Radhan's Racofs Methodology

1. Approach to Corporate Finance ServicesRadhan’s-©RACOFS

2. RACOFS© - The Edge of Professional Approach
• Radhan’s credo is that corporate finance is a profession.
• Therefore, Radhan is constantly engaged in developing and testing methodologies to create solutions that optimize
current market opportunities without compromising future corporate sustainability. Radhan’s Approach to Corporate
Finance Services (RACOFS), is the unique result of this effort
• Though based on rigorous analytical tools, RACOFS is far from being academic. It is a systemized optimization of
corporate finance solutions, based on the specific needs of each client on the one hand, and an accurate mapping
of available sources on the other hand. It also incorporates the best practices of approaching each finance provider
according to its regulations and standards.
• RACOFS relate to all aspects of the interface between Radhan and its clients, from the pre-engagement analysis
up to the completion. In some cases only part of the RACOFS methodology is relevant and in these cases it is
applied accordingly.
• Radhan actively encouragers discourse with both clients and finance providers regarding RACOFS and, as much
as possible, is transparent in sharing its elements.
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3. 3
Phase I
Pre-NDA
Capital
Structure
Analysis
Capital Structure
Classification
Capital Structure
Adaptability
Phase II
Client
Engagement
CSC -1 CSC - 2
CSC - 3 CSC - 4
CSC - 5
CSA - A CSA - B
CSA - C
Post NDA CS Analysis
Terms of Reference
Engagement Letter
Phase III
Full Analysis
Phase IV
Process
Crossroad
Phase V
Process
Design
Phase VI
Delivery
Internal Analysis
Financial Model
Funded
Instruments
(debt, equity, m&a,
restructuring,
structured finance)
Transaction
Management
External Analysis
Benchmark Analysis
Forecast Analysis
Balance Sheet
Development
KPI
Volatility Analysis
Value Chain
Competitive Setting
Exogenous Impacts
Business
Financial
Assumption Analysis Back Testing
Financial
Sources Matrix
Term Sheet
Preparation
Negotiation
Planning
Process
Scheduling
Non Funded
Instruments
(credit rating, non deal
roadshow)
Targeted
Presentation
Analytical
Backup
Commercial
Negotiations
Legal
Completion
Radhan Data
Banks
Capital Structure
Industry Map
Source Map
M&A Matrix
Course of
Action

4. 4
While the capital structure
does not restrain the
ability of the corporation
to achieve its goals, the
structure can be more
efficient usually from cost
perspective or capital
deployment
Phase I
Pre-NDA
Capital
Structure
Analysis
Capital Structure
Classification
Capital Structure
Adaptability
CSC - 1
CSC - 2
CSC - 3
CSC - 4
CSC - 5
CSA - A CSA - B CSA - C
Phase II
Client
Engagement
Phase III
Full Analysis
Phase IV
Process
Crossroad
Phase V
Process
Design
Phase VI
Delivery
Identifies the potential
gap between the
existing capital
structure and the
corporate goals. This
classification is crucial
as it assists in defining
the motives for a
transaction and setting
its concrete objectives.
The capital structure is
suitable to the
corporation’s goals and
is set in optimal terms
and conditions
The capital structure
does not allow the
corporation to fulfill its
plans because of
constraints in cash flow
or available funds
The capital structure
that will require
refinancing within two
years in order for the
corporation to meet its
obligations or has
breached, or is close to
breach, its covenants
The capital
structure
includes
payment
obligations in
default, or with
high degree of
certainty of
defaulting in the
very near future
Capital structure adaptability is
ranked A to C, A reflecting
flexibility and therefore low
expected complexity; B medium
complexity and C rigidness and
high complexity
This scale indicates an initial
opinion as to the legal and
practical complexity of changing
the existing capital structure. It is
based on a basic analysis of the
structure in parameters such as:
• Legal terms of the debentures
• No. & identity of stakeholders
• Public/ Private securities
• Assets available as collateral
• Liquidity

