East Wind Current - Issue Four

Issue 4 | AUG 2024

THE

Current

In this issue:

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

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

For Whom the Pendulum Swings

EAST WIND OVERVIEW AND TEAM GROWTH: East Wind welcomes Richard Duron (Senior Managing Director), Tim Kao (Director), Samuel Moses (Analyst) and Greg Rosen (Analyst)

PROFILE: [Feature section]

PROFILE: [Feature section]

PROFILE: Interview with Derek Belch, Founder and CEO at STRIVR (an XR workforce training platform)

M&A INSIGHTS: Part II 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 notable 1H 2024 transactions for the education, media & entertainment, and consumer & retail sectors

SPOTLIGHT: Q&A with East Wind Partner Peter Rothschild

Issue 4 | WELCOME

Newton’s Third Law of Motion

Joshua Schwartz

Managing Partner

that are otherwise difficult to achieve, while many companies that raised money during ZIRP have unique valuation dynamics in play when assessing strategic alternatives. David Kaufthal and Jason Birke return in this edition to discuss how professional service firms should be thinking about true competitive advantage, while avoiding false positives. East Wind’s culture and approach is greatly influenced by the experiences of many of its bankers at much larger firms earlier in their careers. We are alumni from firms such as Bear Stearns, JP Morgan, Goldman Sachs, Morgan Stanley, Schroders and UBS. Peter Rothschild is a great example. Peter is a seasoned veteran of Wall Street, who, among other things, shared a common experience with yours truly and our Chairman Ilan Kaufthal within the unique culture at Bear Stearns. Peter offers his perspective on various topics including how the investment banking profession has changed over the course of decades. We also feature four new additions to the East Wind Team, as we continue to thoughtfully and selectively add the highest quality talent to better service our clients’ needs. The title of this edition is “For Whom the Pendulum Swings”. The image is of Newton’s Cradle Balance Pendulum, which demonstrates Newton’s third law of motion: For every action there is an equal and opposite reaction. Since early 2024 the market’s tone has improved considerably. We are clearly at an inflection point, with substantial pent up demand for realizations, structural imperatives to “put money to work” and reasons to believe that the fear of recession has justifiably receded. All of this suggests the pendulum of leverage between buyers/investors and sellers/issuers may be slowing if not reversing its swing in favor of the former. But there remains a plethora of uncertainty, including the pace of interest rate cuts, the outcome of elections, the risk of escalating geopolitical conflict, and the impact of AI, any or all of which may produce untoward impacts on the momentum that has been building. We know we cannot ignore the laws of physics, and while we remain optimistic, we will be poised and prepared for any environment we find ourselves operating in, bringing persistence and creativity in pursuit of our clients’ objectives.

We are pleased to provide you with the latest edition of The East Wind Current. In this edition, we sat down with founder Derek Belch, who is leading a (to date) quiet revolution in workforce development through his enterprise-focused extended reality (XR) company, Strivr. Workforce Development is a high priority for our franchise, so we relished the opportunity to hear from one of the true innovators in this area. We share Derek’s view that it is just a matter of time before XR becomes ubiquitous across corporate enterprises and other organizations. Once again we share the results of our Market Survey. The survey suggests that sentiment skews positive for the next six months, with 77% of respondents expecting transaction volume to increase and 55% expecting quality of investment opportunities to improve. Valuations are anticipated to remain unchanged against a backdrop that prioritizes profitability above growth. Our respondents predict an increase in credit market activity, although they expect turbulent conditions to continue across loan portfolios. Meanwhile, it seems there are still no green shoots for IPO activity. In the first half of 2024, despite sticky inflation and slower than anticipated interest rate cut activity, the excitement around generative AI drove the broader indices higher. As detailed in our Market Roundup section, the S&P 500 index was up 15% and was trading at a slightly higher median 2024E EBITDA multiple of 16.3x compared to last year. The publicly traded companies across the sectors we cover compared to the broader market performed well from a revenue and EBITDA growth standpoint, while stock price performance relative to the broader index was mixed; standouts include companies operating in postsecondary education and value/mass retail, while underperformers of note included workforce & lifelong learning, marketing information, broadcasting & filmed entertainment, digital audio & video and leisure products. As for deal activity, transaction volume has picked up from 2023 levels, a trend which, from our vantage point, we expect to accelerate in the back half of the year and into 2025 (with some caveats noted below). High quality assets continue to separate themselves from the pack, commanding high multiples

Current

Issue 4 | EAST WIND OVERVIEW AND team growth

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, significant execution experience in both M&A and capital raising, and high-level access to key decision-makers within its core verticals

Current

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

Issue 4 | EAST WIND OVERVIEW AND team growth

East Wind Welcomes Richard Duron and Tim Kao...

