Buy Presentation

1

• Buy Presentation
• Dave Gregory

2
Company History
Introduction
Business Model

• Canadian Merchant Bank founded in 1987
• Buys and sells companies
• Started by Joseph Rotman
• Now run by Ken Rotman and Jeff Parr
• Leading private equity investor/operator of
  casinos in Canada

Portfolio
Valuation
Governance
Case Study
Mistakes
Conclusion
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How does Clairvest make money?
Introduction
Business Model

• Investing capital of Limited Partners for fees
  based on assets under management and performance
• 2/20
• Profitably investing the firms capital
• Committed to co-invest with LPs and provide 25
  of capital in deals
• Clairvest Equity Partners (Closed)
• Clairvest Equity Partners III
• 225 mm of committed capital from LPs
• 75 mm of committed capital from Clairvest

Portfolio
Valuation
Governance
Case Study
Mistakes
Conclusion
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How does Clairvest make money?
Introduction
2/20
All Gains
Business Model
Limited Partner Equity
Clairvest Equity
Portfolio
Valuation
Governance
Case Study
75
25
Mistakes
Conclusion
Investment
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Investment Portfolio
Introduction
Business Model

• Clairvest Equity Partners
• Clairvest Equity Partners III

Portfolio
Valuation
Governance
Case Study
Mistakes
Conclusion
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Mark to Market Analysis
Introduction
Business Model
Portfolio
Valuation
Governance
Case Study
Mistakes
Conclusion
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Mark to Market Analysis
Introduction
Business Model

• Management indicated that businesses are
  performing better than expected at Aug. 15 AGM
• Mark to Market values are likely conservative
• True value could be closer to 18 per share

Portfolio
Valuation
Governance
Case Study
Mistakes
Conclusion
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Back of the envelope
Introduction
Business Model

• Average net income per quarter over past two
  years is 5.3 mm per quarter
• This has been rising, and is considerable higher
  in the past year
• At a P/E of 14x, this implies a market cap of
  317 mm
• Clairvest has a market cap of 230 mm
• Even when valued conservatively, Clairvest is
  significantly undervalued

Portfolio
Valuation
Governance
Case Study
Mistakes
Conclusion
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Corporate Governance
Introduction
Business Model

• Joseph Rotman (16.6), Gerald Heffernan (16.7),
  and Ken Rotman (29.6) collectively own 63 of
  outstanding shares
• Board of Directors has significant ownership
  positions in the company and has held five
  in-camera meetings over the past year
• Strong alignment of interests
• Management aligned to profitably invest capital
  and make safe investment decisions

Portfolio
Valuation
Governance
Case Study
Mistakes
Conclusion
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Corporate Governance
Introduction
Business Model

• Chairman Joseph Rotman
• Founded Clairvest in 1987
• Co-CEO Jeff Parr
• Been with Clairvest since 1995
• Co-CEO Ken Rotman
• Been with Clairvest since 1993

Portfolio
Valuation
Governance
Case Study
Mistakes
Conclusion
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Case Study Gateway Casinos
Introduction
Business Model

• Made 8.8x their initial investment selling to
  Macquarie
• 36.5 IRR
• 130mm of proceeds to Clairvest Group

Portfolio
Valuation
Governance
Case Study
Mistakes
Conclusion
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Case Study Gateway Casinos
Introduction
Business Model

• Leading investor/operator of casinos in Canada
• Incredible business ?License to print money
• Have restarted with Sonco Gaming
• Potential for another huge IRR investment

Portfolio
Valuation
Governance
Case Study
Mistakes
Conclusion
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Investment Mistakes
Introduction
Business Model

• Consolidated Vendors (1999)
• Vending Machine Operator
• NRI Industries (1992)
• Rubber Recycler

Portfolio
Valuation
Governance
Case Study
Mistakes
Conclusion
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Recommendation
Introduction
Business Model

• Purchase 300 shares at 14.40 per share

Portfolio
Valuation
Governance
Case Study
Mistakes
Conclusion