5. 5
Phase II
Client
Engagement
Phase I
Pre-NDA
Capital
Structure
Analysis
Phase III
Full Analysis
Phase IV
Process
Crossroad
Phase V
Process
Design
Phase VI
Delivery
Post NDA CS Analysis
Terms of Reference
Engagement Letter
As most of Radhan’s services are transaction based, the engagement with the
client is usually preceded with an initial feasibility stage which includes the capital
structure analysis. Sometimes, of course, the client requests only a segment of the
full scale services (such as rating advisory or IPO advisory). Even in these cases,
Radhan aims to understand the nature of the service in a broader perspective and
refrains from a technical approach
In cases where the client is approached by Radhan, the analysis is initially based on
public information and subsequently on, after a NDA is signed, on confidential
information
Based on the capital structure analysis the terms of reference for the engagement
are mutually agreed upon with the client

6. 6
Phase III
Full Analysis
Phase I
Pre-NDA
Capital
Structure
Analysis
Phase II
Client
Engagement
Phase IV
Process
Crossroad
Phase V
Process
Design
Phase VI
Delivery
Internal Analysis
KPI
Efficient capital structure is
based on a deep
understanding of the
corporation’s business
positioning and required
capital allocation. Therefore,
Radhan’s approach to a
corporate finance
transaction entails an in-
depth analysis of the
corporation and its
environment.
This analysis does not
presume to be of strategic
nature, but rather reflect the
impact of various potential
scenarios on the capital
structure and devise a
structure that will be solid
enough to withstand the
possible setbacks ahead. The
robustness of the capital
structure takes into account
the risk appetite of the
decision makers in the
corporation. We do not
assume to replace their
judgment, but rather to put a
“risk tag” on the alternatives
The evolvement of the balance sheet over a three to five years
time period (depending on the industry) is a comprehensive
analysis of how the accounting and business facets of the
corporation interact, as well as how the financials are impacted
by different events. From this analysis It is also possible to
understand how the p&l and cash-flow influence the balance
sheet and the degree of flexibility of the capital structure
Balance Sheet
Development
The key performance indicators will be defined based on the
analysis of the parameters that affect the balance sheet
development

7. 7
Phase III
Full Analysis
Phase I
Pre-NDA
Capital
Structure
Analysis
Phase II
Client
Engagement
Phase IV
Process
Crossroad
Phase V
Process
Design
Phase VI
Delivery
External Analysis
Value Chain
Competitive Setting
Exogenous Impacts
The location of the company in the value chain of its industry;
the dependency on suppliers, clients and industry-level trends
The relative advantage of the corporation and the competitive
dynamics between it and its peers
The external factors that influence the corporation such as
regulation, forex etc.

8. 8
Phase III
Full Analysis
Phase I
Pre-NDA
Capital
Structure
Analysis
Phase II
Client
Engagement
Phase IV
Process
Crossroad
Phase V
Process
Design
Phase VI
Delivery
Comparative qualitative and quantitative inquiries with respect to
the business strategies and operations of the comparables
Based on the analysis conducted, a range of possible scenarios are
defined to model the potential outcomes and their financial
implications
Benchmark Analysis
Volatility Analysis
Business
Financial Financial benchmarking to the comparables. Examination of the
leverage, financial profile and covenants typical to the relevant
industry

9. 9
Phase III
Full Analysis
Phase I
Pre-NDA
Capital
Structure
Analysis
Phase II
Client
Engagement
Phase IV
Process
Crossroad
Phase V
Process
Design
Phase VI
Delivery
Forecast Analysis
Assumption Analysis
Back Testing
Drilling down to the assumptions driving the forecast and
classifying them according to their source - market changes or
internal changes. Each category is then tested in order to
understand to what degree these assumptions can be
substantiated
Once the assumptions are identified, the expected forecast is back
tested to examine what the outcome would have been in the past
under such assumptions. Any discrepancies between the forecast
and the back testing results are analyzed

