LaunchPad brings together all of the players in the Southern California middle market sector of the private capital markets. Sponsored by the Alliance of Mergers & Acquisitions, Dr. John Paglia shares findings from the Summer 2011

1. The State of the Private Capital Markets Private Capital Markets LaunchPad June 10, 2011 John K. Paglia, Ph.D., CFA, CPA Associate Professor of Finance Senior Researcher, Pepperdine Private Capital Markets Project

8. Prob. of failure finally declines Net income expectations positive

9. Confidence rebounds sharply Optimistic about growth

10. What are Owners Focusing on Today?

11. Finally ended layoffs and CAPEX reductions

12. Still increasing collection times Pricing power or inflationary response? More competitive than ever

13. Business Owner Access to Capital (Net Increases) Finally reversed deteriorating capital access

21. Tightness of Financial Covenants, Warrant Coverage and PIK Features Warrant coverage declines Covenants less restrictive

26. 40% of Business Sale Engagements Expired Without a Transaction

27. Valuation Gaps for Non-Transacted Engagements

28. Difficulty Securing Senior Debt?

29. Balance of Capital with Businesses Worthy of Financing: Surplus or Shortage?

30. Top Issues Facing Privately Held Businesses (Today versus Emerging) Today Emerging