East Wind Current - Issue Three: Clearer Skies Ahead?

Issue 3 | FEB 2024

THE

Current

In this issue:

Welcome to the third edition of our bulletin, a regular take on the deal-making environment in our industry verticals.

WELCOME: Our Managing Partner Joshua Schwartz reflects on 2H 2023 and the outlook for 1H 2024

CLEARER SKIES AHEAD?

EAST WIND OVERVIEW AND DEAL UPDATE: 2H 2023 Highlights & Pulling Back the Curtain on Some of Our Activity in Live Entertainment

PROFILE: [Feature section]

PROFILE: [Feature section]

JOSE TOLOSA FEATURE: We sat down with the CEO of Meow Wolf to talk all things immersive and live entertainment

M&A INSIGHTS: Part I in our series on Value Enhancing Strategies for Professional Services Firms

CAPITAL MARKETS SENTIMENT SURVEY: Sentiment on the market environment collected from our network of investors and lenders

MARKET ROUNDUP: Public market performance and key 2H 2023 transactions for the education, media & entertainment, and consumer & retail sectors

SPOTLIGHT: Q&A with East Wind VP Natalie Bader

Issue 3 | WELCOME

Resilience, at home and abroad, is the new normal

Joshua Schwartz

Managing Partner

and Restaurants reflects the resiliency of the economy. A robust and resilient economy, coupled with easing inflationary pressures and the anticipation of reduced interest rates in 2024, bolstered investor confidence. Building upon the momentum from the first half of 2023, the stock market saw an upswing in the latter half of the year, closing the year with the S&P 500 index up by 24%. As for the deal activity, while volumes were certainly down across the board in 2023, high quality assets continued to trade at premia and the large stash of investor “dry powder” continued to fuel demand for transactions, albeit with a more selective veneer. In our own experience, 2023 ended on a more productive note, with several deals highlighted elsewhere in this edition closing, which we felt bodes well for the coming quarters. In these pages we previously welcomed a new senior associate, Natalie Bader (Goldman Sachs; MBA, Northwestern; BA, NYU). It’s hard to believe that Natalie is about to celebrate two years at the firm and now carries a business card reflecting her promotion to Vice President. We have certainly gotten to know Natalie during this period and now it’s your turn; we feature her in the Spotlight section of this edition. In closing, to acknowledge the obvious: We woke up to a different world on October 7. The scars from that day and its aftermath will never fully heal. Our deep professional and personal ties to Israel are self-evident, so it’s unnecessary to add a lengthy statement of condemnation. Suffice to say we stand with Israel. We have been deeply inspired by the Israelis’ resilience and unity, and awestruck by the many entrepreneurs, executives, and investors who remain as determined as ever to advance their business interests and pursue new opportunities. History teaches that those who bet on Israel during challenging times are rewarded. As the CEO of Oracle, Safra Catz, recently said when asked if her company planned to slow or reverse growth, “Okay, don’t even say reductions, that’s crazy talk. We’re doubling down as they say.” We plan to follow Safra’s lead.

We are pleased to provide you with the latest edition of The East Wind Current, which reviews the last half of 2023 while also providing some forward-looking market sentiment pertaining to where the market may be heading from here. In this edition, I, along with my colleagues Ethan Galiette and Chelsea Chen, speak to a seasoned media & entertainment executive, Jose Tolosa, who now leads a high growth company, Meow Wolf, which has the potential to revolutionize how we think about and consume entertainment IP. Our discussion with Jose occurs against the backdrop of significant deal activity in the live entertainment space for East Wind (see East Wind Deal Update for more information on this and our activity elsewhere in 2H 2023). We also have included a new section, M&A Insights, where David Kaufthal and Jason Birke are recently back from successful experiences in the Professional Services area, and they share their insights on value enhancing strategies. Another new feature is our Market Survey, which contains the results of a survey we conducted within our network of investors and lenders. As we continue this feature and develop more longitudinal data, we believe the insights we can draw from the data will be more meaningful. For now, sentiment appears to skew moderately positive, and the pendulum that had swung so decidedly in favor of profitability at the expense of growth may be beginning to show some signs of reversal. As demonstrated in our Market Roundup section in this issue, the public market performance across many sectors aligns with revenue or EBITDA growth. The Live Entertainment sector stood out this past year with a median revenue growth of 35.0% and median EBITDA growth of 35.6%. Education companies demonstrated notable growth in 2023, with outperformers such as Stride, PowerSchool, Coursera, and Duolingo leading the way. Meanwhile, growth in Value/Mass Retail

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Issue 3 | EAST WIND OVERVIEW AND DEAL UPDATE

East Wind Overview

Selected Services

An independent, industry-focused investment banking firm providing bulge-bracket quality advisory services to companies and financial sponsors primarily across three specialty industry verticals as well as companies serviced by its General Industries and Special Situations Group

Advisory Services

Mergers & Acquisitions (Buy-side and Sell-side)

Fairness Opinions & Valuations

Tender Offers & Takeover Defense

Cross Border Advisory

Leveraged & Management Buyouts

Strategic Alliances & Consulting

Restructuring

Proxy Contests

Media & Entertainment

Education Services & Technology

Financing Advisory Services1

Bank Credit Facilities & other Senior Debt

Consents & Exchange Offers

ESOPs

Mezzanine Financing

General Industries & Special Situations

Consumer & Retail

Public Equity & High Yield Advisory Services

Recapitalizations

PIPEs

Private Placements

East Wind is differentiated by its bulge-bracket standards, senior-level attention, considerable execution experience both in M&A and with raising capital, and high-level access to key decision makers within its core verticals

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(1) Securities are offered through East Wind Securities, LLC, a FINRA-licensed broker-dealer.

Issue 3 | EAST WIND OVERVIEW AND DEAL UpDATE

East Wind Deal Update

SoapBox Labs Deal Type: Sell-side M&A November 2023

JM Zoning Deal Type: Sell-Side M&A August 2023

We acted as the exclusive financial advisor to JM Zoning in its sale to Milrose Consultants, a portfolio company of Southfield Capital. Founded in 2006, JM Zoning provides guidance to the nation’s top property owners, development firms, and industry partners. Consistently delivering top-tier client service and professional expertise to the multi-family residential, new building development, and commercial-to-residential conversion segments, JM Zoning has become the go-to municipal building consulting, permitting, and code and zoning firm in New York City.

