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1. Confidentiality is paramount. Describe how you would safeguard
confidentiality throughout the entire process, including the RFQ process.

In any transaction, maintaining confidentiality with respect to your customers, employees and competitors is challenging – on the one hand, a potential bidder requires information to make an intelligent decision, but on the other, disclosing such information increases the potential for a breach of confidentiality. Our approach to confidentiality stems from our experience both as advisors (both financial and legal), but also as principal buyers and sellers of businesses in which we have had to handle the same operating and management issues you will be facing.

First, as with many other firms, we utilize strict non-disclosure/confidentiality agreements to legally bind recipients of confidential information about your business, including the fact that your business is currently on the market for sale. In addition, unlike many confidentiality agreements, we require recipients or potential bidders to disclose by name the identity of each person within their organization who will be reviewing confidential information, and in what capacity those persons will be acting. Too often, a confidentiality agreement will simply apply to a company and its advisors, which leaves ample room for a recipient to disclose information to a variety of people. Our confidentiality agreement focuses potential bidders on the sensitive nature of your information, as well as acts as a limiter on the people to whom they will disclose such information (it has the added benefit of having a documented list of recipients should a breach of confidentiality occur). The fewer people that have access to or knowledge about your confidential information, the less likely that information will be leaked. Second, we spend a lot of time up front with you to define the attributes of an ideal buyer for your business. This time, combined with the time we spend qualifying potential bidders, means that our processes will naturally limit the number of people who have access to your confidential information, again limiting the odds of an unplanned disclosure. We strive to bring only qualified, serious bidders to the table to engage in any substantive dialogue with you, and as a result, we will protect your confidential information by limiting the number of people to whom such information is disclosed.

Third, in order to accurately assess a potential bidder’s interest, we will initially only disclose a one-page “teaser” document that is detailed enough to allow potential bidders to make a reasonable assessment of their level of interest, but generic enough that it limits the chances someone will determine the description relates to your company. Only after we have qualified a potential bidder for the next round of discussions (which will involve discussion with you) will we disclose additional, more detailed information about your company.

Finally, we develop a communications plan with you that will address how you and your senior management should answer any questions you might receive, whether they come from employees, customers, suppliers or competitors. Having been sellers of businesses in the past, and having had to deal with questions from various different constituencies, we know how important it is to have a well considered communications plan that addresses different scenarios that may or may not occur throughout the sale process. As part of our early engagement with you, we help you develop that plan such that you are not surprised, your entire team is consistent with its messaging, and you reduce the risk of any damage that may occur to your business as a result of any ongoing discussions related to an acquisition of your business.

2. Provide General Information about your firm and services it provides – include any brochures, website addresses, or other information you deem appropriate. Be specific to our interests.

CapitalValue combines accredited valuation expertise with significant merger & acquisition and operations expertise. The three principals of CapitalValue (David Tolson, Chris Younger, and Mark Luecke) all have significant experience in valuation and representation. In addition, Chris is a Harvard-educated (non-practicing) lawyer and Mark is a non-practicing Certified Public Accountant. This means that we will provide the highest level of expertise (and experience) for your transaction. In addition, Chris was the President and Chief Operating Officer, and Mark headed up carrier services and regional operations, for Expanets, a large, national communications services firm that engineered, designed and installed communications systems across the country. As part of their involvement with Expanets, they along with their teams completed both the acquisition of 27 businesses, as well as the ultimate sale of Expanets to its main vendor, Avaya. As a result of this experience, we understand how critical people are to your business, how important confidentiality is, and what the key value drivers for your business likely are for potential buyers.

As outlined more completely in our brochures (attached as Exhibit 1), CapitalValue provides a level of representation, expertise and advice that is far above and beyond what is typically available to owners of privately held businesses as they contemplate selling their businesses. We pride ourselves on being different from the standard business broker or investment bank – we take on only a few engagements every year through referrals from professionals and other business owners. We have the ability and resources to provide business owners with service that will exceed your every expectation by maximizing value while minimizing the disruption in your personal and professional life. We’ve included both our company brochure and a brochure that specifically highlights the differences you will find in our representation services. CapitalValue is a young, aggressive firm, although the experience of our three principals would compare to any firm’s experience. In short, because we are small and aggressive, your transaction takes on supreme importance to us, and you will receive the highest level of service and commitment to getting the best value for your transaction.

