 years.” Alberta’s 20-‐Year Strategic Capital Plan QE2 Acquisi7on Corp: Confiden7al
11
Maximizing Efficiencies §
Economy of scale: combined companies can reduce costs by removing duplica7on, thus increasing profit margins.
§
Economy of scope: increasing or decreasing the scope of marke7ng and distribu7on.
§
Fleet op#miza#on: effec7vely u7lizing fleet by minimizing down-‐7me and appropriately dispatching fleet. Dispatch: more effec7vely dispatching to required service areas.
§ § § § §
Experience: combined companies provide almost 45 years of opera7onal experience. Managerial/Opera#onal Specializa#on: increasingly specialized management. Geographical Diversifica#on: capturing all available service areas within Alberta. Ver#cal integra#on: merging upstream and downstream processes.
QE2 Acquisi7on Corp: Confiden7al
12
Business Risk and Mi7ga7on Issue
Risk
Mi#ga#on
Underes7ma7ng people impacts
Loss of key management and employees
Establish strong rela7onships and address human capital issues
Neglec7ng core business
Could damage the core business of one or both organiza7ons, undermining the deal before it even happens, or weakening the post M&A company
Maintain energy and focus on the core business and ensure careful planning and execu7on of the M&A
Culture mismatches
Lack of teamwork and/or inefficient opera7ons
Be honest and fair on expecta7ons of acquiring/parent company
Poor due diligence
Many informa7on opera7onal gaps that jeopardize the success of the final M&A
Review each func7onal area of the target company looking for risks and poten7al pioalls
Cost of M&A is underes7mated
M&A is expensive to complete and open ancillary costs are not considered
Do not contemplate undertaking a merger or acquisi7on without budge7ng for the required costs
QE2 Acquisi7on Corp: Confiden7al
13
Growth Drivers $15 billion planned to be invested into Alberta infrastructure 2013-‐2016 1
Alberta GDP expected to average 2.9% over next three years 1
Growth
Mergers and Acquisi7ons
Alberta’s popula7on expected to grow to more than 5 million, from 3.9 million, in less than 20 years 1
Movement to more environmentally friendly ligh7ng through LED ligh7ng
1 Alberta Budget 2013: h@p://www.finance.alberta.ca/publicaEons/budget/budget2013/
QE2 Acquisi7on Corp: Confiden7al
14
2013-‐16 Outlook
2013
2014
2015
2016
Complete two acquisi7ons totaling $15 million in revenues Seek to acquire one to three addi7onal complementary ver7cal companies M&A poroolio with $50 million in revenues and genera7ng $5-‐$10 million in EBITDA
QE2 Acquisi7on Corp: Confiden7al
15
Capitaliza7on As of May 27, 2013
Price per Share
Proceeds
Shares
$0.25
$305,000
1,220,000
$305,000
1,220,000
$1,000,000
4,000,000
Class A Shares Founders/Seed Financing Total Class A Shares
Class B Shares Current Financing
$0.25
Other Total Class B Shares
Total
QE2 Acquisi7on Corp: Confiden7al
2,000,000
$1,000,000
6,000,000
$1,305,000
7,220,000
16
Our People Our Execu#ve Mihalis (Mike) BelanEs -‐ CEO and Director Joe Gagliardi, CMA -‐ Chief Financial Officer & Director Vice President -‐ Business Development – TBA Our Managers Erin Heath – MarkeEng Brand Manager Bryan Gassner – Sales Manager Independent Board of Directors Claudio Pucci, MBA – Director Maria Nathanail, LLB – Director Gino DeMichele -‐ Investment Banker – Director
QE2 Acquisi7on Corp: Confiden7al
17
Contact Mihali (Mike) Belan#s CEO Direct: 1.403.701.7299 Email: [email protected]
Maria Nathanail Corporate Secretary Direct: 1.403.968.7889 Email: [email protected]
Mailing Address 1981 -‐ 246 Stewart Green SW Calgary, AB T3H 3C8
Legal Counsel Burstall Winger LLP Suite 1600 -‐ 333 7 Ave SW Calgary, AB T2P 2Z1 Phone: 1.403.264.1915
Auditors KPMG LLP Suite 2700 -‐ 205 5 Ave SW Calgary, AB T2P 4B9 Phone: 1.403.691.8000
QE2 Acquisi7on Corp: Confiden7al
18
Forward Looking Informa7on Certain informa7on in this presenta7on and in oral answers to ques7ons may contain forward-‐looking informa7on statements or forward-‐looking informa7on together, “forward-‐looking informa7on”. Forward-‐looking informa7on is based on current expecta7ons, es7mates and projec7ons that involve a number of risks which could cause actual results to vary and in some instances to differ materially from those an7cipated by QE2 Acquisi7on Corp. Forward-‐looking informa7on is based on the es7mates and opinions of management at the 7me the informa7on is presented. Actual results could differ materially from conclusions, forecasts or projec7ons in the forward-‐looking informa7on, and certain material factors or assump7ons were applied in drawing conclusions or making forecasts or projec7ons as reflected in the forward-‐looking informa7on. Readers are cau7oned not to place undue reliance on forward-‐looking statements as actual results could differ materially from the plans, expecta7ons, es7mates or inten7ons expressed in the forward-‐looking statements. Except as required by law, QE2 Acquisi7on Corp. assumes no obliga7on to update any forward-‐looking informa7on, should circumstances or management’s es7mates or opinions change, or any other reason.
