1. © 2008 Northern Trust Corporation northerntrust.com The Northern Trust Experience A C C E S S. E X P E R T I S E. S E R V I C E. Robert Jank Senior Vice President Robert Morgan Senior Vice President Positioning Closely Held Businesses For Sale Trends In Private Equity Gerard Mazurczak Senior Vice President

2. The Northern Trust Experience Question #1 What trends are you seeing that will impact our clients regarding how they position their closely held business for sale or succession?

3. The Northern Trust Experience Jerry Mazurczak Unprecedented pool of Private Equity capital Strong earnings Baby boomers reaching retirement age Cap gains rate at 15% Consolidation trends Credit market turmoil Weak U.S. Dollar What trends are you seeing that will impact our clients regarding how they position their closely held business for sale or succession?

4. The Northern Trust Experience Bob Jank Turmoil in the credit markets is affecting pricing, structure and availability of bank credit The amount of leverage that banks will allow has decreased during this phase of the credit cycle As a result: Sellers must reduce their price expectations Find buyers who can provide more equity Be patient until cycle turns What trends are you seeing that will impact our clients regarding how they position their closely held business for sale or succession?

5. The Northern Trust Experience Bob Morgan M&A markets are driven by the convergence of buyer and seller expectations 2006 and the first half of 2007 was characterized by record breaking numbers for deal flow and capital raised The liquidity provided by the debt markets and increasing fund sizes led to very frothy valuations Contraction in the debt markets have implications for buyers and sellers Reduced purchase prices – Slowly Higher equity contributions Slower deal pace Returns??? What trends are you seeing that will impact our clients regarding how they position their closely held business for sale or succession?

6. The Northern Trust Experience Trends in the Buyout Market Source: Thompson Buyouts, July 7, 2008

7. The Northern Trust Experience Trends in the Buyout Market Purchase Price/EBITDA by Deal Size (Includes Fees) Source: S&P LCD- M&A Stats, June 2008

8. The Northern Trust Experience Trends in the Buyout Market Average Debt Multiples of Middle Market Loans (Defined as Issuers with EBITDA of less than $50M) Source: S&P LCD- M&A Stats, June 2008

9. The Northern Trust Experience Question #2 How would you recommend preparing a business and its owners for a liquidity event?

10. The Northern Trust Experience Bob Jank Start getting audited statements now Remove / identify personal adjustments from statements Club membership Cars, planes Travel Expenses If real estate is owned by the family not corporation, increase the lease to market rate Institutionalize clients Commit to the decision How would you recommend preparing a business and its owners for a liquidity event?

11. The Northern Trust Experience Jerry Mazurczak Owners Restructure ownership to minimize taxes, move appreciation to future generation Sales to defective grantor trusts GRATs Charitable trusts/entities LLC strategies Delaware non-grantor trusts Dynasty trusts Design infrastructure for a post sale family enterprise / family office Create a personal plan for life after business is sold How would you recommend preparing a business and its owners for a liquidity event?

12. The Northern Trust Experience Jerry Mazurczak Business Obtain professional valuation Clean up negatives, build out positives Move real estate out of the business Get environmental report Prepare audited financials Consider stay bonuses for key managers How would you recommend preparing a business and its owners for a liquidity event?

13. The Northern Trust Experience Bob Morgan What they will look for: Strengths and weaknesses of management team Audited financial statements / one-time or family expenses Retaining relationships with key clients Recurring / stable cash flow streams- addbacks Ability to service debt Growth in some form Exit scenarios Deal killers Inability to conduct thorough due diligence Waffling How would you recommend preparing a business and its owners for a liquidity event? Private equity firms will conduct a significant amount of due diligence in their review process.

14. The Northern Trust Experience Question #3 What process do you recommend for obtaining the best transaction price / best overall value for the business?

15. The Northern Trust Experience Bob Morgan All depends on the sellers definition of value Corporate versus family sellers Market has become significantly more intermediated in the last ten years Range from large investment banks to one-off business brokers Considerations: Price Discretion / confidentiality Speed Treatment of existing employees Roll-over of ownership Hire good service providers: law firm, accountants, investment bank What process do you recommend for obtaining the best transaction price / best overall value for the business?

16. The Northern Trust Experience Jerry Mazurczak Clarify goals and risk appetite / financial preferences Optimize after tax proceeds All cash at closing Business owner role post closing Retention of management Retention of employees Identify value preferences Buyer culture similar to seller Commitment to community Only strategic buyer Certain buyers not acceptable What process do you recommend for obtaining the best transaction price / best overall value for the business?

17. The Northern Trust Experience Jerry Mazurczak Select transaction preference IPO Sale of stock Sale of assets ESOP Recapitalization Combination Choose the best team for transaction and identified goals Trusted advisors, attorneys, accountant, key business execs, Board members, trustees, family members Additional expertise Investment banker Transaction attorney Estate planner Match expertise to most probable buy expertise What process do you recommend for obtaining the best transaction price / best overall value for the business?

18. The Northern Trust Experience Bob Jank IPO: Price vs. Ongoing expense Administrative aggravation Constant report card Private Equity: Price vs. Impact on employees Potential requirement to stay for some time Synergistic Buyer: Price vs. Loss of privacy Impact on employees Selling to a rival ESOP: Great tax treatment and high regard for employees vs. Lower price Ongoing responsibility in the event of performance downturn What process do you recommend for obtaining the best transaction price / best overall value for the business?

19. The Northern Trust Experience Bob Jank Best scenario I have seen: Sell to synergistic buyer who offers earn out provided that: Buyer pays a fair price Buyer has a proven track record of treating acquired employees well Buyer has a proven track record of treating earn out fairly Seller recognizes that buyer will bring some real synergies What process do you recommend for obtaining the best transaction price / best overall value for the business?

20. © 2008 Northern Trust Corporation northerntrust.com Thank You Positioning Closely Held Businesses For Sale Trends In Private Equity