Tim KaoDirector

Richard DuronSenior Managing Director

Richard joins our firm as Senior Managing Director from Atlas Advisors, where he spent the last nine years advising on an array of transactions in the consumer and basic industries sectors. Earlier in his career, Richard spent seven years at UBS, where his last position was Vice Chairman in the Wealth Management International Americas division. He also ran UBS's Wealth Management operations in Canada and Latin America. Prior to UBS, Richard spent 24 years at JPMorgan in various functions and headed the M&A group for Latin America. At East Wind, Richard will build on his relationships with clients in various industries while primarily focusing on the consumer sector. Richard serves on the boards of Surgeons of Hope and SPIN Global. Richard studied civil engineering in France and obtained a MS from Stanford University. He also holds an MBA from INSEAD and an MPH from the Mailman School of Public Health at Columbia University.

Tim has provided investment banking services to consumer, health care, media, education, business services, general industry and technology companies since 1999. Prior to joining East Wind in 2024, Tim served as Vice President in the Consumer Healthcare Investment Banking team at JPMorgan NYC and Tokyo offices and as Director at Atlas Advisors in NYC. At previous firms, he advised on M&A, Private Placement, Equity Capital Market and Debt Capital Market transactions worth more than $16.5 billion, for private and public company clients such as HJ Heinz, Grupo Bimbo, Ajinomoto, Kagome, Boston Scientific, Dasym/Endemol, Bosch Automotive System. Tim graduated from Columbia University School of Engineering and Applied Science with BS in Operations Research and received a BS and a MS in Economics from Universität Heidelberg, Germany and Certificate of Japanese Studies from Keio University Tokyo Japan.

Current

Issue 4 | EAST WIND OVERVIEW AND team growth

... and Samuel Moses and Greg Rosen to the Team

Greg RosenAnalyst

Samuel MosesAnalyst

Greg joins us having recently graduated from NYU with a BA in Economics and Mathematics and a minor in Business Studies at the Leonard N. Stern School of Business. He previously interned with Valuation Research Corporation (VRC), where he performed valuations on complex securities, including earnouts, options, and convertible debt. Prior to that, he worked with PhD students and professors at New York University to conduct global macroeconomic research. Greg was a pitcher on the NYU varsity baseball team.

Samuel joins us having just completed his BCom in Finance from McGill University. Previously, he was an Investment Banking Summer Analyst at LionTree, focusing on Technology, Media, and Telecommunications. In 2022, he worked as a Summer Analyst at the National Bank of Canada, supporting the Healthcare and Diversified Industries M&A groups. Before that, he interned at the Royal Bank of Canada, assisting various investment teams and portfolio managers. During his time at McGill, he co-founded a blockchain start-up and established McGill’s first student-run mock investment fund for alternative assets.

Current

Issue 4 | Derek belch FEATURE

Elevating Workforce Performance Through Experiential Learning

We sat down with Derek Belch to discuss his perspectives on Extended Reality in enterprise training, recent technological advancements, and his vision for Strivr. Incubated at Stanford University’s Virtual Human Interaction Lab, Strivr was founded in 2015 by Derek Belch, then a graduate student and assistant football coach for the Stanford Cardinal football team.

Derek Belch

Q: You came up with the idea for Strivr while you were an assistant coach for the Stanford Cardinal football team, completing a master's degree in VR. Can you describe what factors drove your decision to turn your master’s thesis exploring whether training athletes in virtual reality could improve athletic performance into a VR training company that is now Strivr? I played football at Stanford from 2003 to 2007, where I took a virtual reality class with Jeremy Bailenson, one of the foremost experts in the space. After graduating, I worked in consulting before attending business school at USC. I was doing the things that most business school students do as it relates to the next step in their career, but I had a strong urge to pursue coaching before turning 30, so after graduating I returned to Stanford to coach football. I was a graduate assistant on the football staff, and Jeremy Bailenson became my advisor for my master’s thesis. This was in 2013-2014, right around the time that Facebook acquired Oculus -- and it was then that Jeremy predicted VR would soon become lighter, cheaper, and more accessible. With this as our tailwind, we decided to develop a VR simulator for quarterbacks to solve the problem of limited practice time and repetitive drills. The thesis proposed that with VR, even if players are off the field, their brains could simulate being on the field. This would allow for unlimited practice reps, similar to a flight simulator for pilots. We were onto something, and quickly found opportunities to present our work to NFL scouts and general managers, who showed real interest. With this momentum, I started to seriously consider this idea as a career path, and in December 2014 Stanford’s head coach at the time, David Shaw, sat me down after the season and strongly encouraged me to leave coaching and start a company; he even offered to be our first investor. And that’s how it all began.

Founder and CEO

“We’ve essentially built the 'Workday for virtual reality' and are committed to making this vision a reality, proving both efficacy and scalability in our solutions.”