Milrose is a national provider of building code compliance, fulfillment, and consulting solutions spanning a broad spectrum of industry sectors. The transaction will allow both companies to leverage each other's capabilities to better serve their clients and enhance the portfolio of consulting services they can offer across a national footprint.

We acted as the exclusive financial advisor to SoapBox Labs in its sale to Curriculum Associates. Founded in 2013 in Dublin, Ireland, SoapBox Labs develops a proprietary, first-of-its-kind, AI-powered, equity-based voice engine that caters to the unique speech patterns of children, powering K–12 tools – including classroom-focused learning and assessment products, apps, and platforms – to support early literacy, reading fluency, language learning, and more, all the while promoting equity and inclusivity, accessibility, and data privacy in the classroom.

Curriculum Associates is a leading education technology company supporting K-12 classroom teaching and learning through a suite of comprehensive education programs, including its flagship i-Ready® product. The transaction will accelerate the use of voice AI in learning and bring new and innovative assessment and instructional programs to classrooms supporting the ways in which children learn to read, how multilingual learners build oral vocabulary, how teachers monitor progress and provide feedback, and more broadly, how classrooms can better engage in all forms of discourse.

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Issue 3 | EAST WIND OVERVIEW AND DEAL UpDATE

East Wind Deal Update

P&F IndustriesDeal Type: Take Private Transaction December 2023

We acted as the exclusive financial advisor to P&F industries in its sale to an affiliate of ShoreView Industries. P&F Industries operates in the design, development, sourcing, manufacturing, marketing, and sales of power tools, under brand names including Jiffy for the aerospace market, AirCat for the after-market automotive market, and Universal Air Tools for the industrial market. The company also private labels certain products for The Home Depot under their Husky® brand as well as manufacturing, marketing, and selling custom gears and gear boxes.

ShoreView Industries is a Minneapolis based private equity firm investing in niche manufacturing, value-added distribution, business services, residential services, industrial services, niche consumer, and aerospace/defense. The purchase price represents an approximately 97% premium to P&F’s closing stock price on October 12, 2023, the last trading day prior to announcing the transaction. With the completion of the transaction, P&F’s Common Stock ceased trading and is no longer listed on the NASDAQ Global Select Market.

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Issue 3 | EAST WIND OVERVIEW AND DEAL UpDATE

Pulling Back the Curtain on Some of Our Activity in Live Entertainment

Publicly announced in January 2023, LiveCo is a new live entertainment venture that consolidated five leading independent promoters with financial backing by Waterland Private Equity. East Wind acted as exclusive financial advisor on a series of transactions dating back to the formation of the initial platform in 2021. LiveCo is focused on delivering rich consumer experiences, including promoting music, comedy, and a variety of family entertainment tours, as well as producing festivals and other events. Today, LiveCo consists of eight companies and represents more than 3,000 annual live shows and events across its platform.

For additional information regarding the transactions highlighted below, please contact us.

BASE EntertainmentDeal Type: Sell-side M&A November 2021

We acted as the exclusive financial advisor to BASE Entertainment (“BASE”) in its sale to Waterland Private Equity (“Waterland”) in the context of Waterland forming the initial platform for its U.S.-focused live entertainment roll-up. BASE Entertainment is a live entertainment company that develops, produces, and presents live shows and theatrical productions. Waterland is an independent private equity investment group that supports entrepreneurs in realizing their growth ambitions. Waterland has made over 950 acquisitions, including over 150 platform investments and over 800 add-ons.

Waterland Private EquityDeal Type: Buy-side Roll-up Merger and Debt Financing November 2021

LiveCoDeal Type: Refinancing and Upsizing Credit Facility October 2022

We acted as the exclusive financial advisor to Waterland in the refinancing and upsizing of the credit facility for LiveCo by Summit Partners Credit (“Summit”). Summit is a global alternative investment firm dedicated to growth equity, fixed income and public equity opportunities.

We acted as the exclusive financial advisor to Waterland in its acquisitions of BASE, ICON Entertainment (“Icon”) and Premier Productions (“Premier) to form the initial platform for LiveCo and the exclusive arranger of a term loan and a revolving credit facility to support the acquisitions of BASE, Icon, and Premier.

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Issue 3 | Jose Tolosa FEATURE

The Power of Storytelling in an Increasingly Digital World

We sat down with Jose Tolosa for a wide-ranging conversation on his career, Meow Wolf, and the media & entertainment ecosystem. Jose joined Meow Wolf as CEO in 2022, after 15 years at ViacomCBS, where he was most recently Chief Transformation Officer.

Jose Tolosa

Q: You recently left an executive role at a traditional, diversified media conglomerate to lead one of the most innovative platforms in entertainment that is redefining the paradigm of art and storytelling. Can you describe what factors drove your decision? I loved my time at ViacomCBS. It's an amazing company with great brands, people, and culture. I learned so much from so many people and wanted my next step to be leading a P&L within the entertainment industry. I had managed location-based entertainment while at ViacomCBS, and I saw it as a vertical within the entertainment industry that had a lot of potential for growth, and a place from where we can innovate a lot. With Meow Wolf, I saw a unique product extremely differentiated with a unique employee culture and a very committed investor base. When I visited the company, I was impressed by the combination of storytelling, technology, and art innovation and saw an opportunity to expand on a unique proposition within the evolving entertainment

CEO

“Those that want to compete in the creative space for the long term need to think about IP and connection to the human spirit in a deep way.”

MEOW WOLF "THE REAL UNREAL" IN GRAPEVINE, TX

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Meow Wolf is an arts and entertainment company that creates large-scale immersive, multimedia experiences that transport audiences of all ages into fantastic realms.

