Manhattan Atlantic Capital

Manhattan Atlantic Capital
Manhattan Atlantic Capital LLC Presentation to Potential Limited Partners
Disclaimer
This presentation contains forward forward-looking information. information. Forward Forward-looking information includes, but is not limited to, information with respect to the operations, investment strategy and processes of the Partnership as well as the Partnerships ability to identify and conclude transactions with acquisition targets and complete subsequent liquidity events events. . Generally, forward forward-looking information can be identified by the use of forwardforward-looking terminology such as plans, expects, or does not expect, is expected, budget, scheduled, estimates, forecasts, intends, anticipates, or does not anticipate, or believes or variations of such words and phrases or state that certain actions, events or results may, could, would, might, or will be taken, occur, or be achieved achieved. . ForwardForward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Partnership, to be materially different from those expressed or implied by such forward forward-looking information, including risks associated with the private equity industry such as economic and market conditions, the ability to raise sufficient capital, the ability to identify and conclude acquisitions of suitable investment opportunities and complete liquidity events on favourable terms terms. . Implicit in this forward forward-looking information are assumptions regarding the general economy, debt financing availability, currency exchange rates, interest rates and opportunities opportunities. . These assumptions, although considered reasonable by the General Partner based on information currently available to it, may prove to be incorrect incorrect. . Although the General Partner has attempted to identify important factors that could cause actual results to differ materially from those contained in forward forwardlooking information, there may be other factors that cause results not to be as anticipated, estimated or intended. intended . There can be no assurance that such forward forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information information. . Accordingly, readers should not place undue reliance on forward forward-looking information information. . The General Partner does not undertake to update any forward forward-looking information, except in accordance with applicable securities laws laws. .
MAC creates sustainable value for its shareholders by maximising both the synergies and efficiencies of its portfolio companies in the LatAm healthcare and consumer sectors
MAC brings together Capital, managerial expertise and novel ideas to produce sustainable returns to its Limited partners
Novel ideas Complementary Team
Integrity Transparency Excellence
Sector experience Teamwork
Meritocracy
Fundraising Strategy
~50 % of total fund from local investors; ~50% from International investors GIC, Singapore SWF, $60m investment Atlantic Pacific Capital, world largest independent fundraiser to fund raise for MAC Energy Investors Fund $1.7b ARC Financial Corp $1b Riverside Partners $561m International investor interest: GIC, IFC, Pantheon
Partners Profiles
Augusto Gitirana
Partner Manhattan Atlantic Capital LLC
Vice President at Intermedica Group Executive Director at Brazil Foods (BRF) CEO at Memorial Hospital Sao Jose CEO at Martins Group Education University of Petrobras
- Master of Petroleum Engineering
Federal University of Pernambuco - BS Mechanical Engineering
Partners Profiles
Victor Serra
CEO at Scalina /Carlyle / Boticario Retail chain with R$500m sales, 5,100 employees Vice President at WalWal-Mart LatAm Consumer Retail with R$1.7b sales, 8,500 employees
Education
University of Chicago Booth School of Business - Financial Management Harvard Business School - General Management Program University of California Los Angeles - Master of Business Administration
Partners Profiles
Luis Fernando Velasco
CFOCFO - Philips Healthcare Ltda LatAm CFO-ESAB LatAm, CFOLatAm, worlds largest producer of standard welding equipment and consumables Audit &Corporate Finance Manager Arthur Andersen
Education
IMD(International Institute for Management Development Executive Education Northwestern University University- Kellogg School of Management Advanced Executive Program Fundacao Getulio Vargas Vargas-Master of Business Adminstration
Partners Profiles
Byron Wilson
Vice President of Clairfield International Healthcare Investment Banking Director at Putnam Private Equity Healthcare private equity & venture capital
Education
University of Cambridge - Master of Business Administration University of Michigan - Master of Public Administration Administration- Economics The Johns Hopkins University - MS Strategic Marketing
MACS COMPETITIVE ADVANTAGE

