Divergent Shareholder Goals

Service Champ L.P.

Example of Divergent Shareholder Goals:

Service Champ is a leading distributor of products and equipment to quick lube centers throughout the United States. The Company was owned by four brothers, two of whom made up the senior management team of the business. One of the active brothers wanted to reduce his day-to-day involvement with the Company while the other active brother wished to remain as the Company’s President. ZS structured a transaction in which all of the brothers received significant liquidity and collectively retained approximately 20% of the equity of the Company. ZS also put in place special bonus pools for the benefit of the brothers who were active in the business to increase the potential consideration to the individuals most responsible for the Company’s performance.

Two years after ZS’s investment, Service Champ acquired Pacific Trend, one of its largest competitors. The acquisition significantly strengthened the Company’s presence on the West Coast, enhanced its already strong management team and made it the dominant player in the industry. ZS was actively involved in negotiating, structuring and financing the acquisition. The combination was extremely successful as the operations and cultures of the businesses merged seamlessly, and the combined Company realized significant synergies.

After integrating Pacific Trend, the Company was approached by a financial institution that was interested in recapitalizing the Company. The founding brothers and other management shareholders were not interested in selling any equity, so ZS negotiated a transaction in which it sold its ownership stake while the management owners received a combination of cash and additional equity in the Company.

Direct Marketing Company

Example of Divergent Shareholder Goals:

Direct Marketing Company was owned 50/50 by its two founders, each of whom had a son working in the business. The Company grew, the founders retired, and one of the sons became President. While he was showing signs of being an excellent manager, the other, less capable son was hampering the President in operating the business. ZS engineered a purchase of 100% of the Company from the two founders and then resold approximately 40% to a group of key managers led by the President, thereby resolving a difficult situation and permitting the Company to continue its growth without distraction. The Company prospered, subsequently went public, and eventually was purchased by another private equity firm, which kept the management team in place.