Issue 3 | Jose Tolosa FEATURE

industry. I also saw a unique culture combined with a clear social purpose as huge positives from where to build from. On the business side, I saw the opportunity to expand on a "Universe" and make the exhibitions a lot more connected, which would improve their value proposition to consumers, particularly tourists that could go from one to the other and be entering the universe from different angles. Also, it gives us the ability to go down the path of developing a digital business taking the IP from physical to nonphysical form, and potentially move into gaming and ultimately, into video. I also saw consistency in that the business success enabled the social purpose and vice versa. Q: In your view, where does Meow Wolf sit in the entertainment ecosystem and how do you think about the competitive landscape? I think there are two dimensions. The first pertains to physical entertainment, wherein there exist two primary categories. One involves local propositions, often centered around food and beverage offerings, which tend to be more commoditized. The other category encompasses outcome-based entertainment experiences, such as those found in arcades or recreational venues like Topgolf, where each engagement yields a unique result, fostering repeat visits. However, for tourists with limited time, these venues may not rank as top destinations. Conversely, the second perspective focuses on offerings tailored to discerning clients, such as high-end digital experiences or universally appealing attractions like Disneyland, LEGO-themed parks or SeaWorld. These cater to individuals who prioritize premium experiences, and this is where our focus lies. I've advocated for targeting cities with high tourist footfall and significant local populations, as this presents an opportunity to attract the most demanding consumers. While our immediate growth strategy may involve establishing flagship locations in major cities, there is potential for expansion into smaller markets across the US.

By developing an outcome-driven value proposition, we can better serve these markets, potentially scaling to numerous locations nationwide. Regarding IP, I categorize offerings along two axes: single-demo to multi-demo and single-platform to multi-platform. For instance, properties like Paw Patrol appeal predominantly to a single demographic but can span multiple platforms and product categories. Conversely, franchises like James Bond or Mission Impossible have broad demographic appeal but are primarily associated with one medium. Meow Wolf has the potential to occupy a unique space, appealing across various demographics and adaptable to multiple distribution channels. Q: What's one area that you would say you really want to focus on to drive foot traffic and customer engagement?Ultimately, we're all dealing with the same formula: how much capital you invest, how much demand you generate, and at what price point and throughput. When deploying location-based entertainment, one must consider the true value proposition. For example, there are experiences based on gaming or sports like Topgolf, as well as regional parks that offer thrills. However, on the creative side, there can be confusion between true content and mere technological innovation. For instance, during the pandemic, there was a trend of projection mapping events like "Immersive Van Gogh." Relying solely on technological novelty can be risky as it may not engage consumers deeply or stand the test of time, and it's prone to being copied or improved upon quickly. Those that want to compete in the creative space for the long term need to think about IP and connection to the human spirit in a deep way, because otherwise I think that there's a propensity that leads to a more faddish behavior. Thrill-based and sports-driven location-based entertainment experiences have proven to last, but it's crucial to differentiate your value proposition from others, whether it's thrill-based, outcome-based, or creative-based.

Meow Wolf "Omega Mart" in Las Vegas

Issue 3 | Jose Tolosa FEATURE

demands considerable time and financial resources for development. Consequently, growth in this realm is inherently time-delayed, as it necessitates both capital and time investment. That’s part of the attractiveness of growing beyond the four walls. Expanding internationally can be more capital efficient. Drawing from my experience at ViacomCBS, I see potential in leveraging partnerships and licensing our IP to international markets, thereby reducing the need for direct capital investment. The entertainment value chain is undergoing a transformation, with profits shifting and assets becoming increasingly digitized. As content creators gain closer access to distribution channels, traditional regional and national distributors are facing significant challenges. However, amidst this disruption, there lies an opportunity for content creators to establish a unique position in the market. Today, the potential to reach consumers across various platforms is greater than ever before. At our core, we see ourselves as content creators and IP owners. While our current focus is on direct-to-consumer engagement through physical spaces, we recognize the evolving landscape and the multitude of opportunities it presents. Our priority is to leverage our IP and creative capabilities to expand our reach and fan base. Ultimately, we view these physical spaces as just one avenue for conducting business, with multiple avenues likely to emerge as we continue to evolve. An important consideration moving forward is the distinction between investors in location-based entertainment and those in media. While some investors may favor one sector over the other, we recognize the potential overlap and are prepared to navigate these differing investor bases as we expand beyond the four walls. Our goal is to articulate a cohesive narrative that encompasses both our location-based entertainment and media ventures, akin to established industry giants like Disney and Universal, albeit on a smaller scale and with a unique creative vision.

Q: How do you think about ticket pricing and competing demands on consumers wallets? I think, ultimately, people want to be entertained. I think there's movement in the wallet between in-home and out-of-home, depending on the circumstances and the offerings that are out there. It is important to pay attention to what they're providing in exchange for the cost that they are charging, and if that consumer surplus is high, then I think there's going to be a lot of demand for the product. Our pricing varies by city. For example, a city like Santa Fe, in terms of purchasing power, would be lower than Vegas. It depends on every local market, but we pay a lot of attention to the value provided versus the cost. What we find is that everywhere we go, we offer one of the best deals in terms of dollars per entertainment time provided in that market. We've been able to provide that because of our differentiation that comes from the integration, the amazing people that we're able to hire, the long-term thinking in the story, the characters, the artistry, and how we can be unique. On this journey I was discussing about going beyond the four walls, I think we have an opportunity to tap into the wallet share for areas that are more in-home or areas in which providers of in-home entertainment would also participate on the go. Q: Is food/beverage and merch an important revenue stream for you? They currently represent 15 to 20% of our revenue today. I believe there's a lot of opportunity in each. Most of our past focus has been on the ticketed experience, but we're now placing more strategic focus on food and beverage and merchandise. I hope they grow in importance as a percentage of our revenue. Additionally, as we consider building a more local model, I think food and beverage needs to become more prominent. Another revenue stream we haven't fully explored yet is private events. Renting out our spaces for private events such as birthdays presents a significant opportunity. We plan to develop a value proposition for corporations and individuals for these

events, leveraging our unique artistic proposition. Private events are particularly important for weekday revenue generation for places where there are differences in visitation between weekends and weekdays. Q: Can you talk about Meow Wolf's growth plans? Do you feel like you're going to need to customize for local markets? From a growth perspective, I believe we still have ample opportunity to expand the current large-scale concept in the US. We currently have four locations open, with plans to reopen our fifth later this year in Houston. I estimate there's potential for around seven more after that. Similarly, I see potential for this concept to thrive in many international cities across Europe, Latin America, Asia, and the Middle East. There's considerable interest, evidenced by the numerous inquiries we receive, particularly from places like Vegas where visitors experience “Omega Mart” and express a desire to replicate it in their own cities. One of the most beautiful aspects of our approach is our commitment to showcasing local talent. Just as we do in the US, where 25% to 30% of our space is dedicated to underrepresented local artists, we plan to replicate this model in international markets. This not only adds a local flair to each location but also demonstrates our commitment to the communities we enter. Additionally, I’m eager to explore the development of a local model the growth opportunities beyond our physical locations. There’s much work ahead, but we’re excited about the possibilities. Q: As you think about expansion into other markets, what have you observed about how equity investors view this story? The first aspect to consider is the capital-intensive nature of location-based entertainment business. At Meow Wolf, we have been fortunate to have strong support from our capital partners, primarily The Invus Group, who holds the majority ownership. However, each exhibition we create