Current

Strivr is an immersive learning platform that powers the creation, delivery, management, and measurement of VR-based learning to optimize workforce performance.

Issue 4 | Derek belch FEATURE

The umbrella term that encompasses all these technologies is Extended Reality (XR). Apple’s Vision Pro headset is expected to set the standard in this field. It will function as both a VR and AR device, providing a true XR experience. Whether it’s for training, flow of work, conferences, or meetings, XR will capture and integrate all these different forms of immersive technology. Q: How would you describe the adoption curve of these technologies for training? What is the market for XR in the enterprise space? In 10 years, XR is likely to become the standard for employee training and simulation, just as e-learning is now. It will be an integral part of our routine, with VR and AR becoming commonplace for various applications. Over the past five to eight years, XR has steadily gained traction, generating significant excitement and imagination around innovative use cases with early adopters. The ROI and efficacy are real. However, the real challenge lies in change management. Many organizations have long-established practices with e-learning and classroom lectures, so a new modality is often met with an unwillingness to change the status quo or to replace subject matter experts that carry so much institutional knowledge. That said, with younger generations entering the workforce and immersive technologies now becoming even more accessible (as Jeremy predicted), we are seeing an accelerated path to adoption. Building the blueprint to navigate the evolution for these large organizations will be key, and that is where Strivr can help, leveraging our decade of experience in change management for some of the largest companies in the world.

Q: What was the pivotal moment for you when you realized you were on to something? We were having a lot of success in sports and gaining media attention when I received an unexpected phone call from a Walmart executive. He had seen our product (he was a University of Arkansas football donor), and was interested in exploring its potential for employee training. I was convinced enough to take him up on the offer to visit and we ended the trip with a handshake agreement for a paid pilot project. I’ll never forget what he told me before I left… he said, “Remember, Derek, we don’t do things in just one Walmart store. If it works, we roll it out to every store. Trust me, this is going to work, so start thinking about how you’re going to scale.” I asked how many stores Walmart had, and he replied, “4,500.” This deal had the potential to surpass every sports team’s budget on planet earth, combined! On the flight home, I decided that we should pivot into the enterprise market.

Q: How do you define XR? There are several terms that have been used over the years: Virtual Reality (VR), Augmented Reality (AR), and Mixed Reality (MR). VR involves using a device that immerses you completely in a digital environment. I like to think of VR as "mental transportation" because, when done correctly, it makes you feel as though you're in a completely different place. AR overlays digital information onto the real world. You can still see your physical surroundings, but additional data or graphics are displayed on top of your view. MR is a blend of VR and AR, where digital and physical elements interact in real-time.

Issue 4 | Derek belch FEATURE

Q: Can you talk about ROI and how vendors in your industry pitch their solutions? We focus heavily on ROI. Our approach involves understanding how VR can save time and reduce costs. For instance, we often cut training times in half while maintaining or improving proficiency. This clear time and cost savings is compelling for clients. The ultimate goal is real-world performance improvement. This can be harder to quantify but crucial in building the case for scale. For example, if VR training helps prevent incidents like bank robberies or improves emergency responses, it's a significant win. While traditional learning content often focuses on basic satisfaction metrics, we strive to demonstrate tangible, real-world benefits. Q: Can you describe the vision of Strivr and how do you differentiate from the competition? Our vision statement is to elevate performance through immersive experience. I envision a future where, just like pilots train in simulators before flying, a cashier would use a headset to prove their readiness before starting their job. The headset would evaluate their skills and only allow them to proceed when they’re fully prepared. Similarly, imagine using a simulation to assess a candidate’s suitability during a job interview—this is the kind of future we’re working towards. We aim to provide a comprehensive solution for XR at scale, encompassing everything from hardware provisioning and content development to software integration, data analytics, and enterprise security. Our competitive edge lies in our ability to deliver a

Q: How did COVID-19 impact XR adoption? COVID-19 was a double-edged sword for the XR industry. On the positive side, lockdowns led people to buy VR headsets and explore new tech, boosting adoption and interest. Apple accelerated its product development as it recognized the growing success of VR. However, for enterprises, the situation was different. Many companies were focused on immediate survival—providing masks, managing unprecedented demand, and ensuring basic operations. Large organizations, overwhelmed by the pandemic's demands, put new tech initiatives on hold and prioritized essentials like video conferencing over XR. But net, net, in hindsight, the increased visibility and attention on VR was positive for the industry. Q: How would you describe the evolution you have seen with headsets? Do they require further evolution to increase adoption and broad market acceptance? Are factors such as costs and required changes in behavior barriers to accelerating the opportunity? The current price of headsets, around $500, is reasonable for large organizations making a significant investment, whether for 10, 500, or even 5,000 units. While this price is manageable compared to other tech investments, it needs to decrease further to facilitate broader adoption. Large companies often hesitate to invest in thousands of headsets until they can see a clear ROI, especially when they already have investments in computers, cell phones, and tablets. For widespread adoption, we need more consumers to own these devices,

