70% of all mall and mid-sized owners who are thinking of selling their business and need to know how to prepare and follow-through the right way to successfully value their business.

1. The Art of PRESENTERS:
Buying & Selling
TOM MARX
CEO AND CO-FOUNDER
a Business PAUL COOPERSTEIN
PRESIDENT & CO-FOUNDER
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
ACOFAS and SSA- October 12, 2011

2. WHO WE ARE
Advisors with over 25 years’ experience in the
Automotive, Heavy Duty, and Commercial Aftermarket
Brokerage: Equity and debt
Consulting services
Buy-Sell-Merge financing
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
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3. MARX GROUP ADVISORS
TOM MARX DAVE BARBEAU
• Business growth & • Parts distributor &
marketing focus aftermarket executive
• 25+ years industry • Industry management
experience consultant
PAUL COOPERSTEIN CHRISTINE LEMAy
• Venture capitalist &
investment banker • Business development
• Business lawyer & manager
mediation specialist • International specialist
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
ACOFAS and SSA- October 12, 2011 3

4. MORE THAN JUST MEMBERS…
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
ACOFAS and SSA- October 12, 2011 4

5. 1. Preserve your life’s work
TODAY WE 2. Understand your exit strategies
WILL COVER:
3. Current state of the M&A landscape
4. Factors for considering selling / buying
5. When do you know it is time to sell?
6. Typical steps in the buy/sell process
7. Deal structures
8. Valuation methods
9. Getting paid
10. Why hire an intermediary?
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
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6. PRESERVE YOUR
LIFE’S WORK ―Most of myam getting readythe
business. I
net worth is in
to
retire and want to sell... Where do
I start?‖
- Business Owner
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
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7. TIMELESS QUESTIONS
• Will my business survive me?
• How do I get my equity out and gain liquidity when I want to?
• How can I get a fair price when I sell, how do I value the
business?
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
ACOFAS and SSA- October 12, 2011 7

8. IF A CATASTROPHE HAPPENED TODAY,
ARE YOUR DUCKS LINED UP?
• Is my succession plan in place both practically and legally? Could
someone take my place tomorrow?
• If not:
– Company is at risk on all fronts
– Key staff is at risk professionally
– Uncertainty about direction/leadership can cause attrition
– Your family may not be taken care of
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
ACOFAS and SSA- October 12, 2011 8

9. UNDERSTAND YOUR SHORT,
MID AND LONG TERM GOALS
AND YOUR OPTIONS FOR
EXIT STRATEGIES
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
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10. 70% OF ALL SMALL AND MIDSIZED
BUSINESSES DON’T SELL AFTER THEY
ARE PUT ON THE MARKET
Selling a business is not like selling a piece of
real estate or any other asset
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
ACOFAS and SSA- October 12, 2011 10

11. CURRENT • M&A activity increased starting
Q4 2010
STATE OF THE • Transactions are being hampered by
low valuations, tight fisted banks
M&A and cautious buyers
• As competition for acquisitions
LANDSCAPE increases, prices will rise
• We live in times of great uncertainty
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
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12. KEY FACTORS FOR CONSIDERING A
TRANSACTION
FOR BUYERS: FOR SELLERS:
• Expand geographic reach • Freedom
• Enhance revenues, add critical • Financial challenges
mass • Disagreements between partners
• Gain new customers, suppliers, or family members
management, technology • Unforeseen events (illness,
• Improve operating margins accident, death, natural disaster)
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
ACOFAS and SSA- October 12, 2011 12

13. WHAT ARE THE TYPICAL STEPS IN
BUYING/SELLING PROCESS:
STEPS IN BUYING: STEPS IN SELLING:
• Evaluation of Transactional • Pre-Deal Preparation
Assumptions/Marketplace • Confidentiality Agreements
Assessment • Identify Buyers
• Financing/equity partners • Letter of Intent
• Target Selection • Definitive Agreement
• Letter of Intent • Due Diligence
• Definitive Agreement • Close
• Due Diligence • Post Close Execution
• Close and Integration
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
ACOFAS and SSA- October 12, 2011 13