Q: How do you think about your competitive differentiation? At a high level, the world we're creating requires a very integrated approach across various elements like storytelling, characters, and art. We employ full-time staff, mostly working together at our 30,000 square foot facility in Santa Fe. Around 75-80% of the work mentioned before that is not outsourced to local artists is done in-house by this integrated group, focusing on universe chapters for 2026, 2027, and even 2028, closely tied to existing chapters. While we handle design internally, a lot of the manufacturing is outsourced. Our goal is to foster a distinct culture that attracts and retains top talent in-house, while outsourcing tasks we can't handle ourselves. This approach differentiates us, akin to Marvel's integrated model, compared to Pixar's model where they select talent and then work with that talent and with special technology to turn out incredible movies. We prioritize integration over a modular approach, ensuring cohesion and quality in our creations. Q: That's an interesting analogy. Would it be correct to say, if you had to run another analogy in Apple versus Microsoft terms, you are more like Apple than Microsoft? The concept of integration versus modularity was articulated by Clay Christensen. When striving for improvement, integration is necessary, while when competing on cost, modularity is preferred. Integration, however, is crucial for pushing creative and intellectual property boundaries, fostering true differentiation. While Pixar may be viewed as modular, the integration of numerous talents is essential for pushing creative boundaries. Marvel's integration occurs in a different context, but both exemplify the importance of integration in pushing limits. In this analogy, we align more with integration, akin to Apple, emphasizing pushing boundaries through integration.

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Issue 3 | Jose Tolosa FEATURE

Q: How do you balance the continued success that you have now, the growth into a very significant global corporation and the need to continue to build relationships with the artistic community? How do you stay true to your roots in the artistic community, while you continue to scale and build a highly successful corporation? It's something that I think about a lot. How do we grow without losing our essence? I certainly think there's a path; it needs to be controlled growth, not growth for the sake of growth. I pay a lot of attention to the culture, an element that would make every employee feel that they're part of a unique company, that allows us to retain them and attract more people like them. We will grow to the extent that I feel that the culture can remain. We have a lot of tools to measure employee engagement and satisfaction. If I feel at any point that the growth is impacting the culture negatively, I do think we will need to hold back. So, we have these goals, and we believe that that the more we grow, and the more people we can positively influence, the more we'll be fulfilling our social purpose. But we know that it's not a light switch, and that we cannot break the machine on the way to get in there. It's a constant balance. Q: The Meow Wolf Foundation was launched in 2022 to use the power of art to support local communities. Can you tell us a bit more about its mission, how it intersects with the company’s operations, and where you are finding the foundation’s work to have the biggest impact? It's very important. There are many ways in which we feel we're contributing to every community, ultimately serving the concept that we are here for a social purpose. I think we're the only location-based entertainment business that's classified as a B Corp. This certification, renewed every three years, evaluates our societal contributions, treatment of employees, and environmental practices. We're very proud of that, and the fact that we set up a foundation is very consistent with our strategy. We want to improve the world

through art, and I think it has three angles. One is creating access for artists, either enabling people to be artists or to be better artists, even in limited spaces. Because we believe that there are many benefits through art—it drives people's imagination and improves critical thinking and problem-solving skills. Through our foundation, we support organizations dedicated to expanding access to art. The second angle is restoration. We believe that art has medicinal qualities. It allows individuals to process a lot of mental health issues and ultimately find comfort in their own journey. We're going to be funding organizations that are looking to use art as a way to heal the spirit. The third angle is transformation. We believe art has a way of pushing the boundaries of what can be developed out there. We will fund organizations that support art as a way of innovating in the world and using creative thinking to open new worlds and new doors. We're going to be funding the foundation year in and year out. The foundation will deploy the money with these three angles. There's also work we're doing internally. In each of our exhibitions, we become involved in the community in different ways, and our employees also donate a lot of their time to causes. We believe that a social purpose improves our business purpose. Q: How do you think about the impact of AI, VR, economic uncertainties, and geopolitical friction on your business? I think AI, Vision Pro, VR, XR, and AR all offer opportunities. The creative integration I mentioned earlier is about creating entirely new things. AI can help by processing existing content in new ways for consumption, but it can't replace our unique creativity. Our team takes existing content and adds their own perspectives to create something new, as has always been done with creativity. As for risks, like pandemics or geopolitical issues, expanding beyond physical locations would help diversify our revenue streams and mitigate these risks to some extent. However, certain risks remain, and we must address them as we continue to pursue our goals across various geographies.

MEOW WOLF "THE REAL UNREAL" IN GRAPEVINE, TX

Interview conducted by Joshua Schwartz, Ethan Galiette, and Chelsea Chen. Ethan leads the firm’s coverage of live entertainment. Josh, Ethan, Chelsea and other team members have advised live entertainment companies including LiveCo (see page 6).

