1. Hank Nelson Monadnock Advisors LLC. Mergers & Acquisitions Overview Market Overview – M & A Process Maximizing Value

2. M & A Market Overview 2010 Global M&A volume increased 25% $2 Trillion U.S. M&A volume grew 17% Aggregate number of transactions increased 34% Record number of transactions Middle market deals up 59%, volume 72% Number of deals under $100M jumped 58% Enterprise Value/EBITDA 8.6 compared to 7.6 Acceleration 2H FY10

3. M & A Market Overview 2010 Drivers: Equity market gains Favorable credit markets Cash/capital stockpiles driving corporations and financial sponsorship activity Moderate economic recovery – Global GDP 4% Returned focus on growth vs operational efficiencies

4. U.S. M & A Activity Source: Software Equity Group 2010

5. U.S. Middle Market M & A Activity Source: Baird M&A Analysis 2011

6. M & A Definitions EV – Enterprise Value EBITDA – Earnings Before Interest Taxes Depreciation & Amortization M & A Measurements EV/Revenues – Multiple of Revenues 1.0x EV/EBITDA – Multiple of EBITDA 9.0x Comparables Multiples for public companies similar sector – size Announced transactions Discounted for size, lack of liquidity, concentration

7. U.S. Technology Sector M&A Activity Source: Baird M&A Analysis 2011

8. M & A Overview 2011 General outlook - continued growth from 2H FY10 R. Blair & Co. “Dollar volumes would be consistent with levels achieved in 2005 record year of the previous M&A recovery.” Pepperdine Survey IB’s – Private Sale Increase 51% Significant Increase 21% Drivers: Strategic buyers flush with cash $2T in U.S. Co. Modest economic growth projected M & A perceived as best way for growth Financial sponsors (PE) opportunity Smaller companies- Make vs. Buy Credit markets in play Timing….

9. M & A Process Role of the M & A Advisor Quarterback of Advisory Team Legal, Tax, Accounting, Wealth Mgmt Operations Consultant Strategy Advisor Preparation for Sale Marketer of Business Deal Technician Financial Advisor

10. M & A Process M & A Advisor: Cultivate relationship(s) as part of your company development process Free advice – market knowledge, timing, business model Forces outward discussion and viewpoint Excellent preparation for first time seller Ability to respond immediately to any inquiries

11. M & A Process Marketing Marketing Document Prep Business Review Negotiations Screening and Planning Transactions Business Model Historical Financials Recast Financials Projections Offering Memorandum Executive Summary Management Presentation Marketing Plan Industry Research Selection Targets Determine Goals and Objectives Company Review : Strategic, Operational, Financial, Competitive Bidding Select Finalist Structure of Transaction Asset vs Stock Indemnification Reps & Warranties Purchase Agreement Identify Weaknesses Improve Operations Develop a Buyers View Data Room Confidentiality Agreement Estate Planning Execute Agreement Funds Transfer Letter of Intent Final Due Diligence Term Sheet Taxes Contact and CA Meetings Due Diligence Establish Marketability Realistic Valuation Review Process Engagement 6 -12 Month Process

12. M & A Process Process Control Change Point 2 Competitive Bidding Offering Memorandum Seller 3 Executive Summary 1 Closing 4 7 Letter of Intent Preparation - NO Surprises Buyer 6 5 Due Diligence P&S Agreement Time is the Enemy 6 -12 Months Process

13. M & A Process Degradation of Value: Lack of a business plan or projections Due diligence preparation – surprises Intellectual property - protection or documentation Missing projections - timelines Lose focus on business Customer references Employees

14. Maximize Value - Range of Values Synergy Value Sale to an Outside Buyer - company Recapitalization –Angel, VC, PE Investment Value Management Buyout Investment Value (structured) Employee Stock Ownership Plans Fair market Value Gifting Fair market Value

15. M & A Maximizing Value Primary types of buyers: Strategic: Competition – Vendors Desire specific aspect – technology –customer base New market entrant, leverage internal resource (marketing sales/distribution) Financial: Angel, VC, Private Equity, Individuals Focus on cash flow from business Business base from which to grow – platform Theoretically paying for the present value of the future cash flows – usually applied by applying multiple price periods Hybrid: Add-ons, Consolidations, Rollups, Product Market share but with cash flow that can be enhanced through improved relationships/distribution

16. Risk vs. Return by Investor Class Risk Angel Investor VC Investor PE Investor Strategic Buyer Multiple

17. Risk Assessment = EBITDA Multiple Private Business – Growing -Mature 100 12% 100 17% = 5.9x = 8.3x Higher Risk Assessment by buyer will generate a lower EBITDA Multiple Private Business – Mid Stage/SMB 100 35% 100 25% = 2.9x = 4.0x

18. Maximizing Value - Valuation Drivers Investment Risk Investment Consideration Cyclical Capital Intensive Commodity Market Share Driven New Competition Threat Management Selling out IP, Owners, Competition Stable and Predictable High Return on Capital Brand Name Growing Industry Recurring Revenue Alignment of Interest Technology

19. M & A - Maximizing Value Differentiators: Company vision Technology – product Customer base Employees Business model Financial performance Stability – (ability to sell future) Strategic relationships (gateway)

20. M & A Maximizing Value Market Reality for the Entrepreneur: Companies no longer look at one opportunity to satisfy needs, but evaluate, compare, assigning weighted value and risk Large companies are presented hundreds or more opportunities a month for 5- 15 deals a year Need to differentiate Market is usually the determinant of time to sell

21. M & A M & A is a process not an event Hank Nelson Monadnock Advisors LLC. hnelson@monadnockadvisors.net www.monadnockadvisors.net