similar to smartphones and tablets, and organizations need a compelling reason to integrate them extensively. That said, XR technology includes more than just headsets. AR on smartphones and tablets, as well as web-based experiences with webcams, are making an impact. This broader scope of XR solutions offers various ways to engage with these technologies, and I’m very optimistic about the future. Q: Do you feel that some competitors with less robust solutions have negatively impacted the market, forcing you to reconsider and possibly adjust your approach? A significant challenge we've faced is overcoming initial misconceptions about VR. Many people have had negative experiences with VR in the past, such as feeling nauseous from a virtual roller coaster or game, and this can leave a lasting impression. We design our content to prevent that kind of issue. The industry has been a bit of a Wild West, with a mix of high-quality and subpar solutions. Some vendors offer cheap, poorly made VR experiences that leave users unimpressed or sick, while others produce high-quality content that lacks real learning value. We've encountered situations where clients spend substantial amounts on VR just for the sake of innovation, without a clear plan for ongoing use. This approach is not sustainable and highlights a real challenge in the industry.

complete, scalable solution, unlike many competitors who focus only on creating content without addressing broader operational needs. We’ve essentially built the "Workday for virtual reality" and are committed to making this vision a reality, proving both efficacy and scalability in our solutions. Q: What about the content development for this environment? Where does Generative AI fit in to accelerate your roadmap? While AI isn't at the point where you can just hit a button and have a fully functional module pop up, there have been significant advancements in content creation. For instance, creating high-quality avatars used to take six weeks, but now it takes just six hours. Language translation, once reliant on human effort, is now mostly handled by AI, reducing the time from days to minutes. We've also made strides in how avatars interact with users. Instead of being limited to scripted and linear responses, AI allows avatars to engage in dynamic conversations based on language models. Beyond content creation, improvements in our data pipeline and device provisioning have also sped things up. The real breakthrough will come when the cost of high-end devices, like Apple's $3,500 model, comes down. When such devices become more affordable, we’ll see a shift from using headsets for training to wearing lightweight glasses in the flow of work. While this vision might sound like something out of Minority Report, it’s the direction we’re heading. I believe AI will enhance rather than

Interview conducted by:

Ethan Galiette Director

Chelsea Chen Associate

Joshua Schwartz Managing Partner

Current

Issue 4 | Derek belch FEATURE

studies was with Walmart many years ago. As a forward-thinking company, Walmart frequently introduces new technology in its stores and traditionally has had to send trainers from location to location to teach associates how to use it. This process was time-consuming and costly, often taking an entire day for training just one set of personnel in one store. In this particular case, Walmart was introducing a new “pickup tower” for online orders. We developed a 20-minute VR training module for the device. Remarkably, the knowledge gained from this VR training was almost identical to what employees learned from a full day of in-person training. This substantial time and cost savings made the decision to implement VR across all their stores a clear choice. This case study became a key factor in justifying the widespread adoption of VR technology at Walmart. In other cases, we've had employees in active shooter situations, bank robberies, and store thefts tell us that our VR training helped them stay calm and follow procedures, which was crucial for their safety. A logistics client recently reported a 14% improvement in package delivery performance from VR training - which for this company, equates to millions of dollars in annual savings.

replace many frontline roles, evolving the way we work and shifting resources rather than displacing jobs. Q: What trends in the mass market for XR give you confidence that societal conditions will support your strategic goals in the coming years? In some sense, the destiny of the adoption is going to be driven by companies like you. What is your strategy for achieving your five-year targets and ensuring the necessary conditions are in place for success? We can't control consumer adoption, and its impact on our business is more about perception. Whether consumers widely adopt XR or not, as long as headsets continue to be produced, our ROI and value proposition remain intact. The major tech companies' ongoing investments in XR technology give me confidence. Apple, Google, HTC, Meta, Microsoft, Qualcomm, Samsung, and Sony are all committed to this space, driving innovation and pushing for adoption. We've realized that some of our innovations are ahead of market readiness, so we'll shift to a maintenance mode for existing products and focus on selling what's already available, rather than continuously adding new features. For new developments, we're emphasizing solutions that integrate directly into the flow of work, offering real-time assistance and guidance that don't necessarily require a headset. Q: Are there one or two case studies that can provide a really good sense for how your solutions are utilized and how they are effective? One of our most long-standing, high-impact case

Interview conducted by:

Joshua Schwartz Managing Partner

Chelsea Chen Associate

Ethan Galiette Director

Current

Issue 4 | M&A INSIGHTS

Value Enhancing Strategies for Professional Services Firm Owners: Competitive Advantages

