Iss Debate Paper

Thomas Egelund Nielsen, Imran Fawaz Al-Alousi, Olav Bjørn Jørgensen and Stefan Zeller

Dialogue paper – Group a couple of Project ISS presented to Cand. Merc. AEF

almost 8 February 2010

Agenda

1 ) ISS prior to buy-out

installment payments on your Impact of ownership change

3. Within Corporate governance 4. Benefit creation caused by buy-out five. Future of ISS

2

Debate paper

1 . ISS ahead of buy-out

Introduction to company

Important facts about ISS: • One of the world's most significant providers of facility solutions, but key focus on washing services • Ongoing acquisition of smaller rivals (mostly privately-held) • Continually increasing revenues and advantage value • Steady and predictable cash flow • Couple of tangible resources • As late nineties: strategy to turn into a more varied company (catering, security, home maintenance, and so forth )  Integrated Facility Services (IFS)

The market of ISS: • Low profit margins, low capital and know-how intensity (" low-tech”) • Low moving over costs and high proceeds of customer base  Organic and natural growth while major competition driver

Strong performing company with market dominance

several

Discussion newspaper

ISS just before buy-out

Obtain target

Typical targets are in adult industries (especially the European facility companies market because the main industry with 59% of total revenue generated in 3 years ago, see ISS annual report) • The modern owners sensed that ISS and the support industry as such were misitreperted and undervalued • Adult industry • Low existing debt • High regular for income • Solid market location after influence buy-out However , ISS has not been a typical acquistion target - at least if in comparison with the characteristics of buyouts inside the 1980s and 1990s, which were mainly turnaround companies • In contrast, the ISS buyout was a development case where a continuing advanced of personal debt would be accustomed to accelerate development by acquisitions • Simply no serious weak points in the business had been detected • In this impression, the ISS buyout can be characteristic of " fresh private equity”

No common turn-around obtain – give attention to high progress

4

Conversation paper

2 . Impact of ownership alter

Capital structure

Overall a dramatic difference in corporate framework: • A lot more leverage after LBO in ISS in addition to the having company FS Funding  substitute affordable debt pertaining to expensive equity  financing accelerated development by purchases • Debt/Asset-ratio increased from about 25% to 50 percent • Debt/Equity-ratio increased coming from 80% to 1000% Effects: • Lower cost of capital under the supposition of unchanged cost of personal debt • Comparative independence of stock market • Higher monetary risk • But: EQT promised to include additional value if necessary

Changed capital framework has allowed pertaining to pursuing even more acquisitions a few

Discussion newspaper

Impact of ownership transform

Strategy

In general: getting ISS closer and even more indispensable to its consumers • Simply no major changes in the corporate approach (stick to ‘Route 101' plan), sometimes minor changes in this tactical plan have been made Concentrate on transformation of ISS into a full IFS provider • Improve the top quality of acquisitions • Funding is now less costly (due to more financial debt in ISS's capital structure) • Choose targets which can be easy to incorporate into the existing organization (marginal or bolt-on acquisitions) • Consolidate existing market positions in at the moment active countries • Trying to increase organic and natural growth New elements in strategic program: • Advantages of security division • Entry in to US-market by simply acquisition of Sanitors Inc. in-may 2007

Related strategy as prior to expense

6

Discussion paper

Impact of title change

Efficiency

Operating profit and EBITDA stayed basically constant • Growth of organization has quicker (higher organic and natural growth after buyout) Revenue/Employee and cash conversion charge  obtain quality might not be optimal • Working capital to measure detailed efficiency  decreased following your buyout (+/-)

Impact on overall performance unclear

7...

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