aClient Name

Sub Head

Banker InfoBanker Title

MERGERS & ACQUISITIONS

BUSINESS VALUATION

CORPORATE FINANCE

MARKET INTELLIGENCE

Investment Bankers To The Middle Market

c Travel and Hospitality

Positioning Your Franchise Company for Capital or Sale

Mark Dayman, Managing DirectorThe McLean Group, LLC

January 26, 2011

Confidential and Proprietary

Need Early Focus of

Attention (“Ready, Aim,

Shoot”):

• What’s the objective? Are you seeking an exit?? Or are you looking for an expansion opportunity?? Or seeking core capital?

• What’s it worth?

• How can value be enhanced in the short run??

Positioning for Capital or Sale

2

Confidential and Proprietary

If you want to sell – each type of exit carries different value outcomes

1. Family transfers

– “Fair Market Value”

is the driver.

– Host of inter-family

issues to overcome.

The Objective – Sell or Expand??

3

Confidential and Proprietary

If you want to sell – each type of exit carries different value outcomes

The Objective – Sell or Expand??

4

2. Sell to third parties – Employees

3. Sell to third parties-Management

Confidential and Proprietary

If you want to sell – each type of exit carries different value outcomes

The Objective – Sell or Expand??

5

4. Sell to third parties – Working investors

5. Sell to third parties-Financial investors (Individuals, Small Groups, PEGs)

Confidential and Proprietary

If you want to sell – each type of exit carries different value outcomes

The Objective – Sell or Expand??

6

6. Sell to third parties – Strategic Buyers

Confidential and Proprietary

The Objective – Sell or Expand??

7

Middle Market Buyer Trends

Confidential and Proprietary

Recaps – Sell Some, Expand Some

The Objective – Alternatives

8

• Take some of the current investment off the table, provide new capital, take business to new level.

• Capital sources may require equity of 25-75%.

• Use new capital for expansion.

• Resell company in 3-5 years, everybody exits.

• Attractive to investors seeking high quality and stable management, proven product & market trends, can overcome barriers to growth.

Confidential and Proprietary

Core Capital

The Objective – Alternatives

9

• It is the most difficult capital to raise.

• AKA early stage, venture capital.

• Might want 25% +/- of equity with upside rewards.

• Common is tech, biomed/healthcare, Pharma.

• Other fields require more than simply potential monetary rewards – previous track record, aspirational investors with BIG EGOs.

Confidential and Proprietary

Value Drivers

The Objective – What’s It Worth?

10

• Earnings potential – frequently EBITDA

• Risk delineated in terms of multiples

• Terms of the deal

Confidential and Proprietary

Value Drivers

The Objective – What’s It Worth?

11

Earnings potential – frequently EBITDA

• Historic performance

Clean v. a mess

Normalized

• Projected performance

Documented and continuing trends?

New concepts and strategies

Confidential and Proprietary

Value Drivers

The Objective – What’s It Worth?

12

Risk

• Buyer’s/investor’s perception

• Market and buyer demands for returns

• Likelihood that expected performance can be achieved (versus alternative opportunities)

• Transparency – how easy is it for a buyer or capital source to see the value?

• Size matters.

• Industry matters.

Confidential and Proprietary

Value Drivers

The Objective – What’s It Worth?

13

Terms of the Deal

• Buyer’s and seller’s perceptions of “value” are normally balanced by the terms of the deal.

• Seller’s are normally forced to take paper back.

• Variances to balance:

1. Earnings - potential v. actual

2. Perceived risks

3. Skin in the deal

4. Other issues – taxes, credit, classifications

Confidential and Proprietary

How Can I Enhance Value??

The Objective – Make It Better

14

• Enhance EBITDA

1. Make it bigger and better and sustainable.

2. Clean up P&L and B/S.

3. Clean up the operations – customers, markets, products, distribution systems, etc.

4. Develop a strategic business plan and start implementing the action plan.

Confidential and Proprietary

How Can I Enhance Value??

The Objective – Make It Better

15

• Reduce perceived risks

1. Develop a strategic business plan and start implementing the action plan. Simplicity, focus, measurable results, scalability.

2. Create & enhance transparency. Make it easy for capital sources to see and understand your

business and where the value is.

3. Make yourself obsolete, especially in a sale.

4. Have a close team of advisors – lawyer, CPA, investment banker.

Confidential and Proprietary

Wrap-Up

16

• Decide what it is you want to accomplish? Stay and build? Sell now?

• If you seek core capital, you’ll need an especially robust compelling message.

• Enhance value

Build EBTIDA

Develop a business plan, implement it

Reduce perceived risk