Source of profit
Pricing multiple differential between private market and public/M&A market Leverage a company with stable earnings Increase earnings through expansion or acquisition Increased profits via improved efficiency or shifting product to higher margin niche Earnings attract a higher price, as buyers feel more informed and protected Earnings of company attract a higher P/E,EBITDA multiple
Return Driver Arbitrage Leverage Earnings growth Margin expansion Transparency & Governance
Multiple expansion due to growth or Profit
Skill Required
Investment or Merchant Banking Consultancy Investment Banking Corporate Operations, Entrepreneurial, Consulting Corporate Operations, Entrepreneurial, Consulting
Corporate Operations, Entrepreneurial, Consulting Private Equity acquire based on what you can sell
INVESTMENT APPROACH
Investment Criteria Deal Sourcing Risk Analysis Strategic Due Diligence Structuring Closing
Healthcare assets $15m to $70m Sales; 5 yrs operations. Operations Improvements Product innovation Broadening Distribution Strengthening customer communication
Healthcare Executives Investment Banks Accountants Own network
Combines all aspects of transaction to identify default risks and recovery rates.
Demand assessment Customer assessment Competition assessment Management assessment Regulatory assessment
GP aims to maximise equity return while providing sufficient debt protection.
Signing all documents
Why LatAm HC & Consumer
Better exit opportunities as LatAm indices are skewed towards financials and mining
Why LatAm HC & Consumer
570m total population with 50m more people to be added to middle class in next 7 years High GDP and GDP per capita growth rates LatAm Private equity investment as a percentage of GDP is lower than that of other regions
Opportunities HC & Consumer

2 Examples to be considered more closely: Dental Insurance and Service Consumer

2 Examples to be considered more closely:
Dental Insurance and Service

Consumer
Dental Market Evolution & Size

R$1.3b in 2009; this represents 2 per cent of Brazilian Healthcare plans industry 2010 13.6million members, Dental plan members for 2011 and 2012 are expected to be 16.48million and 18.8million respectively
Dental Insurance Sales Growth
19% CAGR
02
04
06
08
10
Key Growth Drivers
Imbalance between the supply and demand of services The lack of a public service alternative The growing inclusion of dental plans in the benefits packages of corporations The opportunities created by the growing interest from new distribution channels Evolving regulations Brazils growing middle class
Dental Cost Structure v Health Plans
Source: OdontoPrev
Key Players
Odontoprev
Largest Brazilian dental provider; 5.5 million members; FY2011sales R$793m
Strategy
Expansion through cross selling Increase dental members through increased corp. participation; 70% growth from Bradesco Increase dental plans members by employing sales teams and selective acquisitions
Sul America
Brazilian dental provider; 246,000 members; FY2009 sales R$1.325b (not only dental)
Strategy
Increasing its presence in the underserved North and N. Eastern Brazil through acquisitions Expansion through cross selling
Tempo Assist
Brazilian dental provider; 833,000 members; FY11 Sales R$71.5m
Strategy
Developed monitoring system to better understand consumer behaviour Expansion through new services distribution channels such as retail stores, banks etc Offer low cost dental premiums at high quality; 30-35% come from non cross sell
Consolidation Pays Off

OdontoPrevs consolidation has grown from 224,000 members in 1999 to 4.5 million members in 2010.17% E Membership increase from 2011 to 2012

OdontoPrevs adjusted EBITDA has experienced a CAGR of 23.9 per cent from 2002 to 2008.

