Sterling Partners Investment Thesis Challenge 9 0 2019

Sterling Partners Investment Thesis Challenge 9. 0 (2019 -2020) Info Session | October 14, 2019

SPITC Program Team Polsky Staff Erika Mercer Director of Entrepreneurship Programs and the Svider PE Program Megan Fox Assistant Director of PE and ETA Programs SPITC Faculty/Advisors Prof. Chris Mc. Gowan Adjunct Professor of Entrepreneurship; Investor-in-Residence; Faculty Advisor, SPITC; Faculty Advisor PECC (f. k. a. Ox. Chi) Kim Vender Moffat Investor-in-Residence; Advisor, SPITC 2

Challenge Overview • Launched in 2011 -2012 with the support of Sterling Partners • Unique and innovative concept – the first challenge of its kind among national MBA programs • Three phases spanning several months • Phase 1: Students form teams, conceive original investment thesis, and apply. Participants are selected through a competitive application and review process. • Phase 2: Selected teams work with mentors at PE firms and advisors Prof. Mc. Gowan and Kim Vender Moffat to develop a full investment thesis based on primary research. • Phase 3: Each team formally presents its final investment thesis and execution strategy to its host firm. 3

Phase 1 (Nov-Jan) • Learn more about the challenge by visiting the SPITC website (bit. ly/Booth_SPITC) and meeting with Prof. Mc. Gowan, Kim, Erika or Megan • Build your team • 2 -5 people; must be current Booth students only • Any mix of full-time, part-time, first-year, second-year students • Develop your investment thesis proposal • Feedback available from Prof. Mc. Gowan and Kim Vender Moffat in advance of deadline • Submit your application by 10: 00 am, Wednesday, January 8, 2020 • Participating firms review proposals and select teams • All teams notified of their status by mid-February at the latest 4

Phase 2 (Feb-May) • Each team receives a budget of up to $2, 500 to support detailed research efforts • Selected teams work with assigned mentors at their PE host firms to develop their proposal into a full investment thesis • Meetings scheduled on a regular basis to provide progress updates; frequency and timing of meetings arranged with mentor • Student teams meet regularly (ideally, bi-weekly) with Prof. Mc. Gowan and Kim Vender Moffat, who provide ongoing feedback, coaching, and research support • Teams are expected to work diligently and independently to prepare for the final presentation to their host firm 5

Past Thesis Topics Chosen by Host Firms § § § Health Care Devices/Equipment, Services or IT Software & Services Commercial & Professional Services Consumer Goods or Services Diversified Financials Energy Transportation Pharmaceuticals, Biotechnology & Life Sciences Capital Goods Retailing Technology Hardware & Equipment Utilities 6

Research Resources In addition to the budget and mentorship from host firm mentors, Prof. Mc. Gowan and Kim Vender Moffat, teams receive resources from several in-kind sponsors: 7

Phase 3 (May) • Each team presents its final investment thesis and execution strategy to members of the host firm’s partnership or investment committee in late May • All teams must practice their final presentation with a SPITC Advisor, Prof. Mc. Gowan or Kim Vender Moffat, in advance of their presentation to the host firm • Host firms provide venue • Firms provide teams with constructive feedback and submit evaluations to the Polsky Center 8

Rewards of Participation • Participants have unique opportunity to develop an investment thesis, receive personal mentorship from seasoned PE professionals, and present thesis to a firm’s partnership or investment committee. • Host firm provides a $5, 000 success fee to any team whose work: 1) significantly advances the knowledge the firm has of the target sector; 2) produces actionable ideas; or 3) produces a thesis the firm would like to pursue further. • Additional opportunities to continue working on thesis— including internships, consulting positions, etc. —would be negotiated outside the scope of this program 9

Ownership of Ideas • Upon awarding the $5, 000 success fee, the host firm has an exclusive right to advance the investment thesis for a period of nine months, either independently or with the students' involvement. • During this time, students are not allowed to shop their thesis to other firms. However, student teams may always work on their own to further advance their investment thesis; the firm's exclusive right does not prohibit advancement of the research by the student team members themselves. • Neither Booth nor the University of Chicago retains any rights to the students’ work products.