14. SELLERS
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
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15. WHEN DO • You are tired of the hassles – no
more fun
YOU KNOW IT • You want to do something else in life
• Nostalgia – ―It ain’t like it used
IS TIME TO to be‖
• You aren’t sleeping at night
SELL? • You don’t want to talk with your
spouse – or even your dog!
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
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16. WHAT DO YOU • Keep making profit
NEED TO DO • Maintain adequate inventory,
fill rates and margins
DURING THE • Retain key people
• Keep customers happy
SALES PROCESS
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
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17. TYPICAL DEAL
STRUCTURES
Joint
Mergers Acquisitions
Ventures
Management Going Public
Going
Buy-Out Private
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
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18. • 100% paid at closing
TERMS OF • Seller Financing
Earn-out based on multiples of earnings
SALE
•
• Earn-out based on revenues
• Hold-backs
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
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19. HOW TO • Keep revenues & profits growing
• Have credible successor management
INCREASE THE • Have a broad customer base
PRICE OF YOUR
• Pay attention to your balance sheet
– Quality of assets, inventory, old
BUSINESS
equipment, cores, level of debt,
working capital reserve
• Other strategic assets (real estate,
life insurance policies etc.)
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
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20. PLAN AHEAD
Ideally, begin to prepare at least 3 years before
you want to cash out
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
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21. SELLING: OPTIONS
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
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22. #1: SALE TO Valuation is often book value and
COMPANY goodwill to founder via premium
or deferred compensation
MANAGEMENT
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
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23. #2: PASSING
• Valuation is more complex
DOWN TO • Estate and gift tax considerations
FAMILY significantly impact these
transactions
MEMBER TO
RUN
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
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24. #3: SALE TO • Valuation is determined by the
marketplace or the buyer
PRIVATELY HELD • Seller’s representatives can
COMPANY and should influence buyer’s
valuation
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
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25. #4: SALE TO • Importance of some valuation
components will vary between
PUBLICLY HELD publicly-held buyers and
privately held buyers
COMPANY • Majority of components will be
important to both groups
• Due diligence and discovery
even more critical
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
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26. WHAT IS YOUR COMPANY
REALLY WORTH?
• Conflicting concepts
– Value to buyer & seller
– Sale to company management
– Passing down to family member
– Sale to privately or publicly held company
– Book value
– Industry standards, benchmarks, trends
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
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27. WHAT DOES
• Looks at brighter future and
THE SELLER diminishes past issues, including
those caused by The Great
CONSIDER Recession
WHEN VALUING • Promotes strengths for higher
price
THE BUSINESS?
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
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28. VALUATION METRICS
• Revenue & operating trends: Past/Current/Projected
• Strength of balance sheet
• Amount of long term debt
Assumed Debt Decrease in Purchase Price
• Cash flow (EBITDA)/interest expense ratio
Slow Less More
Pay Cash Debt
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
ACOFAS and SSA- October 12, 2011 28

29. VALUATION COMPONENTS THAT ARE
IMPORTANT TO PUBLIC BUYERS
Operating Buyer Wants
Earnings to Avoid
Margin Dilution
The larger the seller is in
Prediction Public Market
Avoids Erratic
relation to the buyer, the
of Earnings Performance more important these
Large components are.
Cuts Earning
Amounts of Per Share
Goodwill
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
ACOFAS and SSA- October 12, 2011 29

30. DETERMINING THE VALUATION
• Recast your P&L
• Operating earnings averaged over a period of years x a multiple
• Consistency in earnings (margin & growth) = fewer years needed
• Typical average is prior 3 years
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
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31. DETERMINING THE MULTIPLE
• Strong revenue & profit growth = higher multiple
• Above average margins= higher multiple
• Strong buyer marketplace = higher multiple
• Valuable assets = higher marketplace
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
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32. POTENTIAL • Long term debt
• High level of goodwill compared to
FACTORS THAT assets and net income
• High percentage of aged receivables
REDUCE THE • Dominance of a few customers
MULTIPLE • Lower operating margin than that of
buyers
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
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33. EARN OUT OPTIONS:
GETTING PAID
© 2011Group Advisors Advisors – Succession Planning For Family Businesses in the Aftermarket
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34. • Typically 30-50% paid at closing in
BASED ON stock or cash
• Additional payments over 2 – 5 years
MULTIPLE OF based on meeting profit targets
• Sometimes a kicker for revenue growth
EARNINGS • Sometimes a claw-back if key client or
metric is lost or missed or if AR is
uncollectible
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
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35. GETTING PAID: • Management Buyout
• ESOP – will be covered in
OTHER OPTIONS another presentation
FOR OWNERS
• Mezzanine/Equity Partner
• Deferred Compensation
Payment
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
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36. • Mezzanine financing is a
MEZZANINE/ combination of debt and equity
financing that is often used for
EQUITY expansions
• Equity partners may be a valid
PARTNER interim or long term strategy
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
ACOFAS and SSA- October 12, 2011 36