QE2 Acquisi7on Corp: Confiden7al
2
Table of Contents § Execu7ve Summary § Mandate § Criteria for Mergers & Acquisi7ons § The Industry / Customer § Target Companies § Alberta’s 20 Year Strategic Capital Plan § Maximizing Efficiencies § Business Risk & Mi7ga7on § Growth Drivers § 2013-‐16 Outlook § Capitaliza7on § Our People § Contact QE2 Acquisi7on Corp: Confiden7al
3
Execu7ve Summary
Proven Low-‐Risk Business Model
Target Market Growth Strategy Integra7on
• Focused in Alberta -‐ the current economic landscape in Alberta has allowed us to recognize an opportunity for consolida7on of exis7ng service suppliers within certain sub-‐sectors • Predictable cash-‐flow and strong margins • Experienced Management team • We have iden7fied and verified a niche in the small to medium-‐sized enterprises involved in the Alberta Advantage without being directly 7ed to the Oil and Gas sector
• Our Growth Strategy is Mergers and Acquisi7ons (M&A) -‐ both horizontal and ver7cal
• Human integra7on and communica7on post M&A • 70% or more M&A fail due to the lack of understanding of the human integra7on aspect -‐ post M&A.
QE2 Acquisi7on Corp: Confiden7al
4
Mandate §
Backed by world class bankers, our mandate is to grow QE2 Acquisi7on Corp. to over $50 million in annual revenues by 2016
§
We are owners with a formula that will reward equity growth Es#mated Annual Revenues ($ millions)
Strong proven Management team
Ac7ve Board of Directors
QE2 Acquisi7on Corp: Confiden7al
Strong Corporate Governance
Aggressive M&A strategy
Backed by world class bankers
5
Criteria for Mergers & Acquisi7ons § § § §
Service companies headquartered in Alberta Demonstrated consistent earning power Businesses with healthy margins while employing lihle debt Management in place and willing to stay on for 12 to 24 months during transi7on “We will leverage our 20 plus years of M&A experience in capital markets to deliver solid yield and growth opportunity for ourselves and our investors.” CEO, QE2 Acquisi7on Corp.
QE2 Acquisi7on Corp: Confiden7al
6
The Industry/Customer
§
the municipali7es of Alberta Infrastructure, construc7on, maintenance, and service-‐ orientated companies servicing
QE2 Acquisi7on Corp: Confiden7al
7
Target Company 1: Highlights U#li#es Service and Maintenance, Flagging and Traffic Management § Company offers a niche service that plays a vital role for ci7es and u7lity companies in maintaining and extending the life of their light standard assets § Proven track record of 14 years of opera7on § Strong systems and team in place § Good contracts in place with u7lity companies § Plenty of new opportuni7es available via commercial/ industrial, parking lots, traffic lights, transmission boxes, etc. § Since 2009: Ø Revenues have increased nearly 80% Ø Gross profit has averaged 43% and increased over 125% Ø EBITDA has averaged approximately $460,000 per year Ø Assets have increased by 18% Ø Long term debt has averaged only $300,000 (currently at about $200,000)
QE2 Acquisi7on Corp: Confiden7al
8
Target Company 2: Highlights Traffic and U#li#es Construc#on, Service, Maintenance and Monitoring § Offer excep7onal service in the rapidly expanding traffic control industry with a full range of services related to the construc7on and maintenance of traffic signal and street light systems § Company has offices located in Sherwood Park, Calgary and Fort McMurray which provide service to customers in Alberta and Saskatchewan § Areas of exper7se include traffic signal and street light design, construc7on, system installa7on, coordina7on plan design, implementa7on, and maintenance § Since 2009: Ø Revenues have averaged over $12 million per year Ø Gross profit has averaged approximately 22% per year Ø EBITDA has averaged $1 million per year Ø Assets have averaged $7 million per year
QE2 Acquisi7on Corp: Confiden7al
9
Consolidated Summary Post-‐Acquisi7on of first 2 Targets §
Strong foothold on rural infrastructure service companies with a focus in the traffic management / construc7on/ servicing of traffic lights and light poles
§ § § § §
Revenues of nearly $15 million EBITDA of almost $1.8 million expected for 2013 Assets totalling nearly $9 million Gross profit of 30% expected for 2013 The QE2 team is confident that this consolidated business can be ramped and the scope for organic growth in Alberta is extensive
QE2 Acquisi7on Corp: Confiden7al
10
Alberta’s 20 Year Strategic Capital Plan
“The Alberta government has made a commitment to maintain and improve exis7ng infrastructure and has laid out aggressive plans to construct new infrastructure over the next 20 years.” Alberta’s 20-‐Year Strategic Capital Plan QE2 Acquisi7on Corp: Confiden7al
11
Maximizing Efficiencies §
Economy of scale: combined companies can reduce costs by removing duplica7on, thus increasing profit margins.
