Benning Associates is a new boutique investment bank that provides corporate finance and M&A advisory services to private and public middle market companies and investors.

1. Confidential M&A Market Overview: Med-Tech & Healthcare IT March 2011 Benning Associates LLC One Broadway Cambridge, MA 02142 http://benningllc.com http://pulse.benningllc.com (617) 261-3999 Securities offered through Burch & Co., Inc., Member FINRA & SiPC. Benning Associates and Burch are independent entities. Principals of Benning Associates are registered with FINRA through Burch.

3. This heightened deal activity has also included acquisitions where the buyer had made a previous investment to achieve an exclusive "first mover" option, while the asset advances through clinical, regulatory or commercial milestones

4. With the capital markets reaching their highest levels since 2007, banks more willing to lend and an increasing number of companies seeking exits at acceptable valuations, we are optimistic this trend will continue in 2011With economic conditions continuing to improve, 2011 will likely stay on the 2010 trajectory 2

5. Large-Cap Deals in 2010 Large-cap med-tech deal activity returned to robust levels in 2010 3

7. However, these fluctuations are largely driven by large cap transactions. As shown below, the number of large acquisitions can spike under the right circumstances and go dormant under othersLarge cap deal activity is largely to blame for the deal volume and value fluctuations observed year-to-year 4

9. While economic conditions may periodically shut down the market for acquisitions greater than $100 million, “lower middle market” deals and those with undisclosed values (largely sub-$100 million in value), continue to get doneUnlike the large-cap market, the lower-middle market has established transaction volume support levels 5

11. This segment of the M&A market is less cyclical for a number of practical reasons:

12. Straightforward deal rationales – Acquisitions are accretive in the near-term due to sales and marketing synergies, or the acquired technology enhances current product offerings and drives greater market penetration

13. Small bets = manageable downside – Even for larger acquirors, because smaller deals have a greater percentage of success, so not every acquisition needs to be a billion dollar opportunity to be an attractive M&A candidate

14. More efficient R&D strategy – Rather than bear high costs and uncertainties of early stage internal R&D projects, small acquisitions allow acquirors to outsource this role to entrepreneurs and venture capitalists, and pay for proven assets

15. Less integration risk – Relative to larger, more complex businesses, small acquisitions can be added without a large allocation of company resources

16. Larger universe of potential acquirors – For smaller targets, there is a greater number of suitors with a strategic rationale AND the required financial wherewithal6

18. Know the buyer universe, big and small – While a target may fit well with large, diversified Med-Tech consolidators, it is important to investigate smaller, lesser known companies who would view an acquisition as a transformational event

19. Strategic touch points establish credibility – Early and ongoing discussions with potential strategic buyers create a more receptive audience when a sale process is actually undertaken

20. No substitute for commercial proof points – Whether a product is sold into the hospital, physician’s office or homecare market, its competitive advantages, reimbursement strategy and potential market ultimately prove out with compelling sales and growth

21. Business model is critical to making the acquisition case – Valuation hinges on demonstrating that a product will be accretive given assumptions for manufacturing costs, scalability and reimbursement

22. IP position is where deals often fall apart – A strong and focused IP portfolio is a must-have and will be highly scrutinized in the course of buyer due diligence

23. Go-it-alone strategy and funding provide leverage – M&A cannot be "PLAN A". It is important to have a strategy that credibly finances build-out of the business infrastructure7

25. 37th in overall health

26. 34th in life expectancy

27. 30th in obesity

28. 28th in infant mortality

29. These issues cannot be addressed on a large scale with only novel device and drug interventions – in order to improve population-based health outcomes, fundamental health care delivery issues must be addressed

30. We are closely following how the overburdened health care system has created a critical need for new technology, which:

31. Moves/expands treatment and monitoring out of high cost settings

32. More effectively shares information, resulting in improved treatment decisions and outcomes

33. Better informs and empowers the health care consumer

34. SaaS businesses, mobile technologies and new information portals are just a few areas that will be attractiveThe stage is set for renewed investor and strategic focus on HCIT 8

36. Build competitive advantage

37. Product becomes “must-have”

38. Significant growth and margins realized

39. Engineer business model (e.g. Saas)

40. Launch product

41. Cash flow break-even9

43. Believing that growth is headed for an upward trajectory rather than moving sideways is paramount when conveying the value of a business in this space

44. Customers (providers) have historically been fickle when making the decision to pay for IT that should save money and improve care

45. In the absence of a track record of significant growth, there are ways to position an emerging HCIT company’s value:

46. Clear value proposition to target market (e.g., government incentives)

47. High quality reference accounts

48. Sales funnel momentumThe proof is in the pudding: nothing conveys value like demonstrated growth 10