37. • Company buys back stock – resells
DEFERRED to management
• Payout over time – 5 to 10 years
COMPENSATION • Secured by life insurance – if
something happens to principals
PAYMENT • Avoid bank borrowing – hopefully,
financed by company cash flow
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
ACOFAS and SSA- October 12, 2011 37

38. CASHING IN •
•
Stay on in some fashion (if you choose)
Employee
DOES NOT • Consultant
ALWAYS MEAN • Run the business for a defined period of
time
SELLING OUT • Grow the business with someone else’s
investment
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
ACOFAS and SSA- October 12, 2011 38

39. BUYER
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
ACOFAS and SSA- October 12, 2011 39

40. • Take out a competitor
BUYERS CAN • Take out low price leader
GROW • Expand into regions that allow you
to grow your business
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
ACOFAS and SSA- October 12, 2011 40

41. WHAT DOES Looksaat the same financial statements
from buyer’s perspective
THE BUYER • Trailing profit and loss to
determine trends
CONSIDER • Weaknesses so they can present
lower offer
WHEN VALUING • Wonders about the true value of
inventory and collectability of
THE BUSINESS? receivables
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
ACOFAS and SSA- October 12, 2011 41

42. WHAT OTHER •
•
Loss of a key customer
Loss of key employees
CONCERNS KEEP • Hidden legal or accounting traps
• If real estate is included,
BUYERS UP AT environmental or structural issues
• Will the seller go into competition
NIGHT? (hence non-compete clauses
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
ACOFAS and SSA- October 12, 2011 42

43. WHAT OTHER • Degradation of sales and/or profits
during the acquisition process
CONCERNS • Changes in the marketplace,
KEEP BUYERS •
competition or the economy
Losing the competitive edge if word
UP AT NIGHT? gets out
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
ACOFAS and SSA- October 12, 2011 43

44. • Get all skeletons out of the closet—
REDUCING THE eventually they will be discovered anyway
• Full disclosure of all positives and
STRESS OF THE negatives
• Timely review and response
TRANSACTION • Carefully think through all responses so
they are complete and accurate
• Have an intermediary do the heavy lifting
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
ACOFAS and SSA- October 12, 2011 44

45. WHEN DO YOU KNOW THE DEAL
IS NOT GOING WELL
• LONG delays in response
• Every deal results in a new detail
• When every paragraph of the LOI ends with ―BUT‖
• When the legal bills are double and triple what you were originally
estimated
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
ACOFAS and SSA- October 12, 2011 45

46. WHEN DO YOU KNOW THE DEAL
IS GOING WELL
When the deal closes and money is transferred!
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
ACOFAS and SSA- October 12, 2011 46

47. WHY HIRE AN INTERMEDIARY OR A
SUCCESSION PLANNING EXPERT
“Only an idiot would sell his own deal.”
“I don’t do my own dental work.”
• Having someone else find prospects and negotiate the deal
reduces emotions and usually results in higher sell price
• Focus on what you do best: running your business
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
ACOFAS and SSA- October 12, 2011 47

48. WHAT TO LOOK FOR WHEN HIRING
A BROKER OR M&A CONSULTANT
• Knows Your Industry
• Experience
• References
• Intelligent Strategy
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
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49. SUMMARY
• Preparation is key when planning for the future
• Gather the information you need
• Regularly update and review your business plan and other
documents
• Enroll your family/key employees in your plans
• Don’t do this alone – get the support of professionals to help you
maximize your investment
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
ACOFAS and SSA- October 12, 2011 49

50. THANK YOU
If you would like a copy of this presentation or further
information on buying or selling, please contact us below:
TOM MARX Paul Cooperstein
415.453.0844 ext. 106 617.328.7333
tmarx@marxgroupadvisors.com pcooperstein@marxgroupadvisors.com
Marx Group Advisors are located nationwide:
BOSTON SAN NEW
HOUSTON DETROIT FLORIDA PHOENIX
RAFAEL YORK
www.marxgroupadvisors.com
© 2011 Marx Group Advisors – Succession Planning For Family Businesses in the Aftermarket
ACOFAS and SSA- October 12, 2011 50