2019 Participating Firms § Expectation is that there will be 5+ host firms § Students are asked to familiarize themselves with the profiles of the participating firms before drafting their investment thesis proposal 11

Course Credit (34702) • SPITC participants may request permission to earn course credit for the challenge through the Private Equity & Venture Capital Lab (34702) by contacting Erika Mercer in the Polsky Center • Course cannot be audited or taken pass/fail • Students may apply to and participate in both SPITC and the PE/VC Lab (through an individual internship with an additional firm); however, only one course credit will be given • Be aware that the PE/VC Lab covers a broad range of topics in PE and VC (not just investment thesis formulation in PE settings) 12

Eligibility § SPITC is open to: – Chicago Booth students only – Both first-year and second-year students – Both full-time and part-time students § Prior experience in PE/VC not needed to be considered § Suggested courses: Private Equity / Venture Capital Lab (34702), Entrepreneurial Finance & Private Equity (34101) or Commercializing Innovation (34106) 13

Application § Deadline to apply: Wednesday, January 8, 2020 at 10: 00 a. m. ; team applications submitted online, visit bit. ly/SPITC 2020 § Feedback available from Prof. Mc. Gowan and Kim Vender Moffat before deadline § Application consists of two parts, both of which are submitted through the online application by the above deadline: § Investment thesis proposal (up to 10 slides) § Resumes of all team members § Proposals should summarize thesis; explain why this particular thesis was selected; introduce the team members; and, outline a strategy/milestones for developing thesis § Examples of past proposals are available to review in person at Polsky Center 14

SPITC vs. PE/VC Lab SPITC PE/VC Lab § Team-based “mini-internship” with firm and Booth faculty/advisors § Individual internship with firm § Apply via proposal § Apply via resume § ~4 -5 hours / week § 15 -20 hours / week § Can start late February – late March § Can start early January – late March § Project is more defined; based on agreed topic § Project is based on firm’s needs at the time 15

Investment Thesis Workshop § § § IIR Workshop: How to Build a Strong Investment Thesis When: Tuesday December 3, 2019 | 12: 00 – 1: 00 p. m. Where: Harper Center, Room C-02 Hosted by: Prof. Chris Mc. Gowan and Kim Vender Moffat How to Register: bit. ly/IIRthesis 16

Questions? 17

Sterling Partners Investment Thesis Challenge (SPITC) October 14, 2019 PRIVATE & CONFIDENTIAL

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Subsectors focus: o Specialty food and beverage o Health andwellness o Beauty and personalcare o Other consumableproducts with strong unit economics Large industries with stale incumbents Businesses with an authentic founding story, mission orientation, and strong brand affinity Direct-to-consumer focus with omni-channel potential Business Services Consumer Subsector focus: o Asset Light Logistics o Industrial and Maintenance o Outsourced Professional Services Pressing need to maintain and replace aging infrastructure Increased regulatory oversight driving need for service and support solutions Re-industrialization of America, driven by resurgence in domestic energy production Continued shift towards specialization andservice outsourcing PRIVATE & CONFIDENTIAL Education Services SECTORFOCUSED Traditional not-for-profit institutions seeking new ways to generate revenue Changing demographics (minority/adult students) and re-skilling of workforce driving demand in postsecondary space Continued growth in online programs, adult educationand alternative learning models Increased opportunities for private solutions amidst declining K-12 government funding 20

INVESTMENT THESIS: KEY ELEMENTS Investment Thesis Overview • Why the Industry Long term trends Market size & breakdown Market growth Growth drivers Industry dynamics • Why the Business Model Business model characteristics Map the market & value chain Addresses key pain point Fits PE model Targets exist • Why Now Timing impetus Market impetus Path to invest POV on market evolution • Post Closing Strategy to Win • Operational value adds • Strategy • Human Capital • IT • Governance • Other value adds Sample Long Term Trends • Population changes • Compliance and risk management • Suppressed natural gas prices • Environmental sustainability • Aging infrastructure Sample Business Model Characteristics • Platform capable of high growth • Sustainable and scalable • Differentiated strategy • Recurring revenue • Attractive exit alternatives • Low customer concentration • Opportunities for operational improvement • Entrenched customers (e. g. stickiness) • Defensible position/barriers to entry • Profitable and positive cash flow • Operating leverage • Minimal adoption risk • High value proposition PRIVATE & CONFIDENTIAL 21

NEW INVESTMENT: DBI SERVICES Sample Investment Thesis: Market Infrastructure Services State DOTs, municipalities, railroad subcontractors prefer to focus on core competencies and outsource ancillary services Aging infrastructures support predictable maintenance and repair demand (requires $3. 6 trillion spend by 2020) Cost savings for customers through outsourcing Business Model Outsourced Infrastructure Operations and Maintenance Long-term contracts provide predictable revenue streams Minimal risk of insourcing once contracts have been outsourced Proven record of growth The Platform DBi Services Post-Close Strategy to Win Superior service and safety record Deployment of technology positions DBi at the forefront of its industry Augment management team with strategic-minded, growthoriented CEO and other executives Capitalize on the growing outsourcing trend Execute selective strategic acquisitions PRIVATE & CONFIDENTIAL 22

WEBSITE www. sterlingpartners. com PRIVATE & CONFIDENTIAL 23

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