The document discusses using government sponsored credit to facilitate the sale of a company to keep jobs in the local community. It describes how Concerned Capital helps owners sell their companies using financing supports like loans, tax credits, and low interest rates to make the deals affordable for buyers. This allows new owners to continue operating the business and maintaining local employment, rather than relocating after an acquisition. Examples are provided of successful sales to new owners or existing management that preserved dozens of jobs in each case.

1. Using Government Sponsored Credit to Sell a Company Presented To: California Capital Summit Bruce Dobb Concerned Capital

2. Background Field of economic development is when government creates or saves private sector jobs After the earthquake – SBA disaster loans Many small companies get big with help of government loans Often when these companies are sold they leave the community – defeats purpose That’s when we get involved

3. What Concerned Capital Does We’re a bridge between public sector and private companies Help the owner figure out the best transfer strategy that fits his needs so the jobs stay in the community Provide financing for the new buyer using government credit supports Help management and/or workers to prepare for the transition

4. Government Credit Supports Takes many different forms Could be from state, local or federal government (or World Bank) Lots of initials and regulations Not for the un-initiated Make deals happen that would not otherwise

5. Non-traditional Financing That Makes Deals Work No down-payments deal Affordable sub-debt Zero interest leaseholds 20 year money Tax Credit Carry-forwards EDA/FRAP NMTC or CEDLI CRA SBA Empowerment Zone

6. Issues That Have a Negative Impact on the Valuation of Smaller Company Customer concentration Erratic financial performance Market competition – domestic and global When you’re forced to sell All reasons that credit supports may be necessary.

7. What Owner’s Think They’re Selling Vs. What the Market Thinks Owners Think they’re Selling – on-going customers, brand recognition, legacy/dynasty, non-intellectual proprietary properties, pleasant work atmosphere, happy employees, unique market niche, vendor credit What the Market Pays for – market buys multiples of cash flow – whether multiple of gross sale or multiple of profit or multiple of pre-tax profit (EBITDA), or a multiple of free cash flow Source: Garry Michael Kann, Kann Capital

8. Management/worker Buyouts As a Feasible Solution They understand the company, know its history and aren’t concerned about unknown liabilities They seek a quick, easy, rapid transition at the smallest expense possible Selling a corporation is a contract transaction without the need of escrow expense and time delays The owner generally is willing to stay in the picture and will often carry paper for a buyer he/she knows

10. Southwest Mill and Lumber Asset only sale – an exception Purchase of business only Purchase price of $ 1 million Bank loan + owner carry-back + equity Relocation expenses Saved 65 jobs Made the front pages

11. Woodworking by Degree: Case #2 Eddie Bapon had run the day to day operations of cabinet and leasehold improvement company for 10 years Owner wanted to become a real estate lender and investor Sold the company with $ 100,000 carry-back note and $ 400,000 senior debt – fed funds. Saved 40 jobs went on to add 15 more

12. AdMail : A Success Story 45 year old LA mail order company with two aging owners who couldn’t sell for 5 years – dozens of lookers Company had sold its real estate and saddled with debt and negative earnings But had provided $ 350 year compensation to owners for 10 years Successfully sold to management in 3 months Saved 60 jobs and retained customer base

13. When Transition to Existing Management/Workforce Makes Sense When potential purchaser knows how to run the company and has done it in the past for a considerable period of time When efforts to sell in the market make it clear that the real value of company will not be realized The management team strongly wants to own the company and MAKE MORE MONEY The real estate will not be transferred with the purchase The purchaser(s) have equity in their personal residents When a stock sale vs. an asset sale gives the owner a far better after tax return

14. Summing-up Advantages of a Sale to Existing Management/workforce Brings highest value for the company to the seller Saves taxes for the seller Avoids costly time and expense of dealing with traditional business brokers Keeps jobs in the community Gives the seller the satisfaction handing off his company to worthy buyer