David Kaufthal

Jason Birke

Partner

Managing Director

Our prior article on value enhancing strategies touched on how well articulated growth plans, management teams and incentive plans and differentiation tactics help enhance value for Professional Services firms. This installment addresses competitive advantage which, for services firms, can be particularly difficult to obtain. Businesses with sustainable competitive advantage command premium valuations because, to paraphrase one legendary investment guru, such enterprises possess enduring ‘moats’ that protect excellent returns on invested capital.1 Consequentially, one of the first questions we ask when preparing a client for an M&A or capital markets transaction is to describe their company’s competitive advantage. Common responses reference general business characteristics such as “unique culture”, “talented staff” and “brand” that sound compelling, but that do not truly represent distinctive competitive advantages. We believe competitive advantage derives from a beneficial feature unique to a particular company, which enables it to generate results superior to industry competitors and eventually discourage competition. Below, we discuss industrial-strength sources of competitive advantage, attractive business attributes often mistaken for competitive advantage and tactics that support success in sectors like Professional Services where it's secularly challenging to develop competitive advantage.

According to Columbia University Business School’s Bruce Greenwald, there are four major sources of competitive advantage that, particularly when wielded in combination, offer an unassailable edge: economies of scale, customer captivity, cost and government protection.2

• Scale occurs when a business has high fixed costs as a proportion of its total costs and/or network effects wherein the value of its product or service increases as more customers use it. eBay, PayPal and social networks like Instagram and TikTok are businesses that demonstrate the power and benefits of scale and network effects.
• Customer captivity is earned through customer habit and high switching costs and supports privileged, valuable access to demand. Finance professionals, for example, trained and expertly proficient on platforms intrinsic to their daily workflow like Bloomberg and Capital IQ are loathe to spend time finding and implementing alternatives.
• Structural cost, or supply, advantages arise when proprietary technology or processes (e.g., drug patents), institutionalized learning or experience (e.g., Google’s search data) and/or special access to resources (e.g., Disney’s IP trove) enable a company to deliver products or services more cheaply than competitors.
• Finally, government policy can create competitive moats for certain companies, such as those instances when regulation favors well-heeled incumbents with the resources to manage onerous compliance requirements.

Current

1. Source: Warren Buffett, 2007 Berkshire Hathaway annual letter to shareholders. 2. Source: Greenwald, Bruce, “All Strategy Is Local”, Harvard Business Review, September 2005;, Greenwald, Knee, et al, Curse of the Media Mogul, Penguin Publishing Group, 2009

10

Issue 4 | M&A INSIGHTS

Companies generating long-term superior returns typically possess a combination of the attributes described above. Many such organizations also possess powerful brands, gifted teams and strong corporate culture, but those assets are products of and serve to reinforce existing competitive advantages and should not be confused for sources of competitive advantage themselves.

• Consider powerful brands. The once-ascendant Blackberry brand, for instance, was only synonymous with mobile communications until the arrival of Apple and Android phones. The ubiquity and strength of the Blackberry brand was not enough to hold off the competition. Brand pales in comparison to true competitive advantages like economies of scale and customer captivity in the streaming wars where the largest entertainment brands – Warner, Disney, Paramount – have, to date, been unsuccessful challenging Netflix’s dominance.
• Team and culture similarly do not hold up as true, sustainable competitive advantages. Employees can always and often do leave. In fact, retaining talent is a constant challenge across even the largest and best operators in the sectors East Wind covers. Superior talent and firm culture are often observable at companies with real competitive advantages. Those enterprises have resources to attract the highest quality talent, pay better salaries and develop rewarding corporate cultures to retain the talent and reinforce their existing competitive advantage.

Competitive advantage is particularly difficult to establish and maintain in sectors, such as Professional Services, where growth is highly dependent upon constantly expanding the talent pool. Relative success is, nevertheless, imminently achievable through - obvious as it may sound - a focus on operational excellence including some of the following tactics: creating and scaling specialized product or service portfolios that leverage an organization’s core capabilities and that are responsive to customers’ needs; exceeding customer expectations; managing costs carefully; implementing culture and compensation programs designed to reward managerial accountability and performance against challenging yet attainable goals; utilizing technology creatively to improve efficiency, reduce cost and free resources to pursue additional revenue generating opportunities; developing referral networks that drive new business; executing targeted marketing programs. Businesses that employ such means can thrive in highly competitive markets and, over time, leverage their success and relative scale, available resources, institutionalized learnings and experience into true, sustainable competitive advantages.