Ethan Galiette Director

Chelsea Chen Associate

Joshua Schwartz Managing Partner

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Issue 3 | M&A INSIGHTS

Value Enhancing Strategies for Professional Services Firm Owners

East Wind increasingly engages with and advises companies in the Professional & Business Services sector across our core Education, Media and Consumer coverage verticals, and beyond. Encompassing a variety of businesses - from advertising and marketing agencies to management and strategy consulting firms, compliance services providers, software developers, IT consultancies, legal and financial advisors, staffing companies and more – the sector represents a massive, growing segment of the US economy. In aggregate, it employs approximately 14 million people across five million businesses generates nearly $3 trillion in annual revenue and grew at a 3% CAGR since 2018.1 M&A activity in the sector will likely remain strong for the foreseeable future. Investors are attracted to Professional & Business Services firms’ recurring or highly re-occurring revenue streams, strong cash flow profiles and “asset light” business models where R&D and capital expenditures are low. Services firms also appeal to investors pursuing “buy-and-build” programs as synergies between firms serving similar clients with complementary services offerings are oftentimes identifiable and scale creates and enhances advantage. Entrepreneurs seeking to take advantage of these trends will likely consider how to maximize the value of their firms. The following recommendations are based on our extensive advisory experience with clients in the sector and represent the first in a series of discussions on value enhancing strategies for services firm owners. Sellers should, first and foremost, have clearly defined organic growth plans. Asking investors to trust that future growth will resemble recent trends does not inspire confidence. Growth plans need to be clearly articulated and based on proven client “land and expand” campaigns, observable retention rates, quantitative analyses of contracted revenue and historical pipeline conversion rates, evidence of price elasticity and/or demonstrable upsell opportunities. Planned expansion into adjacent services or new geographic markets should reference addressable market estimates and demand factors. Qualitative descriptions of growth drivers should be translated into revenue and cost assumptions representing the P&L impact of the management time and other firm resources required to fully realize such opportunities. Data and analysis supporting growth plans and more credible projections enhance the likelihood that valuation will be based on forward results.

Second to growth, for investors, is the team. Enterprises that revolve around the personality and capability of a founder may be marked with key-man risk relative to firms anchored by a seasoned senior management team with a

David Kaufthal

Jason Birke

Partner

Managing Director

proven track record for effectively serving clients and generating new business. Solid management is a vital ingredient for scaling an organization and often determines whether an investor values a firm as a higher-multiple, platform investment or as a tuck-in to an existing platform. Founders preparing a business for sale should institute senior managers incentives, including equity or phantom equity plans, to encourage loyalty and tenure and to provide substantial monetary rewards for contributing to the firm’s and its owner’s success. These plans will be critical to many investors who will seek to extend incentives, encourage performance and drive growth and value generation during their investment “hold” period. A professional services firm’s differentiation strategy is as important as its growth plan and team. Differentiation encompasses the tactics firms employ to stand out in a crowded competitive field and requires highlighting and demonstrating the value of such tactics to clients. Niche expertise (e.g., specialized tax services for family offices or ecommerce enablement for DTC brands), unique service delivery, novel technology utilization, flexible engagement/billing practices and distinctive employee recruiting and training are some attributes that, in combination, provide for meaningful differentiation. Owners should be able to clearly articulate sources of differentiation and demonstrate their strength through strong client satisfaction rates, brand recognition and financial and other key performance indicators. In future installments of our series on value enhancing strategies, we intend to cover additional topics including competitive advantage and sell-side process tactics. Stay tuned for more.

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1. Source: "Professional, Scientific and Technical Services in the US," Dec 2023, IBIS World

Issue 3 | Capital Markets Sentiment Survey Results

East Wind Capital Markets Sentiment Survey

In January 2024, East Wind conducted a market survey gauging sentiment on deal climate and near term prospects. The results and the feedback collected from the survey follow.

Our survey respondents consist of venture capital (16.7%), growth equity (22.2%), private equity (68.5%), family office/individual investor (13.0%), fundless sponsor (1.9%), and private credit (18.5%).

Sector focuses of our respondents include education technology and services (51.9%), media and entertainment (20.4%), consumer products and retail (29.6%), business products and services (64.0%), industrials (44.4%), and healthcare (37.0%), among others.

Over the next 6 months, what are your expectations on the following?

Quality of investment opportunities

Transaction volume

Valuations

IPO activity

Significant majority of our respondents expect transaction volume, quality of investment opportunities, and IPO activity to pick up over the next two quarters. Perspectives on valuation are more mixed.

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Issue 3 | Capital Markets Sentiment Survey Results

Over the next 6 months, what are your expectations on the following?

Debt capital markets transaction volume

Credit spreads

Loan covenants

Credit defaults

Our respondents expect an upturn in credit market activity while choppy conditions are expected to persist across loan portfolios.

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Issue 3 | Capital Markets Sentiment Survey Results

Over the next 6 months, do you expect to weigh profitability or growth more when evaluating investment opportunities?

Over the next 6 months, what are your expectations on the importance of ESG / Impact related measures when evaluating investment opportunities?

Over the next 6 months, what do you expect the biggest risks will be in your market?

Over the next 6 months, what do you expect the biggest trends will be in your market?

Select responses:

Select responses:

Macro economic uncertainty (rates, election year, overseas wars, etc.) Uncertainty freezing spending as a result of political and economic uncertainty. Political unrest with the US election. Politicization of curriculum and content for schools, end of federal education stimulus. Spend down of ESSER Funds. Lack of exit opportunities for smaller sponsors. Inflation trends, consumer confidence/spending, consumer lending. Liquidity options, war/political instability, supply chain/tariffs. Profitability as labor cost, shipping expenses and availability of product could become greater issues if there is increased political instability.

Increased competition for high quality assets (faster timeline to close; differentiation in a process; higher valuation). More focus on growth than this past year's focus on profitability. Impact of generative AI on different job categories. ESSER cliff adjustment in K-12. AI & Skills-based hiring. I expect to see a greater shift towards efficacy in education products. I think the trend towards profitability will continue, but at a more modest pace as interest rates decline in '24 and financing becomes a little easier. Pipeline and backlog improvement in professional services businesses. Focus on profitability, ongoing margin volatility caused by supply chain disruption and international logistics threats. Continued growth of non-bank lenders.

1. The Elementary and Secondary School Emergency Relief (ESSER) Fund was established in response to the COVID-19 pandemic, providing financial assistance to schools to address challenges like remote learning and learning loss. The ESSER Fund (ESSER I, II, and ARP ESSER) totaled about $190 billion, and the deadline to obligate ARP ESSER (known as ESSER III) of about $122 billion is September 2024.

