1. M&A International™ – the world's leading M&A alliance Common Errors in Business Valuation and How to Avoid Them April 8, 2013 Howard E. Johnson, MBA, FCPA, FCA, FCMA, CBV, CPA, CFA, ASA, CF, C.Dir Veracap M&A International Inc. 1

2. M&A International™ – the world's leading M&A alliance About Veracap M&A International Inc. Veracap provides advice and transaction support to business owners and executives relating to acquisitions, divestitures, financing and shareholder value initiatives. As a member of M&A International, Veracap forms part of the world’s leading organization of M&A advisors, with over 600 professionals in 40 countries around the world. Over the past 5 years, the members of M&A International have completed 1400 transactions worth US$75 billion. Veracap is an affiliate of Campbell Valuation Partners Limited (CVPL), Canada’s longest established independent business valuation firm. CVPL has acted for mid-sized and large public and private corporations, as well as regulatory authorities and the Canada Revenue Agency. www.veracap.com 2

3. M&A International™ – the world's leading M&A alliance Speaker Howard E. Johnson MBA, FCPA, FCA, FCMA, CBV, CPA, CFA, ASA, C.Dir Managing Director, Veracap M&A International Inc. (416) 597-4500; hjohnson@veracap.com Howard is a Managing Director of Veracap M&A International and its affiliate, Campbell Valuation Partners Limited. He advises business owners and executives on business valuation, acquisitions, divestitures, financing and shareholder value initiatives. Howard is the author of six books on the subjects of business valuation and corporate finance, and has acted as an expert witness on valuation matters before the courts. 3

4. M&A International™ – the world's leading M&A alliance Disclaimer This material is for educational purposes only. It deals with technical matters which have broad application and may not be applicable to a particular set of circumstances and facts. As well, the course material and references contained therein reflect laws and practices which are subject to change. For these reasons, the course material should not be relied upon as a substitute for specialized advice in connection with any particular matter. Although the course material has been carefully prepared, the author does not accept any legal responsibility for its contents or for any consequences arising from its use. © Howard E. Johnson, 2013 4

5. M&A International™ – the world's leading M&A alliance Primary Business Valuation Issues Technical errors Unreasonable assumptions Internal inconsistency Inadequate valuation report 5

6. M&A International™ – the world's leading M&A alliance Technical Errors Simple math errors Normalization adjustments Missing the balance sheet The hidden value of real estate Cyclicality considerations Foreign exchange 6

7. M&A International™ – the world's leading M&A alliance Valuation Approach Multiple of EBITDA Discounted cash flow Use of public company multiples Reliance on industry transactions Rules of thumb Reliance on asset values 7

8. M&A International™ – the world's leading M&A alliance Rates of Return / valuation multiples Pretax vs. after-tax Inclusion or exclusion of inflation Type of return (WACC, ROE, etc.) Double counting of risks Financial leverage considerations Long term growth rates 8

9. M&A International™ – the world's leading M&A alliance Minority Discounts Highly subjective Need to know the starting point Liquidity issues Control / influence issues Avoid double-counting Shareholder agreement is key 9

10. M&A International™ – the world's leading M&A alliance Unreasonable Assumptions Industry conditions / forecasts Financial projections Growth rates vs. market Profit levels vs. market Capital expenditures Working capital requirements 10

11. M&A International™ – the world's leading M&A alliance Internal Inconsistency Within financial projections Revenues vs. costs Capacity limitations Between projections and rates of return Between facts and projections Between facts and rates of return Previous transactions 11

12. M&A International™ – the world's leading M&A alliance Valuation Report Problems Calculation vs. Estimate vs. Comprehensive Independence of expert Qualifications of expert Inadequate business and industry analysis Incomplete / incorrect facts Lack of third party data / contacts Scope limitations and qualifications 12

13. M&A International™ – the world's leading M&A alliance More Valuation Report Problems Reasons underlying historical results Changing business / industry / economic conditions No sensitivity analysis Unrealistic conclusions 13

14. M&A International™ – the world's leading M&A alliance Contentious Valuation Issues Definition of fair market value Reliance on hindsight Valuation date determination Minority discounts Use of critique reports 14

15. M&A International™ – the world's leading M&A alliance Beware Anything offshore Foreign entities Donation schemes Acquisitions for tax losses Major reorganizations Large transactions 15

16. M&A International™ – the world's leading M&A alliance Protective Measures Contemporaneous valuation Approach – verbal then written Maintain privilege Do not bias the expert Ensure independence in both fact & appearance 16

17. M&A International™ – the world's leading M&A alliance Visit www.Veracap.com for a variety of articles, publications and other resources that may be of usewww.Veracap.com Resources