Current

11

Issue 4 | Capital Markets Sentiment Survey Results

East Wind Capital Markets Sentiment Survey

In August 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 (5.9%), growth equity (15.7%), private equity (66.7%), family office/individual investor (5.9%), fundless sponsor (3.9%), private credit (17.6%), and commercial bank (5.9%).1

Sector focuses of our respondents include education technology and services (51.0%), media and entertainment (13.7%), consumer products and retail (23.5%), business products and services (64.7%), industrials (45.1%), and healthcare (31.4%), among others.1

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 and quality of investment opportunities to continue to pick up over the next two quarters. Perspectives on valuation remain mixed. A majority of our respondents now expect IPO activity to remain unchanged over the next two quarters.

Current

12

(1) Percentages exceed 100% because of overlapping coverage among respondents.

Issue 4 | 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 continue to expect an upturn in credit market activity while choppy conditions are expected to remain across loan portfolios.

Current

13

Issue 4 | Capital Markets Sentiment Survey Results

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

January 2024 Survey

August 2024 Survey

A significant majority of our respondents believe profitability to be more important than growth.

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:

Inflation is not tamed, interest rates stay high, and public markets underperform, closing the small window of IPOs the market is seeing. Optimism around interest rates decreasing, but will take longer than expected to do so. Tighter K-12 budget environment and declining enrollments. Macro market volatility related to the election and interest rates. Recession driven by slowing consumer spending. Geopolitical instability and conflict. Macro factors impacting founder/owner decisions to come to market.

Add-on volume will continue to outpace platform investments. Private company valuations will continue to come down, public company valuations will continue to do well, and interest rates will go down as inflation goes back to the Fed's expected range. Tightening of K-12 budget, tougher higher ed market, and more emphasis on workforce training. Middle-market private equity firms raising longer-term capital. Increase of structure in transactions (e.g., earn-outs, downside protection, etc.); return of volume but deals themselves will look different. Lower interest rates ought to lead to more deal activity.

Current

14

Issue 4 | Market Roundup

Public Market Performance Education

1H'24 Change in Stock Price

2024E Revenue Growth

2024E EBITDA Growth

EV/2024E EBITDA

EV/2024E Revenue

S&P 500

15.1%

4.4%

11.0%

5.0x

16.3x

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

4.8%

5.3%

48.8%

PreK-12

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

17.7%

7.6%

33.4%

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

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

Workforce & Lifelong Learning

(6.7%)

7.0%

51.6%

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

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

10.8%

6.8%

19.9%

Low / Median / High

Low / Median / High

Medians are shown for each sector. Market data is as of August 27, 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

Current

15

Issue 4 | Market Roundup

Notable 1H24 Transactions Education

Current

18

Issue 4 | Market Roundup

Notable 1H24 Transactions Education

Current

17

Issue 4 | Market Roundup

Notable 1H24 Transactions Education

Current

16

Issue 4 | Market Roundup

Notable 1H24 Transactions Education

Current

16

Issue 4 | Market Roundup

Public Market Performance Media & Entertainment

1H'24 Change in Stock Price

2024E Revenue Growth

2024E EBITDA Growth

EV/2024E EBITDA

EV/2024E Revenue

S&P 500

15.1%

4.4%

11.0%

5.0x

16.3x

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

Magnite (MGNI) Outbrain (OB) PubMatic (PUBM) Taboola (TBLA) The Trade Desk (TTD) Nexxen International (NEXN) Viant Technology (DSP)

Advertising Technology

15.7%

10.7%

169.9%

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

(1.1%)

(1.1%)

16.2%

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

(4.5%)

14.6%

43.0%

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

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

Marketing Information

(9.8%)

4.8%

28.0%

Low / Median / High

Low / Median / High

Medians are shown for each sector. Market data is as of August 27, 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

Current

19

Issue 4 | Market Roundup

Public Market Performance Media & Entertainment

1H'24 Change in Stock Price

2024E Revenue Growth

2024E EBITDA Growth

EV/2024E EBITDA

EV/2024E Revenue

S&P 500

15.1%

4.4%

11.0%

5.0x

16.3x

Diversified Media & Entertainment

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

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

5.6%

1.1%

25.6%

Filmed Entertainment

AMC Networks (AMCX) Lions Gate (LGF.A)

Thunderbird (TBRD) WildBrain (WILD)

(8.0%)

(0.6%)

3.5%

Live Entertainment

CTS Eventim (EVD) Live Nation (LYV)

Sphere Entertainment (SPHR) Madison Square Garden (MSGE)

7.5%

9.7%

11.4%

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

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

(10.0%)

7.9%

37.2%

Broadcasting

Low / Median / High

Low / Median / High

Medians are shown for each sector. Market data is as of August 27, 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

Current

20

Issue 4 | Market Roundup

Public Market Performance Media & Entertainment

1H'24 Change in Stock Price

2024E Revenue Growth

2024E EBITDA Growth

EV/2024E EBITDA

EV/2024E Revenue

S&P 500

15.1%

4.4%

11.0%

5.0x

16.3x

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

News Corporation (NWSA) New York Times (NYT)