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Issue 3 | Market Roundup

Public Market Performance Education

2H'23 Change in Stock Price

2023 Revenue Growth

2023 EBITDA Growth

EV/2024E EBITDA

EV/2024E Revenue

S&P 500

7.2%

4.2%

7.3%

4.5x

14.5x

Bright Horizons (BFAM)PowerSchool (PWSC) Scholastic (SCHL) Stride (LRN) Nerdy (NRDY)

1.9%

10.8%

34.7%

PreK-12

2U (TWOU)Adtalem Global Education (ATGE) American Public Education (APEI) Chegg (CHGG) Grand Canyon Education (LOPE)

Laureate Education (LAUR) Perdoceo Education (PRDO) Strategic Education (STRA) Universal Technical Institute (UTI)

Post Secondary

36.2%

2.3%

14.0%

Coursera (COUR) Duolingo (DUOL) Franklin Covey (FC) Healthstream (HSTM) Learning Technologies Group (LTG)

Skillsoft (SKIL) Tribal Group (TRB) Udemy (UDMY) Workday (WDAY)

Workforce & Lifelong Learning

22.2%

5.0%

29.4%

Blackbaud (BLKB) Clarivate (CLVT) Constellation (CSU) D2L (DTOL) Graham (GHC) Informa (INF)

Instructure (INST) John Wiley & Sons (WLY) Pearson (PSON) RELX (REL) Tyler (TYL) Wolters Kluwer (WKL)

Skillsoft (SKIL) Tribal Group (TRB) Udemy (UDMY) Workday (WDAY)

Coursera (COUR) Duolingo (DUOL) Franklin Covey (FC) Healthstream (HSTM) Learning Technologies Group (LTG)

Diversified Education

14.8%

6.7%

19.6%

Low / Median / High

Low / Median / High

Medians are shown for each sector. Market data is as of January 31, 2024. Select multiples were excluded when deemed not meaningful. Growth in revenue and EBITDA are not adjusted for M&A, if any. Non-US firms whose performances are related to the US market are included. Categorizations are not always precise because firms included may crossover various segments. Listed companies are illustrative, not exhaustive. Source: S&P Capital IQ

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Issue 3 | Market Roundup

Key 2H23 Transactions Education

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Issue 3 | Market Roundup

Key 2H23 Transactions Education

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Issue 3 | Market Roundup

Key 2H23 Transactions Education

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Issue 3 | Market Roundup

Public Market Performance Media & Entertainment

2H'23 Change in Stock Price

2023 Revenue Growth

2023 EBITDA Growth

EV/2024E EBITDA

EV/2024E Revenue

S&P 500

7.2%

4.2%

7.3%

4.5x

14.5x

AdTheorent (ADTH)Cardlytics (CDLX) Criteo (CRTO) Digital Turbine (APPS) DoubleVerify (DV) Innovid (CTV) Integral Ad Science (IAS)

LiveRamp (RAMP) Magnite (MGNI) Perion Network (PERI) PubMatic (PUBM) The Trade Desk (TTD) Nexxen International (NEXN) Viant Technology (DSP)

Advertising Technology

(6.2%)

5.2%

20.3%

Accenture (ACN) Dentsu (4324) Entravision Communications (EVC) Ipsos (IPS) M&C Saatchi (SAA) Omnicom (OMC)

Next 15 Group (NFG) Publicis (PUB) S4 Capital (SFOR) Stagwell (STGW) Interpublic (IPG) WPP (WPP)

Advertising & Marketing Services

(6.5%)

(3.1%)

4.0%

Adobe (ADBE) Amplitude (AMPL) AppLovin (APP) Braze (BRZE) Brightcove (BCOV) Coveo (CVO) HubSpot (HUBS)

Klaviyo (KVYO) Oracle (ORCL) Salesforce (CRM) Semrush Holdings (SEMR) Sprinklr (CXM) Sprout Social (SPT) Zeta Global Holdings (ZETA)

Marketing Technology

16.5%

16.8%

10.5%

comScore (SCOR)Dun & Bradstreet (DNB) Experian (EXPN)

Equifax (EFX) TransUnion (TRU) ZoomInfo Technologies (ZI)

Marketing Information

2.1%

3.1%

14.7%

Low / Median / High

Low / Median / High

Medians are shown for each sector. Market data is as of January 31, 2024. Select multiples were excluded when deemed not meaningful. Growth in revenue and EBITDA are not adjusted for M&A, if any. Non-US firms whose performances are related to the US market are included. Categorizations are not always precise because firms included may crossover various segments. Listed companies are illustrative, not exhaustive. Source: S&P Capital IQ

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Issue 3 | Market Roundup

Public Market Performance Media & Entertainment

2H'23 Change in Stock Price

2023 Revenue Growth

2023 EBITDA Growth

EV/2024E EBITDA

EV/2024E Revenue

S&P 500

7.2%

4.2%

7.3%

14.5x

4.5x

Diversified Media & Entertainment

Comcast (CMCSA) Endeavor (EDR) Fox (FOXA)

Paramount Global (PARA) Disney (DIS) Warner Bros. Discovery (WBD)

(3.9%)

3.7%

8.6%

AMC Networks (AMCX) FL Entertainment (FLE) Lions Gate (LGF.A)

Thunderbird (TBRD) WildBrain (WILD)

Filmed Entertainment

(5.5%)

(3.4%)

8.2%

Live Entertainment

CTS Eventim (EVD) Live Nation (LYV)

Sphere Entertainment (SPHR) Madison Square Garden (MSGE)

6.1%

35.0%

35.6%

Gray Television (GTN) Cumulus Media (CMLS) Sinclair Broadcast Group (SBGI) Townsquare (TSQ)

TEGNA (TGNA) Nexstar Media Group (NXST) E.W. Scripps (SSP)

(5.8%)

(10.1%)

(36.7%)

Broadcasting

Low / Median / High

Low / Median / High

Medians are shown for each sector. Market data is as of January 31, 2024. Select multiples were excluded when deemed not meaningful. Growth in revenue and EBITDA are not adjusted for M&A, if any. Non-US firms whose performances are related to the US market are included. Categorizations are not always precise because firms included may crossover various segments. Listed companies are illustrative, not exhaustive. Source: S&P Capital IQ

