THE FLANIGAN GROUP John Flanigan (317) Kevin Flanigan (317) Merger & Acquisition Advisors

1969 COM, Film, Equip 1987 COM, Film Equip, Scan 2006 Film, Equipment, Scan, PS, ECM, ASP 2011 Scan/BPO, PS, ECM, ASP, Vertical Apps

1969 COM, Film, Equip 1987 COM, Film, Equip, Scan 2006 Com Film Equip Scan, PS, ECM, ASP 2011 Com Film Equip Scan/BPO, PS, ECM, ASP, Vertical Apps

 Company A ◦ Sales $2,000,000 ◦ 50 customers ◦ 5% growth ◦ Acquired microfilm company ◦ Positive EBITDA ◦ Good financial reporting ◦ C-Corp  COMPANY Z ◦ Sales $6,000,000 ◦ 150 hospitals ◦ 10% declining/film ◦ No investment in business ◦ Negative cash flow ◦ Weak financial reporting ◦ S-Corp

 1. Make your business an investment  2. Improve Corp structure (if you can)  3. Make your business bigger  4. Find internal growth  5. Reduce buyer risk  6. Prepare for the selling process  7. Identify the RIGHT buyers  8. Maximize Proceeds  9. What real buyers said

 Your business is your biggest investment  Plan to sell your business …at the right time  Make your business (investment) easy to understand  Be known for something

 C/S/LLC sales all work but… ◦ Buyers prefer to acquire assets- NOT stock ◦ C-Corp not conducive to asset sale ◦ Number of buyers is reduced ◦ C-Corp takes more care to structure

 Move consideration outside of corporation ◦ Buyer pay via phantom consulting ◦ Buyer pay extra rent  Start an S-Corp now to grow part of business ◦ Use same ownership structure ◦ Split proceeds between S-Corp and C-Corp

 Increases the number of buyers  Seller get proceeds at capital gains rate  Flexibility ◦ Sell division that doesn’t fit ◦ Sell division to raise funds ◦ Split company- sell to different buyers

 Transactions from $300,000 to $35,000,000 … … essentials to gain value are the same  Bigger = better price  Bigger = higher quality buyers  Bigger = higher multiples

Revenue

 Company A ◦ Sales $2,000,000 ◦ 50 customers ◦ 5% growth ◦ Acquired microfilm company ◦ Positive EBITDA ◦ Good financial reporting ◦ C-Corp  COMPANY Z ◦ Sales $6,000,000 ◦ 150 hospitals ◦ 10% declining ◦ No investment in business ◦ Negative cash flow ◦ Weak financial reporting ◦ S-Corp

FILMEquipmentScanASPECM OnBase ECM AX SELLER VALUE CREATED BUYER FILMEquipmentScanASPECM OnBase ECM AX

More matches Buyers see efficiency Buyer has more comfort More value with overlap (shared) Less matches Buyer discounts non- related revenue Number of buyers reduced

Raise EBITDA MultipleAttract more buyers Show bigger market potential Project post acquisition growth Higher internal growth rates

 Emphasize higher growth segments  Integrate lower multiple business to higher multiple services - reclassify FilmScanECMPSBPOASP

 Company A ◦ Sales $2,000,000 ◦ 50 customers ◦ 5% growth ◦ Acquired microfilm company ◦ Positive EBITDA ◦ Good financial reporting ◦ C-Corp  COMPANY Z ◦ Sales $6,000,000 ◦ 150 hospitals ◦ 10% declining ◦ No investment in business ◦ Negative cash flow ◦ Weak financial reporting ◦ S-Corp

 What risks do buyers see?  Is seller serious about selling?  Large accounts  No contracts  Can key people leave without non-compete  Reseller dependence ◦ Is “top 10 VAR” good?

 Be committed to the process  Takes 1-24 months to sell business  You only sell one time- Do it right! 6 months 1 year 2 years

 Financials- 3 years  Data to support strengths  Data to support addbacks  Use “QuickBooks”  Written story/profile  Good advisors

 The Obvious  Find buyers with real money  Select active buyers ( established process)  Use value creation as one good criteria

 Your right buyer is in/around your industry  Search with a rifle not a shotgun  Find high multiple paying buyers (storage buyers & software buyers)  Your buyer is not your buddy down the street (unless he fits above criteria)  Treat every buyer special/ tailor to each buyer

Tire kickerNDA violatorsLow valuation buyers/bottom fishersBad process buyers- too many people/no timelineThe “I don’t pay for synergy” buyerInexperienced buyers

 Stabilize customers/ contracts  Employees (Non Competes, GM)  Investments = “NONE”  Identify buyers  Building – better outside of business  Resolve ownership complications  Acquire an add-on business  Stabilize customers/ contracts  Employees (Non Competes, GM)  Investments = “NONE”  Identify buyers  Building – better outside of business  Resolve ownership complications  Acquire an add-on business

Acquired microfilm business Value = 2X Converted customers to scanning Sold integrated business Value = 4X

 Use structure for more value ◦ Cash ◦ Debt – no balloons ◦ Earn-outs - you know the risk better than buyer  Make the sale competitive ◦ Says you are serious ◦ Creates timetable ◦ Bidding atmosphere ◦ Fear of loss ◦ More data points

 Biggest error is waiting too long ◦ Sell when things are going well  The right time to sell is … ◦ … when buyers are buying ◦ … when the industry is growing ◦ … when your business is ready  Sell before you want to retire  Biggest error is waiting too long ◦ Sell when things are going well  The right time to sell is … ◦ … when buyers are buying ◦ … when the industry is growing ◦ … when your business is ready  Sell before you want to retire

# of responses

Z A - xx xxxx xx - xxxx - xx - xxxx xxxx - xxxx xx x xx xxx

 Company A ◦ Sales $2,000,000 ◦ 50 customers ◦ 5% growth ◦ Acquired microfilm company ◦ Positive EBITDA ◦ Good financial reporting ◦ C-Corp  COMPANY Z ◦ Sales $6,000,000 ◦ 150 hospitals ◦ 10% declining ◦ No investment in business ◦ Negative cash flow ◦ Weak financial reporting ◦ S-Corp