Michael Flock's presentation at the 22nd Annual RMA Conference

1. Top Ten Things to Prepare a
Debt Buyer for a Sale
Moderator:
Panelists:
Michael Lamm, Founder, Corporate Advisory Solutions
Michael Flock, Chairman & CEO, FLOCK Specialty Finance
Matthew Maloney, Co-founder, President & Chief Investment
Officer of the FFAM Group of Companies

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4. This information is not intended to be legal advice and
may not be used as legal advice. Legal advice must be
tailored to the specific circumstances of each case.
Every effort has been made to assure this information
is up-to-date. It is not intended to be a full and
exhaustive explanation of the law in any area, nor
should it be used to replace the advice of your own
legal counsel.
Any opinions expressed are the opinions of the
speaker and not their organization or the Receivables
Management Association International.

5. 10 Steps to Prepare a
Debt Buyer for a Sale
Michael Flock, Chairman & CEO, FLOCK Specialty Finance

6. 10 Steps to Prepare a Debt Buyer for a Sale
1. Why are you selling? Assess strategic alternatives.
2. To hire a broker or not?
3. Develop a Process.
4. Develop marketing strategy and tell your story.
5. Estimate Value of company.
6. Clean up your data and sell your underwriting skills.
7. Compliance is crucial.
8. Set up virtual data room and highlight analytics.
9. Make it a team effort and show off your stars.
10. Keep focus on your business. Results are everything.

7. 10 Steps to Success
1. Why are you selling?
◦ Simple exit totally? Retirement? Raising new equity? Partnering for growth?
New markets? New products and services?
2. To hire a broker or not? We are biased.
◦ Don’t assume you can focus on running your company and selling it at the same time
◦ Brokers usually have larger networks, and processes already established
◦ You need dozens of prospects, not just a handful
3. Develop a process
◦ Process keeps focus and resources organized
◦ Important for meeting deadlines
◦ More professional approach to potential buyers

8. The M&A Process Produces Alternatives
STRATEGY MARKETING NEGOTIATIONS EXECUTION
Assess Strategic
Alternatives
Estimate Value
Evaluate Options
Test the Market
Formulate Marketing
Strategy
Identify Potential
Buyers
Prepare Management
Presentations
Contact Potential
Buyers
Solicit Indications of
Interest
Facilitate Due
Diligence
Conduct Preliminary
Negotiations
Structure Preliminary
Deal
Solicit Letters of
Intent
Evaluate Final Offers
Refine Structure
Facilitate Final Due
Diligence
Negotiate
Agreements
Closing
Evaluate Initial Offers
We facilitate the sale process, emphasizing the importance of creating multiple alternatives.
Select Partner

9. Process Timeline
Initial Due Diligence:
-
Conduct Interviews with Management
-
Prepare Confidential Memorandum
-
Develop Marketing Strategy
-
Discuss Buyer List
Marketing:
-
Contact and Qualify Buyers
-
Distribute Confidential Memoranda
-
Prepare Management Presentations
-
Select Partners to Meet Management
-
Conduct Management Presentations
Intensive Buyer Interaction:
-
Request Proposals
-
Review Follow-Up Proposals
Buyer Selection:
-
Negotiate Final Offers
-
Sign Letter of Intent
Finalize Transaction:
-
Conduct Final Due Diligence
-
Negotiate Applicable Agreements
-
Close Transaction
-
Select Preferred Buyer
April May June July August September
Follow-up Due Diligence
-
November
Set Timeframes For Activities

10. 10 Steps to Success
4. Develop a Marketing Strategy and tell your story.
◦ Identify Buyers
 Financial – private equity, institutional investors, family offices
 Strategic – competitors, other industry service providers
◦ Prepare confidential memorandum – “the book”
◦ Tell a story that differentiates the company and shows future potential of
business model and team. Share your passion.
◦ Quality of data and analytics is key. Demonstrate it.

11. 10 Steps to Success
5. Estimate Value of company. Choose the methodology carefully.
◦ Most common for middle market is the discounted ERNC of portfolio
inventory plus platform value. Others are driven by EBITDA or EBJIT.
◦ Prepare data carefully. Get outside validation.
◦ Platform value is subjective, includes value of data, systems, customer base,
employees, brand. Could be multiple of book value, EBITDA, EBJIT.

12. Stages of Underwriting
10 Steps to Success
6. Clean up your data – sell your underwriting skills

13. 10 Steps to Success
7. Compliance is crucial. Show a focused process and dedicated resources.
8. Set up virtual data room – highlight analytics
◦ 3 year audited financials; 3 year forecast
◦ Adjusted EBITDA for owner expenses, extraordinary one time costs
◦ Outstanding accounting or tax issues
◦ Revenue composition, detailed portfolio returns
◦ Underwriting process
◦ Operations, customer contracts,
◦ Examples of debt purchasing structures
◦ Compliance detail
◦ Organization charts

14. 10 Steps to Prepare a Debt Buyer for a Sale
1. Why are you selling? Assess strategic alternatives.
2. To hire a broker or not?
3. Develop a Process.
4. Develop marketing strategy and tell your story.
5. Estimate Value of company.
6. Clean up your data and sell your underwriting skills.
7. Compliance is crucial.
8. Set up virtual data room and highlight analytics.
9. Make it a team effort and show off your stars.
10. Keep focus on your business. Results are everything.

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