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Issue 3 | Market Roundup

Public Market Performance Media & Entertainment

2H'23 Change in Stock Price

2023 Revenue Growth

2023 EBITDA Growth

EV/2024E EBITDA

EV/2024E Revenue

S&P 500

7.2%

4.2%

7.3%

4.5x

14.5x

Gannett (GCI) Lee Enterprises (LEE) Graham Holdings (GHC)

News Corporation (NWSA) New York Times (NYT)

21.9%

(2.3%)

(6.7%)

Publishing

fuboTV (FUBO) iHeartMedia (IHRT) Netflix (NFLX)

Roku (ROKU) Sirius XM (SIRI) Spotify (SPOT)

Digital Audio & Video

18.9%

8.6%

(0.3%)

Alphabet (GOOGL) Bumble (BMBL) Match Group (MTCH)

Meta Platforms (META) Snap (SNAP)

Interactive Media

16.7%

8.3%

33.4%

Low / Median / High

Low / Median / High

Medians are shown for each sector. Market data is as of January 31, 2024. Select multiples were excluded when deemed not meaningful. Growth in revenue and EBITDA are not adjusted for M&A, if any. Non-US firms whose performances are related to the US market are included. Categorizations are not always precise because firms included may crossover various segments. Listed companies are illustrative, not exhaustive. Source: S&P Capital IQ

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Issue 3 | Market Roundup

Key 2H23 Transactions Media & Entertainment

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Issue 3 | Market Roundup

Key 2H23 Transactions Media & Entertainment

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Issue 3 | Market Roundup

Key 2H23 Transactions Media & Entertainment

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Issue 3 | Market Roundup

Public Market Performance Consumer & Retail

2H'23 Change in Stock Price

2023 Revenue Growth

2023 EBITDA Growth

EV/2024E EBITDA

EV/2024E Revenue

S&P 500

7.2%

4.2%

7.3%

4.5x

14.5x

Crocs (CROX) Steven Madden (SHOO) Caleres (CAL) Hanesbrands (HBI) Kontoor Brands (KTB) Levi Strauss (LEVI) On Holding (ONON)

Oxford Industries (OXM) PVH (PVH) Ralph Lauren (RL) Tapestry (TPR) Under Armour (UAA) V.F. (VFC)

Apparel & Accessories

14.6%

1.3%

(3.8%)

Lululemon Athletica (LULU) Tractor Supply Company (TSCO) Urban Outfitters (URBN) Abercrombie & Fitch (ANF) Bath & Body Works (BBWI)

Best Buy (BBY) DICK'S Sporting Goods (DKS) Foot Locker (FL) Victoria's Secret (VSCO) Warby Parker (WRBY)

Specialty Retail

15.0%

3.4%

(6.0%)

Amazon.com (AMZN) eBay (EBAY) Etsy (ETSY) 1-800-FLOWERS.COM (FLWS)

Chewy (CHWY) Solo Brands (DTC) Hims & Hers Health (HIMS) Revolve Group (RVLV)

(0.6%)

4.6%

3.0%

E-Commerce

The TJX Companies (TJX) Ollie's Bargain Outlet (OLLI) Costco (COST) Dollar Tree (DLTR) BJ's Wholesale Club (BJ)

Burlington Stores (BURL) Dollar General (DG) Target (TGT) Walmart (WMT)

Value / Mass Retail

8.0%

6.3%

10.3%

Low / Median / High

Low / Median / High

Medians are shown for each sector. Market data is as of January 31, 2024. Select multiples were excluded when deemed not meaningful. Growth in revenue and EBITDA are not adjusted for M&A, if any. Non-US firms whose performances are related to the US market are included. Categorizations are not always precise because firms included may crossover various segments. Listed companies are illustrative, not exhaustive. Source: S&P Capital IQ

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Issue 3 | Market Roundup

Public Market Performance Consumer & Retail

2H'23 Change in Stock Price

2023 Revenue Growth

2023 EBITDA Growth

EV/2024E EBITDA

EV/2024E Revenue

S&P 500

7.2%

4.2%

7.3%

4.5x

14.5x

Arhaus (ARHS) iRobot (IRBT) Newell Brands (NWL) Ethan Allen Interiors (ETD) Floor & Decor (FND)

The Home Depot (HD) Lowe's (LOW) La-Z-Boy (LZB) Restoration Hardware (RH) Williams-Sonoma (WSM)

Home

9.4%

(12.9%)

(16.2%)

Cricut (CRCT) Hasbro (HAS) Mattel (MAT) Peloton (PTON) Sonos (SONO)

Acushnet (GOLF) Topgolf Callaway (MODG) Vista Outdoor (VSTO) YETI (YETI)

Leisure Products

(3.4%)

(10.8%)

(5.8%)

Simply Good Foods (SMPL) The Chefs' Warehouse (CHEF) Kraft Heinz (KHC) Mondelez (MDLZ) Conagra (CAG) Campbell Soup (CPB) General Mills (GIS) Hormel Foods (HRL)

Hershey (HSY) Kellanova (K) McCormick (MKC) Performance Food (PFGC) J. M. Smucker (SJM) Sysco (SYY) TreeHouse Foods (THS) US Foods (USFD)

Food & Food Distributors

(14.7%)

4.2%

12.0%

Bloomin' Brands (BLMN) The Cheesecake Factory (CAKE) Cracker Barrel (CBRL) Jack in the Box (JACK) Papa John's (PZZA) Texas Roadhouse (TXRH) Wendy's (WEN) CAVA Group (CAVA)

Domino's Pizza (DPZ) Darden Restaurants (DRI) Brinker (EAT) Restaurant Brands (QSR) Sweetgreen (SG) Shake Shack (SHAK) Yum! Brands (YUM)

0.8%

5.9%

11.0%

Restaurants

Low / Median / High

Low / Median / High

Medians are shown for each sector. Market data is as of January 31, 2024. Select multiples were excluded when deemed not meaningful. Growth in revenue and EBITDA are not adjusted for M&A, if any. Non-US firms whose performances are related to the US market are included. Categorizations are not always precise because firms included may crossover various segments. Listed companies are illustrative, not exhaustive. Source: S&P Capital IQ