§
Economy of scope: increasing or decreasing the scope of marke7ng and distribu7on.
§
Fleet op#miza#on: effec7vely u7lizing fleet by minimizing down-‐7me and appropriately dispatching fleet. Dispatch: more effec7vely dispatching to required service areas.
§ § § § §
Experience: combined companies provide almost 45 years of opera7onal experience. Managerial/Opera#onal Specializa#on: increasingly specialized management. Geographical Diversifica#on: capturing all available service areas within Alberta. Ver#cal integra#on: merging upstream and downstream processes.
QE2 Acquisi7on Corp: Confiden7al
12
Business Risk and Mi7ga7on Issue
Risk
Mi#ga#on
Underes7ma7ng people impacts
Loss of key management and employees
Establish strong rela7onships and address human capital issues
Neglec7ng core business
Could damage the core business of one or both organiza7ons, undermining the deal before it even happens, or weakening the post M&A company
Maintain energy and focus on the core business and ensure careful planning and execu7on of the M&A
Culture mismatches
Lack of teamwork and/or inefficient opera7ons
Be honest and fair on expecta7ons of acquiring/parent company
Poor due diligence
Many informa7on opera7onal gaps that jeopardize the success of the final M&A
Review each func7onal area of the target company looking for risks and poten7al pioalls
Cost of M&A is underes7mated
M&A is expensive to complete and open ancillary costs are not considered
Do not contemplate undertaking a merger or acquisi7on without budge7ng for the required costs
QE2 Acquisi7on Corp: Confiden7al
13
Growth Drivers $15 billion planned to be invested into Alberta infrastructure 2013-‐2016 1
Alberta GDP expected to average 2.9% over next three years 1
Growth
Mergers and Acquisi7ons
Alberta’s popula7on expected to grow to more than 5 million, from 3.9 million, in less than 20 years 1
Movement to more environmentally friendly ligh7ng through LED ligh7ng
1 Alberta Budget 2013: h@p://www.finance.alberta.ca/publicaEons/budget/budget2013/
QE2 Acquisi7on Corp: Confiden7al
14
2013-‐16 Outlook
2013
2014
2015
2016
Complete two acquisi7ons totaling $15 million in revenues Seek to acquire one to three addi7onal complementary ver7cal companies M&A poroolio with $50 million in revenues and genera7ng $5-‐$10 million in EBITDA
QE2 Acquisi7on Corp: Confiden7al
15
Capitaliza7on As of May 27, 2013
Price per Share
Proceeds
Shares
$0.25
$305,000
1,220,000
$305,000
1,220,000
$1,000,000
4,000,000
Class A Shares Founders/Seed Financing Total Class A Shares
Class B Shares Current Financing
$0.25
Other Total Class B Shares
Total
QE2 Acquisi7on Corp: Confiden7al
2,000,000
$1,000,000
6,000,000
$1,305,000
7,220,000
16
Our People Our Execu#ve Mihalis (Mike) BelanEs -‐ CEO and Director Joe Gagliardi, CMA -‐ Chief Financial Officer & Director Vice President -‐ Business Development – TBA Our Managers Erin Heath – MarkeEng Brand Manager Bryan Gassner – Sales Manager Independent Board of Directors Claudio Pucci, MBA – Director Maria Nathanail, LLB – Director Gino DeMichele -‐ Investment Banker – Director
QE2 Acquisi7on Corp: Confiden7al
17
Contact Mihali (Mike) Belan#s CEO Direct: 1.403.701.7299 Email: [email protected]
Maria Nathanail Corporate Secretary Direct: 1.403.968.7889 Email: [email protected]
Mailing Address 1981 -‐ 246 Stewart Green SW Calgary, AB T3H 3C8
Legal Counsel Burstall Winger LLP Suite 1600 -‐ 333 7 Ave SW Calgary, AB T2P 2Z1 Phone: 1.403.264.1915
Auditors KPMG LLP Suite 2700 -‐ 205 5 Ave SW Calgary, AB T2P 4B9 Phone: 1.403.691.8000
QE2 Acquisi7on Corp: Confiden7al
18