10. 10
Phase IV
Process
Crossroad
Phase I
Pre-NDA
Capital
Structure
Analysis
Phase II
Client
Engagement
Phase III
Full
Analysis
Phase V
Process
Design
Phase VI
Delivery
The financial model is a compilation of the full analysis and the different
financial solutions from the mapped sources. It is a dynamic decision support
tool that incorporates the business dynamics, the financial reports (past and
forecasted) and the alternative financial instruments
Based on the Radhan Data Banks, the specific relevant financial sources for the
corporation are analyzed based on various parameters including: potential
transaction size, price range, expected duration, required collateral and
covenants, process complexity and cost
Financial Model
Financial
Sources Matrix
Course of
Action
Based on the financial model, and following discussions with the corporation
regarding the different viable alternatives, a chosen course of action is decided
upon. At this stage the process is determined, although the specifics of the term
sheet are not yet required

11. 11
Phase V
Process
Design
Phase I
Pre-NDA
Capital
Structure
Analysis
Phase II
Client
Engagement
Phase III
Full
Analysis
Phase IV
Process
Crossroad
Phase VI
Delivery
Funded
Instruments
(debt, equity, m&a,
restructuring,
structured finance)
Term Sheet
Preparation
Negotiation
Planning
Process
Scheduling
Non Funded
Instruments
(credit rating, non deal
roadshow)
Targeted
Presentation
The term sheet includes all relevant parameters: volume, price and major business
and legal clauses. It is adjusted to meet the requirements of each potential
financial provider
Defining the parameters on which the negotiation will be held; presetting the
covenant and security packages (in case of debt) or option and price mechanisms
(in case of equity); analyzing the negotiations dynamics and preparing accordingly
Determining the timetable for the since multiple tasks are simultaneously
assigned to different teams (accounting, legal etc.)
The targeted presentation is the marketing material designated specifically for
each potential financing source and includes relevant information from the full
analysis stage and the financial model
Rating agencies use dynamic
matrices and methodologies
which are industry specific.
Radhan has intimate knowledge
of the processes and models
used by the rating agencies
The outputs of this phase are: a
financial model adjusted to the
format required by the rating
agency and a full presentation of
the argument, that serves as
framework for the analysis
Non-deal road-shows are
planned in a similar manner to
an issuance road show

12. 12
Phase VI
Delivery
Phase I
Pre-NDA
Capital
Structure
Analysis
Phase II
Client
Engagement
Phase III
Full
Analysis
Phase IV
Process
Crossroad
Phase V
Process
Design
Transaction
Management
Analytical
Backup
Commercial
Negotiations
Legal
Completion
Overseeing the correlation between the commercial understandings and the legal
outcome and balancing the protection of the client’s legal rights with the need
business flexibility
Proactively managing the process, in accordance with the plan in order to arrive at
the best possible result for the client
Using a supporting model adjusted to meet regulatory restrictions, while enabling
investors’ analysts to single out the investment in a easy, structured manner
Executing the transaction as planned in the previous phases. This includes management of
all related facets of the investors’ road show or any other competitive process up to
completion

13. 13
Radhan Data
Banks
Capital
Structure
Industry Map
Source Map
M&A Matrix Matrix of buy side and sell side opportunities based on on-going dialogues with private and
public corporations and funds
CSC
CSA
A B C
1
2
3
4
5
Corporation X
Corporation Y
Corporation Z
Radhan systematically develops and maintains Data Banks with updated information regarding its
operations. The Data Banks are valuable in expediting processes and enhancing the analytical processes
The comparable corporations are sorted into
industry groups. Each company is located on an axis
which includes the Capital Structure Classification
(CSC) scale and the Capital Structure Adaptability
(CSA) scale
Each corporation is displayed as a circle whose size
correlates to the capital base size (with financial
debt & equity each represented in different color)
An up to date detailed list of specific potential financing sources with relevant information
on each (last transactions, investment policy, etc.)

14. ‫תודה‬