3. Explain CapitalValue’s advantages over industry experts.

A Comprehensive, Individualized Valuation Not Governed by Industry “Rules of Thumb”. CapitalValue uses all approaches and methods to give you a comprehensive, accurate valuation of your business. Unlike many industry experts who rely on rules of thumb and valuation techniques based on formulaic approaches, we examine the value of your business from all angles that a prospective buyer may use, not just the ones most convenient or fitting of the industry. The result is that CapitalValue delivers the most accurate and reliable valuation available, completed by an accredited expert. In particular, CapitalValue uses a well-defined, exhaustive process by which we uncover the intangibles in your business. By doing so, we develop a detailed understanding of the key elements of your business for which a strategic buyer may be willing to pay a premium. In some instances, strategic buyers have come from outside of an industry and made significant acquisitions in order to enter the market. We can identify strategic buyers both inside and outside of your industry group.

A Full Review of All Potential Deal Structures, Not Limited By Industry “Standards”. Our approach to valuation is similar to our approach to structuring a deal. If a rule of thumb or formulaic approach is used, the deal structure also may fall into a rule of thumb or formulaic structure. In essence, your business may be positioned and the deal structured in the same manner as other transactions in your industry have been completed, which may not always be helpful or advantageous to you. The unique characteristics and significant points of leverage in your particular business may be ignored, reducing the premium a strategic buyer may pay for your business. Because of our understanding of what drives value in businesses, your business will be positioned and sold for its unique attributes, and the strategic buyer will reward you for it. Vigorous Client Advocacy, Unclouded by Pre-Existing Industry Relationships. While some industry experts have personal relationships with prospective buyers of your business, they may also have ongoing business relationships with these buyers. Many industry experts provide consulting services to the same list of buyers they intend to call as potential buyers for your business (and any other businesses they may represent now and in the future). Specifically, some industry experts seek to provide post-closing integration consulting services…for the buyer. As a result, these industry experts may not be willing to engage in tough negotiations on your behalf because they are reluctant to ruffle the feathers of the same buyers (and clients) to whom they want to sell in the future. When strong advocacy is exactly what your deal requires, this reluctance can cost you millions. For this reason, you should seriously consider hiring experts in negotiation and orchestrating a sale, not industry experts. Industries do differ in various ways but in combination with your industry experience and knowledge, CapitalValue will uncover the right strategic buyer, whether inside or outside your industry. The question is…where do your advisors’ loyalties lie - with you, or with their existing and future base of clients? We are prepared to do battle with one goal in mind – meeting your objectives. In short, CapitalValue will be a zealous advocate for your interests and your interests only.

4. Describe your firm’s general philosophy, values, and approach to representation services. Be specific to client communication.

Our general philosophy on representation is simple: through our defined processes, CapitalValue seeks to attain for you the best possible value with the least possible disruption to your business. The difference, from our client’s perspective, is in the level and type of communication between our team and the client. With principals experienced in valuation, law, accounting, negotiations, mergers & acquisitions and operations, we can highlight what issues are worth fighting over versus those that are worth accepting. We have the acumen to effectively advocate for your interests throughout the entire process. One of the unique differentiators that we bring to the processes is our ability to work through the entire transaction with you. Many representation firms (whether they be investment banks or otherwise) will take a seller to the point of the letter of intent stage, but then sit back and wait for due diligence to be conducted with little or no interaction from the advisors. CapitalValue, on the other hand, continues to work with you to gather and present the additional due diligence materials that we haven’t already collected and manage the communication process with the buyer so you don’t have to. We continually work with you until the deal closes. In addition, we believe that to maximize value, we must present a highly professional image of your business. We do this by controlling (in a professional presentation) the information that we deliver to the potential buyer. CapitalValue believes that every piece of communication (in verbal or written form) delivered to prospective strategic buyers is a form of negotiation; therefore, we take the utmost care in presenting information professionally to impress upon the buyer that your business is extremely valuable.

