Building a World Class Finance Organization/Private Equity as a Stakeholder

1. Building a World Class Finance Organization/Private Equity as a Stakeholder IMA Detroit Chapter Mark Blaufuss January 14, 2014 CFO, Metaldyne

2. Overview • Summary Background • Building a World Class Finance Organization • Benefits • Characteristics • How to Get There • Challenges • Private Equity as a Stakeholder • Overview • Characteristics • Key Success Drivers

3. Summary Background • Education • BA – Michigan State University • Professional Services/Consulting • Pricewaterhousecoopers • Alixpartners • Small Acquisition/Roll-Up Manufacturers • JPE, Inc. • Stonebridge Industries, Inc. • Larger Multi-National/Private Equity Backed • Axletech International, Inc. • United Components, Inc. • Metaldyne Summary Background

4. Summary Background – Approach • Understand the stakeholders of the business • Ownership • Customers • Employees • Peers/Management Team • Understand role in the organization • Expectations of Stakeholders • Establish key working relationships • Service organization mentality • Understand the parameters to work with • Resources • Relationships Summary Background

5. Benefits of a World Class Finance Organization

6. Benefits of a World Class Finance Organization • Transforms finance into a valued business partner • Allows management of the trade offs between business partnering and corporate governance • Sets targets for improving finance’s business value • Implements innovative budgeting, forecasting and analysis methods • Reduces the costs of financial services and improves their effectiveness • Identifies the new skills and talents needed to maintain excellence within the organization Building a World Class Finance Organization

7. What Does a World Class Finance Organization Look Like?

8. Characteristics of a World Class Finance Organization • Culture • Highly communicative • Fact based management/data driven decisions • Promotion of insight/team participation • Blameless environment • Consistently evolving/transforming • People • Establishing annual goals and measuring against them • Cross-training (incl. various departments w/in finance) • Job succession • Professional development • Incentive/Compensation strategies • Honesty Building a World Class Finance Organization

9. Characteristics of a World Class Finance Organization (cont.) • Business Partnering • Recognized as bringing value to the organization • Fact based assessments • Balanced approach to corporate governance • Involvement in non-finance activities • Cost Efficient Organization • Understand cost of the organization • Assess/challenge costs, seeking on-going cost reductions • Benefits derived from personnel and system costs • Engaged approach to outside service providers • Benchmark against similar organizations Building a World Class Finance Organization

10. Characteristics of a World Class Finance Organization • Processes/Systems • Automation • System reliance • Risk based authorizations • Documented and defined • Data management/retention • Reporting • Simple and Concise • Timely • 2-3 day close • Bridges with minor “other” • Consistency with operational management Building a World Class Finance Organization

11. How Do You Get There?

12. Adopt a Continuous Improvement Approach Building a World Class Finance Organization

13. Assess The Finance Organization People • Skills & Capabilities • Job Satisfaction • High Potential Processes • Basic Business Processes • Exceptions and Inefficiencies • Recurring Errors/Issues Controls • Identify Key Controls • Segregation of Duties • Delegation of Authority Building a World Class Finance Organization Value • Value of Deliverables • Timeliness of Reporting • Overall Cost of the Organization

14. Assessment Tips • If someone cannot explain it to you, they don’t understand it • Ask who uses the report or information that is being produced • What is it used for? • What decisions are made on the report/information? • Look for manual intervention • “I download the report and then make these adjustments to it” • Challenge how effective reviews are • How often are adjustments made • How many follow-up items are done • Take people off the distribution • “Dye into the system” • Ask “what would you change?” Building a World Class Finance Organization

15. Assessment Tips • Document your findings in an organized manner • Consider using a score sheet/template • Helps to record findings consistently • Provides a medium to communicate with the rest of the team • Template becomes the building block for the next phase – Plan and Design Building a World Class Finance Organization

16. Develop a Plan Plan Development • Determine specific goals • Create action steps and champions for each goal • Establish timing and deliverables Tips on Improvement Plans • Leverage assessment template/work • Be realistic – people have day jobs • Avoid ambiguous items – “Improve efficiency” • Use measurable data as much as possible • Involve the team early and often in the plan • Buy-in and alignment of where the organization is going • Mix in short term and long term goals • Quick wins • Establish scheduled progress updates • Celebrate successes to keep momentum Building a World Class Finance Organization

17. Implement • Arm champions for success • Empowerment • Resources • Project management 101 • Monitor progress • Establish monitoring tool • “Stop light” chart • Set consistent schedule of update meetings • Include problem solving/resolution opportunities • Be supportive • “Pile on” to support requests for information/attendance at meetings • Be personal • Avoid emails – talk to people in person wherever possible Building a World Class Finance Organization

18. Evaluate and Re-Assess • Compare actual results to goals • Understand drivers to variances • Determine the need to keep the item on the plan • More improvement to be garnered? • Cost/benefit of further improvement • Re-assessment • Update initial assessment • New circumstances/challenges • Stakeholder input • Continuous Improvement is Journey, not a Destination Building a World Class Finance Organization

19. Challenges to Building a World Class Finance Organization • Culture • Multi-national challenges • “This is how we do business here” • Distance • Language • “Tone at the Top” • Succession planning/career opportunities • Competition • Compensation • Legacy Systems/Issues • Company Performance Building a World Class Finance Organization

20. Private Equity as a Key Stakeholder

21. Private Equity – Quick Stats Quick Facts Private Equity Firms Headquartered in the U.S.: 2,797 firms Buyout/Growth Expansion Funds Currently Fundraising in the U.S.: 320 funds Private Equity-Backed Companies Headquartered in the U.S.: 17,744 Employees Hired by U.S. Private Equity-Backed Companies: 7.5 million Last updated: June 2013. Source: PitchBook, PEGCC Analysis. Private Equity U.S. Private Equity Investment. Source: PEGCC

22. Private Equity – Here to Stay Funds Available for Investment Held by Private Equity Private Equity U.S. Private Equity Investment. Source: PEGCC

23. Private Equity Characteristics • Looking to create value in acquired companies • Status Quo post acquisition unlikely • Growth • Revenue • Profitability • Investors Attracted to Stronger than Market Returns • “Private equity delivers significant benefits to its investors and has a proven track record of outperforming other traditional asset classes. As of December 2012, private equity outperformed the S&P 500 Index by 4.3 percentage points, 5.1 percentage points and 7.0 percentage points for three-, five- and ten-year periods. • A review of 151 public pension funds across the U.S. found that private equity delivered an 8.8 percent median 10-year annualized return to pension funds, outperforming the returns of other asset classes (fixed income, listed equity and real estate).” • Financially driven people • EBITDA/Multiples • Leveraged Buy-Outs • Typically Non-Operators – Financial Engineers Private Equity U.S. Private Equity Investment. Source: PEGCC

24. Key Success Drivers with Private Equity • Remember Who Has Taken the Risk • The equity investment is likely substantial in the business • Talk the Talk • EBITDA • Multiples • Debt • Know Your Numbers • Explainable variances • Avoid “surprises” • Robust budget and forecasting • Operate the Operations • Seek approval not guidance • Communication • Establish an agreed upon communication cadence • Performance, Performance, Performance Private Equity

25. Questions? Mark Blaufuss Chief Financial Officer Metaldyne Corporation markblaufuss@metaldyne.com (734)207-6768