1. H&K Strategic Business Solutions Valuing Your Government Contractor Business John T. Schell Special Briefing The McLean Hilton October 3, 2001

2. H&K Strategic Business Solutions Holland & Knight Consulting Strategic Business Solutions What is Your Business Worth? Book Value? Liquidation Value? Fair Market Value – Financial Buyer Stock Price (Public Company) Adjusted Cash Flow (Private Company) Revenues (Small, specialty only) – Strategic Buyer Market (Agencies, programs, expertise, etc.) Buyer can consolidate and improve cash flow. Buyer can generate cash flow from other areas.

3. H&K Strategic Business Solutions Holland & Knight Consulting Strategic Business Solutions What Kind of Cash Flow? EARNINGS PlusNon-cash charges PlusOwners’ Perks and Excess Salary PlusNon-recurring Expenses LessNon-recurring Revenues ADJUSTED INCOME PlusInterest PlusTaxes PlusDepreciation PlusAmortization EBITDA Key Issue:Historical or Forecast?

4. H&K Strategic Business Solutions Holland & Knight Consulting Strategic Business Solutions Valuation of Cash Flow Relevant Methods – Discounted Cash Flow – Capitalization of Earnings. – Payback on EBITDA. Calculation vs. Market Comparables. Reduce by Outstanding Debt.

5. H&K Strategic Business Solutions Holland & Knight Consulting Strategic Business Solutions Estimate of True Value Contractors Providing Services: 3x-5x EBITDA – Titan/BTG:4.24x 2001 EBITDA Adjust for Variables, e.g: – Interest in Government Sector. – Agencies served (Intelligence, GSA, etc.) – Contract Backlog, Terms, Follow-on Work. – Modify for Earn-outs, Stock, Seller Financing. –Abundance and Viability of Contract Vehicles. –Value-Added Work, Technical Skills and Margins. –Task Order Win Rate.