Since its IPO in 2006, OdontoPrev has garnered a shareholder return of 250 per cent versus Bovespas 73 per cent over the same period. Factoring in share buybacks and dividends as well as other shareholder remuneration schemes, OdontoPrevs total shareholder return to its shareholders from 2006 to 2010 was 307 per cent
Opportunity
For 2011, 9 per cent Brazilian penetration rate v 55 per cent U.S. penetration rate; Expected to reach 21.7% in 2022 19 per cent CAGR from 2002 to 2010 64 per cent of Brazilian dental plans holders live in South East region Room for consolidation 451 dental insurers as of June 2010 63.7 %
Population of Millions
7 42 % 5 17.4 % -----------9.3% 1 South -----------------------
North East
Sao Paulo
South East
Opportunity
Potential Targets
Phosphorus is one of the largest Brazilian pure play dental insurance companies Sales FY2008 R$21m; Sales FY2009 R$43m; 105%YOY increase; Sales FY2010 R$73.1m; Sales FY2011 R$64.9m EBITDA Margin FY2010 9.5%; FY2011 10.7% Expected to 650,000 members in 2010 and 1million members in 2012 Its focus is small to medium sized companies
Potential Targets
Thallium is a Bovespa listed healthcare company comprised of specialized assistance services, home care and dental plans units Sales FY2011 R$74; Sales FY2012 R$77m; EBITDA Margin FY2011 4.8%; FY2012 4.3% Divestiture of dental plans unit from parent company Its focus is corporate clients
Potential Targets
Strategy
Expansion of Phosphorus into underserved NE, S regions via cross selling Make Phosphorus one of the top three Brazilian dental providers by sales via consolidation Growth potential is evidenced by 63.7% concentration in SE Evaluate various means of value creation Groundwork for Growth
Establish annual budget Perform strategic due diligence Optimize working capital by focusing on noncash items Standardize back office systems
Potential Targets
Growth & Consolidation
Target fast growing SME segments Use bank platforms to cross sell dental insurance Target clinics, hospitals and dentists Embark on NE & S dental insurance acquisitions Form team to integrate acquired dental targets and implement organic growth between acquisitions Reduce interest payments by switching from unsecured debt to secured debt
Margin Expansion
Implement ABC system to assign costs to various departments Align executive compensation with EBITDA margin expansion Assess price elasticity of dental premiums (R$20 per month) Shed or support further geographic or service or distribution expansion With scale, renegotiate with partnerships and third party suppliers Standardize monitoring and reporting routines
Potential Targets
Governance
Create an investor relations department to liaise with institutional investors Comply with Bovespa financial reporting rules Disclose ownership structure Publication of executive compensation Board and management structure and process

2 Examples to be considered more closely:
Dental Insurance
Consumer
LatAm Consumer Market

$3.7trl LatAm household consumer buying power Long term growth rate ~ 10 per cent CAGR
Key Growth Drivers
Burgeoning LatAm middle class Access to credit LatAm housing demand outstrips supply LatAm employment is consistently high Increase in real house hold incomes Uneven per capita LatAm consumption: per capita consumption of the average Brazilian is 11 times that of the average Mexicans Stable inflation
Potential Target
Takino is a leading Brazilian food company that produces sauces, condiments and beverages Sales FY2010 R$130m; Sales FY2011 R$138m EBITDA Margin FY2010 10%; FY2011 5.3% 100% revenues are Brazilian, leaving room for LatAm exposure Production process lends itself to primarily to tomato based products, affording further product diversification
Potential Target
Strategy
Expansion of Takino into Mexico, Colombia etc via cross border acquisitions and/or joint ventures Further consolidation of Brazilian condiments, sauces market Groundwork for Growth
Establish annual budget Update processing facility for selling variety of products Optimize working capital by focusing on noncash items Standardize back office systems
Potential Target
Growth & Consolidation
Acquire larger processing plant with scale & cross sell ability Acquire processing plant in wider LatAm region to distribute to other LatAm countries Margin Expansion Increased purchasing power with suppliers due to larger scale Align executive compensation with EBITDA margin improvement Optimize working capital by focusing on noncash items Implement ABC system and assign costs to various departs for review
Potential Target
Governance
Create an investor relations department to liaise with institutional investors Comply with Bovespa financial reporting rules Disclose ownership structure Publication of executive compensation Board and management structure and process
Risk Mitigation
Stress testing under worse case scenarios Securitization of receivables Sale lease back of real estate Diversified revenues streams Diversified geographic presence Rigorous due diligence process Devils advocate No more than 15% of AUM on one MAC portfolio company
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