1. © 2015 Evergreen Consulting, LLC DISTRIBUTION M&A 2015 IT DOESN’T GET ANY BETTER THAN THIS Brent R. Grover Evergreen Consulting, LLC

2. © 2015 Evergreen Consulting, LLC "COMPETITION BETWEEN BUYERS IS AT AN ALL-TIME HIGH. THUS, WHEN A QUALITY COMPANY HITS THE MARKET, BOTH PE FUNDS AND STRATEGICS ARE WILLING TO STRETCH FOR IT, KNOWING THAT THEY ARE SUPPORTED BY AN EXTREMELY ROBUST DEBT MARKET.” WILLIAM BLAIR REPORT, 2014

3. © 2015 Evergreen Consulting, LLC 3 Brent R. Grover Evergreen Consulting, LLC 30100 Chagrin Blvd., Ste. 111 Cleveland, OH 44124 brent@evergreenconsulting.com www.evergreenconsulting.com (216) 360-4600 ext. 101 40 years as CPA 35 years as Adjunct Professor 25 years as Distributor 15 years as Consultant 12 years as Author 10 years as NAW Institute Research Fellow 8 years as APIC Partner 3 years as UID Faculty Member = 148 years of experience

4. © 2015 Evergreen Consulting, LLC

5. ABOUT TODAY’S FINANCIAL MARKETS

6. © 2015 Evergreen Consulting, LLC ABOUT BUYING DISTRIBUTORS IN 2015

7. © 2015 Evergreen Consulting, LLC Buying Distributors Seller’s market Owners want to sell at the “top” of the market Never enough great companies on the market IB’s running sales processes (i.e, auctions) for distributors

8. © 2015 Evergreen Consulting, LLC Target selection Acquisitive distributors need a good buying process (playbook) Most IB’s prefer sell- side work Starts with your strategy Acquisitions filter: prioritize the targets

9. © 2015 Evergreen Consulting, LLC Target cultivation Rules of diplomacy apply Highest and best use of executive time Communication builds trust Patience: 2-3 years? Goal: intercept target, avoid auction

10. © 2015 Evergreen Consulting, LLC Assessing value Many valuation methods, each of which is a guess Good comparables hard to find No two deals alike “EBITDA” Add-backs & adjustments Projections & assumptions

11. © 2015 Evergreen Consulting, LLC Negotiation Term sheet Letter of Intent Definitive purchase agreement (assets or stock) Price & terms Escrows and post-closing adjustments Warranties & representations Real estate Employment, consultation

12. © 2015 Evergreen Consulting, LLC Due diligence 30-60 days Quality of earnings Data room Environmental Customers Suppliers Employees Subsequent events Renegotiation Break-up fees

13. © 2015 Evergreen Consulting, LLC Integration Start before closing Avoid “conqueror syndrome” Place the right person at the acquired company Don’t make promises that you can’t keep

14. © 2015 Evergreen Consulting, LLC ABOUT SELLING A DISTRIBUTOR IN 2015

15. © 2015 Evergreen Consulting, LLC Selling A Distributor “The right time to sell is when someone desperately wants to buy your business” Once in a lifetime event for most

16. © 2015 Evergreen Consulting, LLC Ownership succession Family, manager(s), ESOP Japan - grooming scion Dynasties Estate planning

17. © 2015 Evergreen Consulting, LLC End-game strategy Is the question what to do, or when to do it? Strategic or financial Reinvest and get a “second bite of the apple”?

18. © 2015 Evergreen Consulting, LLC Getting the house in order Other stockholders Books and records Housekeeping Taxes Environmental Real estate

19. © 2015 Evergreen Consulting, LLC For sale by owner? Only going to do this once Your lawyer and CPA? Competition Process

20. © 2015 Evergreen Consulting, LLC Secrecy Vulnerability Who must know? Suppliers Damage control

21. © 2015 Evergreen Consulting, LLC After-tax, after expenses Debts Post-closing adjustments Federal income taxes Capital gains or ordinary income rate? State income taxes Expenses - banker, attorney, accountant

22. © 2015 Evergreen Consulting, LLC How much is enough? Lifestyle and retirement goals What are you going to do now? Buying another business Cash flow from investments Next generation

23. © 2015 Evergreen Consulting, LLC ADVICE FROM DISTRIBUTION M&A EXPERTS

24. © 2015 Evergreen Consulting, LLC NAW GUIDE SURVEY HIGHLIGHTS

25. © 2015 Evergreen Consulting, LLC NAW survey results 42 sales in 2010-2014 20% stock purchases $954 million revenues > $200 million purchase price

26. © 2015 Evergreen Consulting, LLC NAW survey results One seller in six approached the seller, several through bankers Nearly 40% through industry relationships One in eight was an auction None of the buyers used a finder

27. © 2015 Evergreen Consulting, LLC NAW survey results Deal expenses 1.4% of price 40% of sellers stayed on > one year Disputes in one of seven Escrow claims in one of four Success rate 7.5 on scale of 10.0

28. © 2015 Evergreen Consulting, LLC NAW survey results 3.9% ROS 30% of sales 1.8X premium 6.1X EBITDA

29. © 2015 Evergreen Consulting, LLC TEN THINGS YOU CAN START DOING NOW 1.A dvisory board 2.S trategic planning 3.A cquisition filter 4.A cquisition process 5.P oint person for acquisitions 6.D eal attorney 7.C PA with deal experience 8.I nvestment banker with distributor deal experience 9.E xit strategy 10.R ead a good book about distribution! 29 © 2015 Evergreen Consulting, LLC ISSA October 2015

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