By design, CapitalValue handles only a limited number of transactions per year. We do this in order to provide our clients with the highest level of client service available in the market today. Our clients understand exactly where we are in the process as our process requires continuous feedback and interaction from our client. This ensures that we are accurately delivering the right information to only approved prospective buyers. With this constant communication and feedback loop, CapitalValue has a deep understanding of the client’s business and is accurately representing it in the market. Because our principals have significant operational and merger & acquisition experience, we understand that a transaction is about more than just the numbers. If it were that simple, you wouldn’t need experts. Our extensive experience tells us that transactional value is actually made up of three key components. Ignoring any part of this equation results in a transaction that does not meet expectations. In sum, our approach to achieving maximum value for you can be summarized as:

Maximum Value = Financial Valuation + Intangibles + Deal Structure

• Financial Valuation. Because of our experience in completing over 150 valuations in over 20 different industries, we understand value. Our valuation process is second to none as we use all three methods of business valuation to assess the value of your business and put together a solid stream of logic to back up our conclusions.
  
  Benefit for our clients: The most accurate valuation available. We don’t overvalue nor do we undervalue. Our extensive comparable transaction analysis gives us an extremely accurate reading as to what price the market is willing to bear for such a business, and allows us to advocate effectively for you as the seller.
  
  
• Intangibles. Very few (if any) of our competitors look at value as we do. Value is more than the financials; it is understanding your business, your market, your competitors, and the underlying value drivers (intangibles) of your business. We have a proprietary process that uncovers the value drivers behind the intangibles in your business. It is generally in this portion of the equation that strategic buyers will pay premiums for businesses. With proper discovery and positioning of these value drivers, strategic buyers begin to understand what makes your business unique and worth top dollar.
  
  Benefit for our clients: Increased value by using these intangibles (value drivers) as negotiating points. These are the value drivers that strategic buyers desire when they make an acquisition. We position these with each strategic buyer so that the strategic buyer’s perspective of value is maximized without having to negotiate.
  
  
• Deal Structure. This is an area that is often overlooked yet it is as critical to the process as the valuation and assessment of intangibles. We help you navigate through the business decisions (and their subsequent impact on the sales price and value) of issues such as non-compete agreements, stock restrictions, nonsolicitation agreements, earn-outs, notes, warrants, and employment agreements to name just a few.
  
  Benefit for our clients: You receive advice from business advisors using our legal, accounting, and valuation background to help you structure the deal to maximize value.

Many of our competitors are proficient in one or maybe two of these areas. We believe that focusing on all three components ensures that we structure a transaction that exceeds your expectations. Finally, we are with you every step of the way, through every part of the process, advising and negotiating where necessary. CapitalValue’s involvement throughout the entire process is unique. Until the deal closes, our work is not complete. At CapitalValue, we know that selling a business is one of the most challenging and, at times, emotionally taxing, events a business owner will undertake. Having expert representation and counsel that can confidentially represent your company in the market will make the process easier to manage for a business owner and will make the transaction more successful. Whether it is gaining a thorough understanding of your business and what makes it unique and valuable, preparing a high-quality presentation of your business, reviewing your financials and presenting them in a way that buyers will understand and accept, qualifying buyers to ensure they don’t waste any of your valuable time, assisting in the negotiations to creatively put together a transaction that works for everyone, or simply being a sounding board as you progress through the sale process, CapitalValue will exceed your expectations.

5. Describe the process by which you intend to market our business.

While our firm has access to a large network and multiple lists of potential financial acquirers, our extensive mergers & acquisitions experience on both sides of a transaction has led us to develop a proprietary process that identifies those acquirers that will place a higher value on your business. As described below, we will begin the process of marketing your business with the MarketProfiler™ to gain a thorough understanding of your market and identify potential strategic acquirers. This process will provide an opportunity for you to highlight prospective acquirers in your industry as well. The output of the MarketProfiler™ will be a strategic overview of your market, as well as an initial list of potential strategic acquirers. We will review and prioritize this list with you and build a communications plan that will present the business to the most likely strategic acquirers while preserving confidentiality. This communications plan will include a buyer profile process and may also include a one-page overview of the business, a formal letter and follow-up telephone or face-to-face communications by members of our team. The final communications plan will be approved by you prior to any actions in the market. The buyer profile process is critical to determining the initial interest level and ability to complete a transaction according to your financial and nonfinancial requirements. As the buyer profile process implies, we will systematically conduct our interview process on a prioritized basis. Our experience indicates that an acquirer willing to pay the highest value for your business will be identified through this process while minimizing the disruption inherent in every acquisition process, internally as well as externally in the market place, by not widely marketing your business over the Internet or to a list of potential financial acquirers that have not been well-qualified.