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Issue 3 | Market Roundup

Key 2H23 Transactions Consumer & Retail

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Issue 3 | Market Roundup

Key 2H23 Transactions Consumer & Retail

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Issue 3 | Market Roundup

Key 2H23 Transactions Consumer & Retail

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Issue 3 | SPOTLIGHT: Q&A with East Wind VP Natalie Bader

Vice President Natalie Bader shares valuable insights on deal execution and her perspective on East Wind's unique qualities

Q: Which sector(s) and types of business do you focus on? I am a generalist here at East Wind, which I enjoy. It keeps things interesting to get exposure to all different types of business models. During my time at East Wind, I’ve covered companies in industries such as education, media, consumer & retail, and healthcare. Most of the clients I’ve worked with are earlier stage and often in their high-growth phase. It’s a really exciting time to get involved with the business. We are lucky to work with teams that are so motivated and energized about making a meaningful impact through their work. Q: What does your role at East Wind entail? As a Vice President at the firm, my role has a big focus on deal execution. I am responsible for liaising between our team at East Wind, our client, and the party on the other side of the transaction to make sure we have everything we need to get a deal done. A lot of my time at the beginning of a deal is spent preparing to launch our outreach process. This involves collaborating with our client to create marketing materials, pressure-test financial projections, and develop a list of the most compelling potential investors or buyers. Once we are in market, my role shifts to more of a focus on managing relationships with potential investors and buyers, addressing any information gaps, gathering additional materials as needed, and managing the expectations of all parties involved. Throughout this process, figuring out the right communication strategy with our clients is key. As this is often their first exposure to

Q: Could you start by telling us a bit about yourself and your career journey to date? I started my career at a boutique retail and sales consulting firm called The Seurat Group. Our clients were consumer packaged goods manufacturers, everything from emerging start up brands to the Fortune 500. It was a very data-driven role, I spent a lot of time analyzing retail sales data and consumer shopping data and ultimately we used that information to advise our clients on their go-to-market strategy, in store and online. After spending four years with Seurat, I decided that I wanted to pivot into the finance industry which is what led me to apply to business school. I got my full-time MBA from the Kellogg School of Management at Northwestern and out of there started at Goldman Sachs in their industrials investment banking group. At Goldman, I spent three years advising industrial companies across multiple sectors on M&A transactions, capital raises, and other corporate actions. I was able to build up a really robust financial tool kit in a short period of time and gain exposure to a number of complex transactions. What drew me to East Wind following that experience was the opportunity to work with earlier stage companies. At a high level, the steps you take on a deal are more or less the same, but you get much deeper in the weeds of how a company actually operates when working in the lower middle market. This was exciting to me as a way to round out my M&A capabilities.

Natalie is originally from Boston and is a fan of all things New England (lobster, Cape Cod, the Patriots). She first moved to NYC for her undergraduate program at New York University where she majored in Urban Studies and minored in Business and Italian. After spending some time outside Chicago for business school, Natalie loves being nearer to her very big and close-knit family on the East coast. She spends a lot of her free time with them, mostly re-telling

old stories over her aunt’s legendary eggplant parm. When she gets time to herself, she enjoys reading (ask her about her book club).

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Issue 3 | SPOTLIGHT: Q&A with East Wind VP Natalie Bader

an M&A process, we want to make sure we are regularly providing updates and guidance through any complexities of the transaction. A big benefit of working at East Wind is being able to work so closely with our partners. They are true experts in the industry, so learning some of the more nuanced components of the negotiations and agreements directly from them has been a really unique experience. Q: As a vice president you often spearhead the execution effort. What are the key priorities when you think about successful deal execution? I’ve learned that you always need to be thinking one, or ideally several, steps ahead on the transaction. It’s important to anticipate what will be needed next in the process. A big part of our role is to help our clients package their data in a way that a potential investor or acquirer can easily digest and take away the key information they need in order to make a decision. I try to always think about what the next questions might be and how we can proactively be prepared to address them. Staying organized in this way allows for everyone to get what they need in short order, while creating the least amount of strain on the management team. Of course, there will always be things that come up that you weren’t expecting, that’s the nature of this job. But staying proactive always helps things remain as on pace and efficient as possible. Q: What are your views on the current market conditions and deal landscape? It is not news to anyone – investors have been cautious over the last couple of years. We’ve been clouded by high interest rates, fears of recession, growing inflation, geopolitical uncertainty, etc. There has been a big shift in prioritizing profitability and cash flow generation over top-line growth. This led to much lower M&A volumes, as the bar for attractive acquisition targets was very high. I think that has left us with a lot of pent-up demand, from both strategics and sponsors. We have had active dialogues with these parties throughout, and interest in M&A certainly remains robust. Especially if interest rates do begin to lower, I would expect we’ll see a pick-up in M&A activity,

particularly for sponsors who have been relatively quiet over the last year. We know they are sitting on near record levels of dry powder and are eager to put that capital to work. Q: What do you think sets East Wind apart from other firms? The team at East Wind works seamlessly together – it is a collaborative and supportive environment. We take pride in the fact that we are not siloed, we are able to leverage expertise and relationships across the firm in any given transaction, allowing us to get to the most positive outcome possible for our clients. We also work collaboratively with our clients to custom build a process that allows them to efficiently achieve their desired outcome. We are not bound to any cookie-cutter processes and are able to address any nuances that may arise as part of the transaction. Every deal presents its unique challenges, and our team has expertise in acting nimbly and quickly to find a solution. Q: What’s the most rewarding part of your job? I find it very rewarding to work directly with such exciting and innovative founders. This is an advantage of working with lower and middle market companies. I always love when we have an introductory call with a new client and get to hear the story of their company and the founder’s goals and motivations. It’s very inspiring to see the passion and determination that goes into building these businesses, and it’s meaningful to be able to play a part in achieving these goals. The transactions we work on are truly transformative for these founders, and as their advisors, it is really exciting to get to be a part of that entrepreneurial journey.

Growing up, Natalie was very passionate about music and trained in classical voice at the New England Conservatory. She continues to practice today with her keyboard at home.

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+1 646.202.1500

east-wind-advisors

@EastWindAdv

info@eastwindadvisors.com

810 Seventh Avenue, 35th FloorNew York, NY 10019

www.eastwindadvisors.com

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