Investment Strategy

New Mountain's private equity funds seek to acquire the highest quality leaders in carefully selected growth industries. The Firm generally invests $100 million - $500 million per transaction and seeks companies that are generally characterized by:

• Market leadership in sustainable growth niches
• High barriers to competitive entry, as demonstrated by high operating margins
• Strong "downside" protection in all reasonable worst-case scenarios
• The opportunity for substantial value creation due to rapid growth or to special factors existing at the time of the investment.

New Mountain is a generalist firm with the freedom to pursue attractive risk/reward tradeoffs opportunistically across the full spectrum of industries and styles.

More importantly, however, New Mountain has developed a proven, consistent and reproducible process of identifying top down the sectors it believes to be the best investment areas; seeking to become the most knowledgeable investor in these sectors; and then acquiring control of highly attractive companies in these sectors proactively and without an auction. After an acquisition, the Firm works intensively with management to raise these already attractive businesses to an even higher level of performance and valuation.

In selecting sectors for proactive pursuit, New Mountain chiefly focuses on "defensive growth" industries: that is, on sectors that should succeed in both good and bad economies, but which are also large and growthful enough to achieve very high valuations and returns at exit. New Mountain works to become the most knowledgeable investor in each selected space; for example, by building proprietary databases, hiring executives-in-residence from the industries and securing exclusive retainers with select industry bankers, brokers and consultants. To date, the Firm has developed particular competitive advantages in selected sectors of education, health care, software, logistics, specialty chemicals, business services, federal services, media, consumer products, financial services and insurance, environmental services, infrastructure and energy. The Firm is systematically establishing new sectors of competitive advantage over time.

New Mountain Value-Add

Once an investment is made, New Mountain works to help management add value to these companies, in order to create much larger and more profitable "new mountains" in their own industries. Chief executives of New Mountain portfolio companies have been strong references for our Firm, and the variety of ways that New Mountain has helped management teams add value include:

• Providing growth capital
• Increasing management ownership
• Developing and supporting new growth strategies
• Seeking out, supporting and executing add-on acquisitions
• Recruiting high quality board members
• Strengthening management teams
• Supporting technology and infrastructure upgrades
• Supporting increased research and development
• Making high level sales contacts on the company's behalf
• Establishing strong financial Wall Street coverage and support
• Establishing improved financial systems and controls.

How New Mountain Differentiates Itself

New Mountain believes it is distinctive from other private equity firms in the following ways:

• New Mountain emphasizes growth and value added, rather than debt, as the correct way to generate long term private equity returns. New Mountain has achieved its success by helping build great businesses with strong balance sheets, rather than by applying debt aggressively to weaker businesses.
  
  
• New Mountain pursues its chosen industries extremely deeply and proactively, and is continuously updating its list of sectors under review. In this way, the Firm achieves all the benefits of a specialist firm, without being compelled to invest in any sector. In the past, the Firm has prepared for months or even years in advance of finding the right entry opportunity into a chosen sector.
  
  
• The Firm has never acquired a company through a sealed bid in a formal auction. Instead, New Mountain has dealt proactively or preemptively with shareholders and managements who appreciate the Firm's differentiated abilities and approach.
  
  
• New Mountain rejects "portfolio theory" in the ownership and control of operating companies and is dedicated to the success of every investment it makes. Typically, New Mountain's private equity team reviews hundreds of acquisition opportunities each year, but acquires only three or four carefully selected targets. New Mountain has never had a bankruptcy or missed a debt payment on any Fund investment since the Firm began. New Mountain's founder/CEO has not had a bankruptcy or missed debt payment on any fund investment made with New Mountain or his previous partnership for over twenty years.
  
  

In recognition of it efforts, New Mountain was named North America's middle market private equity firm of the year for 2004, and again in 2007, by Private Equity International¹, and was also named one of five finalists for Buyout Firm of the Year in 2007, 2008 and 2009 by Buyouts Magazine². Recently, New Mountain was awarded the 2010 Silver Award for the US Mid-Market LBO Fund category by Private Equity Exchange & Awards.

1- Source: Private Equity International.

2- Source: Buyouts Magazine.