1. The Market Today & Business Valuations Kevin Uphill Avondale

2. www.avondale.co.uk The Market Avondale SME/mid tier commercial focus. 35 transactions pa. 25 team 3 mentors Organic growth slow driving acquisitions (average 5 bids per project). Fast change driving interest in niche companies with products.

3. 3 2011 Global economy worth 69,659,626 million US dollars. The United Kingdom is world’s 7th largest economy. Over 300,000 companies in UK employ more than 6 people. 2 billion to 7 billion in 60 years Advanced economies no longer driving global GDP growth Source: IMF, Global market www.avondale.co.uk

4. The UK M&A market 0 1 2 3 4 5 6 7 8 9 1234567891011 1981 1992 2011 Spare capacity increases competitive factors and creates driver for consolidation and Mergers and Acquisitions (M&A) activity. Interest rates low to 2015? UK output- Recovery lagging last two recessions Weak credit arena/volatility creating drag. Overall 2013 M&A activity (by value) increased on 2012 with Europe most active due to consolidation. Activity down 20% on 2007 but down only 10% in sub £250m arena. 1st qtr 2014 increased on 2013.

5. Sellers Personal/strategic cross roads Growth in sector House in order Elevator deal Leap of faith Buyers House in order Organic growth slow Create shareholder value Strategic New products/team/services Motivations www.avondale.co.uk

6. Valuation Methods www.avondale.co.uk Strategic deals + Economies1 + Synergy1 + Value influence1 Sum6

7. Valuation Methods www.avondale.co.uk Discounted cash flow forecast or price earnings multiple of profits Debt free/cash free Adjustments to profits Valuations are financial forecasts to exceed in the process

8. www.avondale.co.uk

9. Example hire business31/12/2013 Equipment undervalued£ 50,000 Debt free/cash free£-75,000 Adjustment to final price£-25,000 Surplus cash negotiate extra to deal for tax savings but be warned buyers will try and include as goodwill, if its there. Debt- Long term liabilities Less - Cash www.avondale.co.uk Adjusted Balance Sheet

10. Example Medical Clinic31/12/2013 Turnover£2,320,000 Gross£1,800,976 Operating Profit£438,000 Adjustments to net profit Rent£130,000 Managers salary/NI£60,000 Directors remuneration (part- time/strategic role)-£150,000 Bank interest£639 Factoring£16,806 Hire purchase interest£3,542 Insurance£21,600 Depreciation real cost hire co Adjusted EBIT under management£520,587 Forecast Financial value x 4 est. 5.5x £500k = £2.86 ml Actual Marketed on Offers 2 bids Offer achieved £4 ml --------------------------------- Private Equity backed trade Group UK wide www.avondale.co.uk Adjusted Profit & Loss

11. Deal Structure 1. On Completion £2,000,000 2. Deferred Payment £ 1,000,000 3. Earn out ‘on growth’ £ 1,000,000 4. Total £4,o00,000 Deal structure is a multiple influencer www.avondale.co.uk Protections Deferred subject to continued service Charges on shares for deferred Protections business to be run materially same Quality buyer/covenant Access to records Reverse non compete

12. Positioning - Modelling - Deal Structure Strategic Deals Case Studies TypeProfit/t/0ValueROI PENotes Construction Hire £316,000£1,900,00011%7 Dutch buyer needed UK presence Tuition (London)£70,000 pbit£240,00025%4 Actually 8 multiple plus as no owner manager cost- went to a charity Gateway Ltd £500,000 ebitda £3,500,00014%7 £100 million buyer, looking at new products Meter Provida£3,600,000£20,000,00017 %6 Rare right buyer again £100 million turnover Updata£5,600,000£80 million 7% 14.2Recurring revenue Forecasts £12 million www.avondale.co.uk 35% of projects international buyers 2014

13. Business Value by Design Company Foundation The Profit Engine www.avondale.co.uk Management Strategy How much time do you spend on strategy versus management? How do you design a better value business, ahead of the competition? What is your worst envelope?