12.9%

2.6%

8.6%

Publishing

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

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

Digital Audio & Video

(40.6%)

14.3%

30.5%

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

Meta Platforms (META) Snap (SNAP)

Interactive Media

(6.8%)

13.0%

56.7%

Low / Median / High

Low / Median / High

Medians are shown for each sector. Market data is as of August 27, 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

Current

21

Issue 4 | Market Roundup

Notable 1H24 Transactions Media & Entertainment

Current

22

Issue 4 | Market Roundup

Notable 1H24 Transactions Media & Entertainment

Current

23

Issue 4 | Market Roundup

Notable 1H24 Transactions Media & Entertainment

Current

24

Issue 4 | Market Roundup

Public Market Performance Consumer & Retail

1H'24 Change in Stock Price

2024E Revenue Growth

2024E EBITDA Growth

EV/2024E EBITDA

EV/2024E Revenue

15.1%

S&P 500

5.0x

11.0%

16.3x

4.4%

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

8.7%

1.1%

6.1%

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

8.4%

2.2%

8.3%

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

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

8.7%

2.5%

60.2%

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

23.2%

3.9%

8.6%

Low / Median / High

Low / Median / High

Medians are shown for each sector. Market data is as of August 27, 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

Current

25

Issue 4 | Market Roundup

Public Market Performance Consumer & Retail

1H'24 Change in Stock Price

2024E Revenue Growth

2024E EBITDA Growth

EV/2024E EBITDA

EV/2024E Revenue

15.1%

4.4%

11.0%

S&P 500

16.3x

5.0x

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

(5.0%)

(2.1%)

(0.7%)

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

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

Leisure Products

(8.5%)

(3.6%)

21.0%

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

(4.7%)

1.7%

10.0%

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)

2.7%

6.8%

10.2%

Restaurants

Low / Median / High

Low / Median / High

Medians are shown for each sector. Market data is as of August 27, 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

Current

26

Issue 4 | Market Roundup

Notable 1H24 Transactions Consumer & Retail

Current

27

Issue 4 | Market Roundup

Notable 1H24 Transactions Consumer & Retail

Current

28

Issue 4 | Market Roundup

Notable 1H24 Transactions Consumer & Retail

Current

29

Issue 4 | SPOTLIGHT: Q&A with East Wind Partner Peter Rothschild

Partner Peter H. Rothschild shares valuable insights on the investment banking industry

Q: Why did you decide to join East Wind? I enjoy working in an entrepreneurial environment where corporate finance / M&A are the principal focus of the firm. As I evaluated my firm and the direction the investment banking industry was headed, I decided that I would be more successful as a partner at a firm with a larger team and a broader reach. I knew the partners at East Wind for many years and believed we shared many of the same values in terms of integrity, providing a high-quality work product as well as treating both clients and colleagues with respect.

Q: Tell us about your career and how you got into investment banking. I started my career as an engineer designing and costing large petrochemical plants for Exxon Chemical Company. After two years at Exxon, I went to business school and became interested in investment banking and was hired as a summer associate. I worked on both a public offering, and merger and acquisition assignments. After graduating from Harvard Business School, I joined Shearson which later acquired Lehman Brothers. In 1984, I joined Drexel Burnham, the firm run by Michael Milken that essentially invented leveraged finance. I became a partner at Drexel and ended up running the Industrial Finance Group and also worked with companies in many other industries including healthcare, consumer and oil and gas. I worked on many mega transactions for companies including American National Can Company, Uniroyal Chemical Company, Revlon, Rexnord Corporation, and Fairchild Fastener Company. I worked on the first going private transaction Drexel did with KKR which was for a retailer called Cole National. I was a member of Drexel’s commitment committee which reviewed all the engagements undertaken by the firm. At Drexel, I developed many relationships with both clients and colleagues that I maintain today.

Peter brings over 40 years of investment banking experience to East Wind and focuses on General Industries and Special Situations as well as Healthcare. Before joining forces with East Wind, Peter

Q: At East Wind what is your role and what do you focus on? I focus on General Industries and Special Situations and I am very interested in expanding our activity in Healthcare. Last year we successfully sold P&F Industries, a leading publicly traded power tools company in a going private transaction. East Wind originated the transaction and provided a fairness opinion in connection with the sale which resulted in a 100% premium to the closing stock price prior to the announcement. We continue to work with this power tools company and its new owner advising on the acquisition of additional power tools businesses for them. We have also closed on several other transactions. In the Healthcare area, we are currently advising a publicly traded biotechnology company that is working on a therapeutic for non-small cell solid tumor lung cancer using AI and allogenic off the shelf approved Gamma Delta Car-T cells. We are doing a private placement of equity for an Israeli healthcare technology company; and we are the exclusive advisor in the sale of a healthcare supply company to a strategic acquirer. I also remain active in the Consumer sector, and am currently working on the sale of a branded consumer product company.

worked in senior roles at some of Wall Street's leading firms. Mr. Rothschild has also served on the board of directors of several public and private companies and has active portfolio of pro bono activities.

