R EALIZE ● Y OUR ● D REAMS 1 Realize Your Dreams Convert ownership into financial independence

R EALIZE ● Y OUR ● D REAMS 2 Owner Transfer Motives Private owners want to: ● Create a family legacy ● Change lifestyle ● Empower employees ● Diversify estate ● Give to charity ● Use transfer to create liquidity

R EALIZE ● Y OUR ● D REAMS 3 Transfer Timing Owners should play the transfer timing slots … PERSONALBUSINESSMARKET

R EALIZE ● Y OUR ● D REAMS 4 Business Transfer Spectrum T R A N S F E R M O T I V E S T R A N S F E R C H A N N E L S Employees Charitable Trusts FamilyCo-Owner Outside [Retire] Outside [Continue] Public T R A N S F E R M E T H O D S INTERNAL TRANSFERS CRTs CLTs ESOPs MBOs/MBIs Gifts SCINs Negotiated Auctions Consolid’s Recaps Buy/Sell Right OFR IPOs DPOs EXTERNAL TRANSFERS

R EALIZE ● Y OUR ● D REAMS 5 The Choice of Transfer Method Matters The choice of transfer method determines the value of the transferred business interest - Because each transfer method is connected to a value world

R EALIZE ● Y OUR ● D REAMS 6 External Transfers ● These are typically the big liquidity events ● The market value world dominates here ● 3 Subworlds: Asset, Financial, and Synergy ● We don’t want to transfer in Asset market value (although most private companies will transfer in this Subworld)

R EALIZE ● Y OUR ● D REAMS 7 Stream vs. Multiple Financial and synergy market value: ● Equals the “Stream times the multiple” (EBITDA times acquisition multiple) ● The stream is influenced by the presenter ● The buyer brings the multiple

R EALIZE ● Y OUR ● D REAMS 8 It’s a Recast World Which level of earnings do you choose? ● Reported EBITDA ● Recast EBITDA ● Synergized recast EBITDA

R EALIZE ● Y OUR ● D REAMS 9 Financial Market Value ● Subject Profile:Positive earning capacity ●Investor Profile:Individual/Non-strategic ●Process:Recast EBITDA times a multiple Seller keeps Cash + RE + LTD; Buyer takes Operating assets plus Current liabilities

R EALIZE ● Y OUR ● D REAMS 10 Synergy Market Value ● Subject Profile:Positive earning capacity plus a cherished market position ●Investor Profile:Strategic ●Process:Recast synergized EBITDA times a multiple Only “hard” synergies qualify

R EALIZE ● Y OUR ● D REAMS 11 Transfer Marketing Processes CharacteristicNegotiatedPrivate AuctionPublic Auction Best to use when:There is one "perfect-fit" prospect There is a select group of buyers It’s OK to invite everyone Summarized Process: Work out a highly customized deal Organize a cattle herd. Can be one or two-steps. Make a public announcement, Can be one or two- steps. Seller Perspective:Seller controls the process Seller cedes some control An intermediary directs traffic Buyer Perspective:All about investment value Getting close to market value Market value

R EALIZE ● Y OUR ● D REAMS 12 Private Auctions Steps: - Herd the cattle (this may require a bull prod) - Sell a synergized Recast EBITDA stream - Play “Let’s Make a Deal!”

R EALIZE ● Y OUR ● D REAMS 13 Let’s Make a Deal! We sold a distributor for ‘6’ times… Deal Size Reported EBITDA$2.0MM$12.0MM Recast EBITDA$3.5MM$21.0MM Synergized Recast EBITDA$5.0MM$30.0MM The owner chose what was behind Door #3!

R EALIZE ● Y OUR ● D REAMS 14 Equity Recapitalizations ● Some businesses have major growth opportunities ● These owners may wish to take some chips off the table but still participate in the upside ● In an “equity recap,” owners sell some part of the business to a private equity group now, and the rest later (80/20% is popular) ● Negotiate the selling price and terms at the same time ● The second sale in 5-6 years usually nets more to the owner than the first sale

R EALIZE ● Y OUR ● D REAMS 15 Going Public – Does It Make Sense? ● There are 13,000 public companies in the U.S. ● Perhaps 3,000-4,000 of these get full benefit of being public ● More companies go private than public each year ● Difference between an IPO and a reverse merger? ● What’s a DPO? ● What can you do as a public entity that you can’t do as a private entity?

R EALIZE ● Y OUR ● D REAMS 16 Owner Motives Matter Possible values for PrivateCo: ●Buy/SellAsset Market Value$ 2.4 MM ●MBOInvestment Value$ 7.5 MM ●ESOPFair Market Value$ 9.2 MM ●RecapFinancial Market Value$12.0 MM ●AuctionSynergy Market Value$16.6 MM ●IPOPublic Value? Business Owners Choose a Transfer Value!

R EALIZE ● Y OUR ● D REAMS 17 Realize Your Dreams Once you realize wealth, you need to make it work for you