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Search Fund Equity Returns Model
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SUMMARY CASH FLOW MODEL & RETURNS - INVESTOR CAPITAL STRUCTURE 1
Summary of Returns ($000s)
Summary of Operating Scenarios
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(US$ in 000s, except where noted)
InvestorsSearcherOptimisticBase CasePessimistic
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Structure 1Structure 2Structure 1Structure 2
Revenue Growth
15.0% 5.0% --
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Optimistic Case
Base Case
Pessimistic Case
Optimistic Case $ 36,056 $ 45,065 $ 9,539 $ 14,638
Annual EBITDA Margin Expansion
50 bps 25 bps --
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Operating Assumptions:
Base Case $ 16,340 $ 26,568 $ 2,060 $ 5,940
Exit Multiple
5.0x 4.5x 4.0x
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Annual Revenue Growth
20.0%12.5%0.0%Pessimistic Case $ 10,908 $ 12,515
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Annual EBITDA Margin Expansion
0.50%0.25%0.00%
Increase in Net Working Capital
20% of Revenue Growth
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Exit Valuation Multiple
7.0x 5.5x 4.0x
Cash Tax Payments
40% of Earnings Before Taxes
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Depreciation & Amortization
$500K in Year 0; fixed margin throughout
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Year 5 Sales
 $ 37,325 $ 27,030 $ 15,000
Capital Expenditures
$250K per year
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Year 5 EBITDA
 $ 8,398 $ 5,744 $ 3,000
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Exit TEV $ 58,787 $ 31,592 $ 12,000
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Less: Net Debt
 6,017 6,017 6,017
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Total Equity
 $ 52,770 $ 25,575 $ 5,983
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Redeemable Preferred Equity
$ 6,933 $ 6,933 $ 6,933
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Nonredeemable Preferred Equity
11,150 11,150 11,150
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Value of Common Equity
 $ 34,686 $ 7,491 $ -
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Returns:
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Investor Redeemable Preferred Equity
 $ 6,933 $ 6,933 $ 6,933
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Investor Nonredeemable Preferred Equity
3,975 3,975 3,975
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Investor Common Equity
25,147 5,431 -
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Total Return to Investors
 $ 36,056 $ 16,340 $ 10,908
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Original Investment
 $ 7,950 $ 7,950 $ 7,950
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Return on Invested Capital
4.5x 2.1x 1.4x
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Investor IRR
#VALUE!#VALUE!
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Manager Common Equity Ownership %
27.5%27.5%20.0%
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Manager Payout
 $ 9,539 $ 2,060 $ -
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SUMMARY CASH FLOW MODEL & RETURNS - INVESTOR CAPITAL STRUCTURE 2
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(US$ in 000s, except where noted)
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Optimistic Case
Base Case
Pessimistic Case
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Operating Assumptions:
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Annual Revenue Growth
20.0%12.5%0.0%
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Annual EBITDA Margin Expansion
0.50%0.25%0.00%
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Exit Valuation Multiple
7.0x 5.5x 4.0x
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Year 5 Sales
 $ 37,325 $ 27,030 $ 15,000
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Year 5 EBITDA
 $ 8,398 $ 5,744 $ 3,000
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Exit TEV $ 58,787 $ 31,592 $ 12,000
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Less: Net Debt
 6,017 6,017 6,017
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Total Equity
 $ 52,770 $ 25,575 $ 5,983
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Redeemable Preferred Equity
$ - $ - $ -
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Nonredeemable Preferred Equity
3,975 3,975 3,975
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Value of Common Equity
 $ 48,795 $ 21,600 $ 2,008
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Returns:
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Investor Redeemable Preferred Equity (a) (b)
 $ 6,933 $ 6,933 $ 6,933
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Investor Nonredeemable Preferred Equity
$ 3,975 $ 3,975 $ 3,975
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Investor Common Equity
34,156 15,660 1,606
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Total Return to Investors
 $ 45,065 $ 26,568 $ 12,515
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Original Investment
 $ 7,950 $ 7,950 $ 7,950
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Return on Invested Capital
5.7x 3.3x 1.6x
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Investor IRR
#VALUE!#VALUE!#VALUE!
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Manager Common Equity Ownership %
30.0%27.5%20.0%
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Manager Payout
 $ 14,638 $ 5,940 $ -
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(a) Includes Investor Capital dividends during duration of investment.
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(b) Cash from operations pays down Redeemable Preferred Equity over 5 year hold period.
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