1. 1 Mergers & Acquisitions Whats it all about? Michael J. Kulmoski Jr., CPA CFO & CTO Lewis-Goetz & Company

2. Page 2 Ways to Grow Option #1: Option #1: Grow through ABL (Asset Based Lending) Grow through ABL (Asset Based Lending) Borrow against AR and Inventory; Borrow against AR and Inventory; Limited. Limited. Option #2: Option #2: Partner with Private Equity; Partner with Private Equity; Establish credit facilities with premiere lending institutions; Establish credit facilities with premiere lending institutions; Cash Flow LendCash Flow Lend Mezzanine debt; Mezzanine debt; Expands options, but have covenant compliance. Expands options, but have covenant compliance.

3. Page 3 Choosing a PE Partner Not all cash is the same shade of green; Not all cash is the same shade of green; Must pick the right partner: Must pick the right partner: Flexible; Flexible; Similarly minded (chemistry); Similarly minded (chemistry); Extensive contacts; Extensive contacts; Solid relationships with lenders; Solid relationships with lenders; Patient; Patient; Advisor vs. operator. Advisor vs. operator.

4. Page 4 Deal Flow Process – some milestone steps LOI – be certain to leave flexibility LOI – be certain to leave flexibility Valuation. Valuation. Due Diligence – will expand later Due Diligence – will expand later Synergies; Synergies; Can drive valuation; Can drive valuation; Can also assist with Proforma financial; Can also assist with Proforma financial; Which will drive funding (bank) ability;Which will drive funding (bank) ability; Be careful not to pay the seller for your hard work post closing. Be careful not to pay the seller for your hard work post closing. Funding; Funding; Lender Deck. Lender Deck. Integration plan – will expand later. Integration plan – will expand later.

5. Page 5 Due Diligence Process The DD team; The DD team; Standardize information request listings: Standardize information request listings: Financial; Financial; Legal. Legal. Quick assessment of financials: Quick assessment of financials: This should be swift and as early in the process as possible; This should be swift and as early in the process as possible; Drives purchase price. Drives purchase price. Further financial & legal DD will follow. Further financial & legal DD will follow.

6. Page 6 Large Deals vs. Small Deals Depends on your industry (fragmentation); There is a minimum amount of work: Financial; Legal. The size of target company drives the resources: Limitations; Advisors; Information Availability.

7. Page 7 Integration Plan Options Option #1 - Simply acquire and allow to conduct business as usual Option #1 - Simply acquire and allow to conduct business as usual Resulting Valuation – not as high in consolidated company; Resulting Valuation – not as high in consolidated company; Ability to draw against credit facility limited Ability to draw against credit facility limited Option #2 - Acquire and Integrate Option #2 - Acquire and Integrate Resulting Valuation – increased in the consolidated company; Resulting Valuation – increased in the consolidated company; Greater ability to draw on credit facility (stronger EBITDA against which to draw) – cash flow lend. Greater ability to draw on credit facility (stronger EBITDA against which to draw) – cash flow lend.

8. Page 8 Integration Plan Develop a detailed plan on the front end (get EITF 95-3 treatment); Develop a detailed plan on the front end (get EITF 95-3 treatment); Works best with a dedicated integration team (resources); Works best with a dedicated integration team (resources); Forthright Communication: Forthright Communication: Employees: Employees: Customers; Customers; Vendors; Vendors; Partners; Partners; Everyone. Everyone. Create a FAQ sheet(s). Create a FAQ sheet(s).

9. Page 9 Integration Plan, Continued Need to remain visible to acquired entity; Need to remain visible to acquired entity; Detailed schedules & timeline: Detailed schedules & timeline: IT (ERP System, Accounting, email, etc.); IT (ERP System, Accounting, email, etc.); Administrative functions (AP, AR, etc.); Administrative functions (AP, AR, etc.); Processes; Processes; Policies. Policies.

10. Page 10 Final Thoughts Question: Question: 2 + 2 = ?? 2 + 2 = ?? Hint: Hint: It can be greater than 4! It can be greater than 4! Answer: Answer: It is all up to you and your approach It is all up to you and your approach