6. Describe the process by which you will identify and target potential strategic buyers for our business.

CapitalValue’s MarketProfiler™ process is a proprietary process that has been developed by our team to identify and target potential strategic acquirers based on extensive experience on both sides of the merger and acquisition transaction. This process will utilize a number of market research databases, industry research, client interactions and other techniques that will highlight recent transactions or other activity of your competitors, suppliers, large customers, partners, and other players in your industry and other closely related industries. Upon completion of this process, we will provide a strategic overview of your market, as well as an initial list of potential strategic acquirers with the highest likelihood of paying the highest value for your business. We will review and prioritize this list with you and build a communications plan that will present your business to the most likely strategic acquirers while preserving confidentiality. As described, this communications plan will include a buyer profile process and may also include a one-page overview of the business, a formal letter and follow-up telephone or face-to-face communications by members of our team. The final communications plan will be approved by you prior to any actions in the market. One unique advantage our team provides is an ability to gain the confidence of a potential strategic acquirer quickly given our level of diversified business experience. Finally, the buyer profile process will determine the initial interest level and ability of the prospective acquirer to complete a transaction according to your financial and nonfinancial requirements.

7. Describe the overall process by which you intend to manage the acquisition including a proposed timeline from engagement to projected close date that details each significant step in the acquisition process.

Our process for representation is built on a detailed, three-phase process, a standard timeline for which is included below.

First, we utilize our proprietary OwnerAnalytics™ process to identify, understand and quantify your needs as sellers, determine the market value of your business using industry-certified personnel, and evaluate the strengths and weaknesses that enhance or detract from the value of your business. This process allows CapitalValue and you to gain a thorough understanding of how a sale of your business may or may not meet your needs, establishes a baseline valuation for your business that we can use to evaluate offers, and uncovers any areas of your business that may need attention prior to marketing your business. This also sets up the information required to present a detailed, accurate and compelling picture of your business to potential bidders.

Secondly we deploy our second process called the MarketProfiler™, to gain a thorough understanding of your market – customers, suppliers, competitors, current acquisition activity, etc. As part of our MarketProfiler™, we uncover who might be potential strategic buyers for your business – buyers that have some unique needs for different elements of your business that would cause them to pay more than fair market value for your business. We believe this is the most critical step of our process insofar as it allows us to identify the limited audience to whom your company should be presented (it has the added advantage of limiting the number of people who see information about your business). Unlike many firms, our approach is not to rely solely on casting a wide net on the Internet or otherwise to try to attract buyers (we certainly have the tools and contacts to do so, but we have found that it is not time well spent). Our belief is that in most cases, the best buyer for your business is not on any representation firm’s mailing list – it is a buyer that may not even realize they have an interest in your company until they are presented with a compelling description of your business that specifically addresses some of the advantages they may uniquely find appealing. In other cases, there might be specific buyers that are active in your industry, all of whom our MarketProfiler™ process will uncover.

Finally, once we have identified and qualified a limited number of potential bidders, we will discretely contact them, soliciting interest levels using our ValueMaximizer™ process. From these contacts, we can then determine which potential bidders to include in a controlled auction environment – having this pool of bidders enhances your opportunity to maximize the value of your business, and accelerates the sale process. Having completed OwnerAnalyticss, we will be able to compile and professionally present appropriate due diligence materials (working with your legal team of course) to selected bidders to move the process along efficiently and effectively. Having been buyers of businesses in the past, we understand how important first impressions are, and that buyers appreciate well-organized, accurate and complete information, all of which our processes enable. From this point on, drawing on our experience managing and negotiating dozens of transactions, we work with your team of advisors (legal, financial and otherwise) to help find creative solutions to the challenges that invariably come up, and keep the process moving along toward a rapid closure. Our job is not finished until you have completed a successful transaction that meets your needs, and as such, we will continue to be actively involved throughout the acquisition process until a deal is closed.

Proposed Project Timeline for Representation Services

CapitalValue Advisors, LLC is a registered broker/dealer and member of the Financial Industry Regulatory Authority (FINRA)

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P: 720.733.0400 • Fax: 720.528.7877 • E: info@capitalvalue.net
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