1. Investor Briefing: Reaching Liquidity

2. 3/15/06 Ways an Investor Gets a Return on their Investment. Network of Business Angels & Investors Reaching Liquidity— Through Acquisition  DeFoor Services, Inc. Mergers & Acquisitions – Business Brokerage Exit Strategy Corporate Finance  CPA, Controller/CFO, Real Estate Licensee Greg DeFoor, CPA has been involved in Acquisitions in some manner for over 20 years Former Controller/CFO in private industry Started DeFoor Services in January, 2002

3. 3/15/06 Ways an Investor Gets a Return on their Investment. Network of Business Angels & Investors Reaching Liquidity— Through Acquisition  Two ways to reach liquidity Acquisition and public markets  Acquisition remains number one way Activity in acquisitions has increased There are more people and more money in the market  Types of acquirers Individuals, corporate acquirers and PEGs Does the owner stay as part of management Buy to keep or re-sell  Role of valuation…real and perceived The higher the transaction price, the higher the multiple Have realistic expectations

4. 3/15/06 Ways an Investor Gets a Return on their Investment. Network of Business Angels & Investors Reaching Liquidity— Through Acquisition  How process is handled….like buying a house? Selling a house is very public Selling a business is very confidential Internet, direct marketing, other methods  When do share holders receive payment Closing Seller financing Earnout

5. 3/15/06 Ways an Investor Gets a Return on their Investment. Network of Business Angels & Investors Reaching Liquidity— Through Acquisition  Asset vs. Stock Stock  Assumption of contingent liabilities  Easier to get done  Capital gain for seller Asset  Are there loan covenant restrictions?  Assignment of contracts  Step-up in basis  Tax attributes do not follow assets  Sec 1245/1250 depreciation recapture on installment sales in year of sale

6. 3/15/06 Ways an Investor Gets a Return on their Investment. Network of Business Angels & Investors Reaching Liquidity— Through Acquisition  Other things to look out for Price shoppers Tire kickers Bargain hunters No money  Wrap-up The acquisition market is strong for businesses with fair multiples and good financials The owner needs to shift focus from minimizing taxes to maximizing value The importance of well-maintained books and records cannot be over-emphasized