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BUSINESS CASE STUDY – BLACKWATER USA

• Company Formation

• Growth

• Capitalization

• Revenue Model

• Steady State

• Risk/Decline

• Founder’s Exit

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COMPANY FORMATIONCOMPANY FORMATION

INITIAL BUSINESS “NEED”: (Blackwater Lodge & Training Center) 365 ranges shut down for insufficient SDZ’s in 1996. SEAL Teams lack nearby firearms training location. First Two “Business Units” -

Blackwater Lodge and Training (Training)Raven Development (Construction)

FIRST EVOLUTION: (Blackwater Target Systems) BW destroys commercially-available firearms targets. Company learns the value of Vertical Integration. Company builds initial manufacturing capability

COMPANY ALWAYS FOCUSED ON “BUILDING CAPABILITY”

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GROWTHGROWTH

GROWTHGROWTH – – Global Events Drive DemandGlobal Events Drive Demand

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GROWTHGROWTH - Revenue - Revenue

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Blackwater’s DYNAMIC revenue growth presented countless financial and operational challenges.

CAPITALIZATIONCAPITALIZATION

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REVENUE MODELREVENUE MODEL

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Government Contracts do not ordinarily award “mobility” or “start up” Government Contracts do not ordinarily award “mobility” or “start up” expenses. This required the company to finance the revenue “trough” at expenses. This required the company to finance the revenue “trough” at the outset of every contract. the outset of every contract.

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STEADY STATE: Blackwater Organization

• Blackwater Training Centers– Blackwater East (Moyock, NC)

– Blackwater North (Freemont, IL)

– Blackwater West (San Diego Co., CA)

• Blackwater Manufacturing– Blackwater Target Systems

– Blackwater Armor

– Blackwater Airships

– Blackwater Gear

• Blackwater Security Consulting

• Blackwater Aviation

• Blackwater Logistics

• Raven Development Group

• Greystone International

• Terrorism Research Center

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STEADY STATE: Major Clients

US Government Law Enforcement Allied Governments

Department of Defense- US Navy- US Marine Corp- US Army- US Air Force- CNTPO- CENTCOM

Department of State Department of

Homeland Security Department of Energy Department of Justice

Canadian Military Azeri Military Afghani Narcotics

Police Jordanian Military UAE Military

United States- NYPD- Connecticut State Police- Virginia Beach Police- New Orleans Police

Allied Police Detachments- Royal Canadian Mounted

Police- Colombian Police- Italian Police- Chilean Police- Kuwait SWAT

RISK/DECLINERISK/DECLINE: Politics and Pundits: Politics and Pundits

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RISK/DECLINE: RISK/DECLINE:

11 2012: OGA Attack in 2012: OGA Attack in KhostKhost

2007: Congress2007: Congress

•2003: Attack in 2003: Attack in FallujahFallujah

2007: Nissor Square2007: Nissor Square

FOUNDER’S EXIT: FOUNDER’S EXIT:

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•20052005: Received a $2.6b valuation from major Wall : Received a $2.6b valuation from major Wall Street Hedge Fund. Street Hedge Fund.

•Offer was rejected by OwnerOffer was rejected by Owner•Hedge Fund later dramatically over-payed for Hedge Fund later dramatically over-payed for competitorcompetitor

•2010: 2010: Company sold in two transactions. Company sold in two transactions. •Aviation assets sold to AAR Global for $200mAviation assets sold to AAR Global for $200m•Remaining Assets sold to investment fund for Remaining Assets sold to investment fund for $300m $300m

COMPANY ULTIMATELY SOLD FOR 20% OF COMPANY ULTIMATELY SOLD FOR 20% OF HIGHEST VALUEHIGHEST VALUE

QUESTIONSQUESTIONS

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