Prior Experience:

Q: What did you do after Drexel? After Drexel, I joined Bear Stearns where I was involved in developing the leveraged finance business and ran the Industrials / Natural Resources / Utilities Groups. In 1996, a former Drexel Partner asked me to join him at Wasserstein Perella to co-head the Leveraged Finance and Financial Buyers Coverage Group. I was also co-head of Wasserstein’s Industrial Finance Group. After Wasserstein was acquired by Dresner Bank which in turn was shortly thereafter acquired by Alliance Insurance Company, I decided to leave and form my firm, Daroth Capital Advisors. Over 17 years, we executed and advised on approximately $7 billion of transaction value. We joined forces with East Wind in December 2018.

Board Service:

Pro Bono Activities:

Current

30

Issue 4 | SPOTLIGHT: Q&A with East Wind Partner Peter Rothschild

Q: Talking about consumer, you serve on The Wendy’s Company Board of Directors. What boards do you serve on and how do you view your role? I currently serve on the Board of The Wendy’s Company. I originally joined that board as the appointee of an activist shareholder group. In the past, I have served on the board of directors of an aerospace company, MAG Aerospace; a consumer kitchenware company, All-Clad Metalcrafters; a major industrial manufacturing company, Rexnord Corporation; an apparel company, Anvil Knitwear; an environmental treatment company, Air and Water Technologies and served as chair of a publicly traded asset management business, Deerfield Capital Management. I enjoy serving on boards where I can contribute my knowledge to help the board set the Company’s strategic direction. I am also able to add value when the companies are evaluating merger and acquisition type transactions as well as financing alternatives. I believe it is important for the board to allow management to run the business and not to micromanage the implementation of the strategic direction. I also serve on the boards of of non-profit organizations includingTufts University’s Derby Entrepreneurial Center, Mount Sinai Department of Medicine Advisory Board and as President of Bulls Bridge Golf Club, all of which brings me great satisfaction. Q: What has been the most rewarding part of working in the investment banking industry? I equally enjoy creating value for our clients and training our junior people. Generally, when we are retained on a transaction, we rarely know how we will create value for our clients, but we inevitably make a difference whether it is through structuring and negotiating working capital adjustments or creating a competitive process that requires the counterparties to sharpen their pencils and improve the terms to win the process. Working as part of a team, training our junior teammates and ensuring East Wind provides superior client service are the most rewarding parts of this work.

grown from approximately $3 billion to $5 billion to over $50 billion to $70 billion in transactional fee volume per year. Likewise corporate finance and M&A departments in the larger firms grew from approximately 100 or so employees to thousands today. In the early days, the analyses we did were all done by hand on spreadsheets which were developed using raw data from companies’ source documents. Everything was done manually including the calculations, which had some advantages because we really understood what was driving the numbers and the sensitivities. Excel made developing financial projections and adjusting sensitivities much easier, but it has also led to more computational errors, because most bankers no longer go back to source documents or check their calculations and instead rely on data from data providers such as S&P Capital IQ, Bloomberg or Pitchbook. Q: What do you make of the resurgence of independent investment banks? Prior to the 1980’s, most investment banks were independent private partnerships. In the early 1980’s we started to see the consolidation of the industry into several very large, global firms. But, starting in the early 2000’s, when East Wind was founded, we started to see independent investment banks re-emerge and companies started to engage both large, global firms for capital commitment purposes and smaller independent firms for strategic independent advice. These smaller firms have been able to attract more creative, entrepreneurial talent that has been an excellent source for customized, creative strategic and tactical advice. To answer your question, it’s like Winston Churchill once said, “The further backwards you can look, the further forward you can see!” Said another way, history always repeats itself! We are now starting to see boutique investment banking firms being acquired and the industry starting to consolidate once again. Q: What do do for fun? I love what I do, work is fun for me. Many of my clients have become close friends. When I am not working on business, I spend time with my family and friends. I like to play golf in the summer and ski in the winter.

Q: What was investment banking like when you started your career and how has it changed today? When I started in investment banking in 1980, a large transaction was $20 million, and those transactions were syndicated among many firms. Investment banking firms were smaller and annually worked on far fewer transactions than we execute today. Since 1980, the industry has

Current

31

+1 646.202.1500

east-wind-advisors

@EastWindAdv

info@eastwindadvisors.com

810 Seventh Avenue, 35th FloorNew York, NY 10019

www.eastwindadvisors.com

Current