Subject: Re: Project BALBOA - Acquisition Opportunity
From: "John DeLoche" <[email-masked]>
To: <[email-masked]>
Cc: "Devon Archer" <[email-masked]>, "Hunter Biden" <[email-masked]>, "Eric Schwerin" <[email-masked]>
Date: Mon, 26 Sep 2011 17:08:23 +0000

Neil,

Thanks for your thoughts. I agree with your assessment. I view this as a marginal business with limited upside, except for the founders.

Since they have hired an investment bank, there really is no role for us unless we want to put a syndicate together to invest. When a bank is hired, a process becomes efficient by definition and the highest price wins the day. I don't think we should waste any time on banker shopped deals as there is no oppty for us to get an inefficient entry price or a fee for working with them.

Thanks again for taking the time to analyze this.

Best,

John

Please excuse typos as this message was sent from my handheld device.

On Sep 26, 2011, at 9:09 AM, "Neil Callahan (Rosemont Seneca)" <[email-masked]<mailto:[email-masked]>> wrote:

Hi guys,

Here are my thoughts on BALBOA:

1.       Good entrepreneurial story, the founders have focused on a niche and have built a real company that makes $2m a year, good for them.

2.       Not sure if it’s really a software company – they have 148 employees on 13m in revenue  (should have 40-50) – it looks more like a services company – lots of arm and legs to help clients customize ads locally wrapped in a software layer/veil.  The software would need be scalable without the huge amount on service manpower to be interesting to another company that might want to but the company and bolt in onto a larger platform for scale and exposure to a resident customer base (like a big publishing company or software company).

3.       The local ad business is a cottage industry and hard to scale.  Google, Yahoo and AOL have all invested billions in the space and have not seen it congeal.  Lot’s of service for small revenue per account (i.e., the local gym eats a lot of customer service hours to spend $1k on monthly advertising).   Search is the only space that has really be a self-service local ad model that scales and I think that is because part of the search model is a revenue share model with local / small publishers – ie. ad sense on google.

4.       I’d like to see the cap table and use of proceeds plans.  If we could help package them up help sell them to an AOL or something like that, it would be something to pursue.  If they want cash to just organically grow the company, we’d want to understand the dividend structure and see what kind of ROI we could garner.

Best,

Neil

Neil Callahan
Rosemont Seneca Partners
401 Greenwich Street, Suite 400
New York, New York 10013
212-796-4037 (o)
917-945-9516 (m)
866-749-8879 (f)

From: John DeLoche [mailto:[email-masked]]
Sent: Wednesday, September 21, 2011 3:39 PM
To: Neil
Cc: Devon Archer; Hunter Biden; Eric Schwerin
Subject: FW: Project BALBOA - Acquisition Opportunity

Neil,

This deal looks right up your alley.

Let’s discuss.

Best,

John
------ Forwarded Message
From: "Byrnes, Lisa" <<[email-masked]>[email-masked]<mailto:[email-masked]>>
Date: Wed, 21 Sep 2011 14:09:18 -0400
To: John DeLoche <<[email-masked]>[email-masked]<mailto:[email-masked]>>
Cc: "Byrnes, Lisa" <<[email-masked]>[email-masked]<mailto:[email-masked]>>
Subject: Project BALBOA - Acquisition Opportunity

John,

Canaccord Genuity has recently been appointed financial advisor to a leading provider automated local marketing solutions. The Company has been approached by a number of parties interested in pursuing either a strategic transaction or recapitalization.  Our firm has been engaged to assist in the evaluation of these options as well as solicit interest from a select group of other parties who may be interested in a dialogue.

Our client’s solution provides local independent business units such as franchisees and dealers with the tools they need to customize and distribute content without sacrificing corporate identity. The Company’s easy to use software platforms provide an automated system for creating personalized marketing materials that can be delivered across a growing number of print and digital media channels, allowing local advertisers to easily create and distribute localized ads faster, and ultimately respond to local market conditions to drive more sales.

Company highlights include the following:

Large and Growing Local Advertising Market Opportunity

  *   Local marketing is expected to grow from $129 billion in 2010 to $145 billion in 2014, translating into a significant opportunity for marketers, and for marketing service providers

Comprehensive Solution for Creating and Distributing Local Advertisements

  *   SaaS based print and digital ad-builder platforms enable clients to locally customize, distribute and digitally repurpose multiple versions of content, collateral and advertising
Attractive Financial Profile with Significant Recurring Revenue

  *   Consistent revenue growth, increasing EBITDA margins and strong cash flow in recent years.
  *   The Company expects to grow revenue from $13.3M in 2010 to $25M in 2013, a CAGR of 23%.
  *   High rate of recurring contracted revenue, estimated to be 94% in 2011, provides excellent visibility into future operating results

Blue Chip, Loyal Client Base

  *   Includes world leading companies such as DIRECTV, Allstate, Ameriprise, BMW, Konica Minolta, Liberty Mutual, American Red Cross, Panera bread, US Cellular and T- Mobile.

I have attached an Executive Summary for your review.  If you are interested in learning more, I would be pleased to send you the full Confidential Information Memorandum upon execution of a non-disclosure agreement.  Please feel free to contact me with any questions that you may have. I will plan to follow-up with you in a week if I do not hear back from you sooner.  Thank you for your consideration, and I look forward to hearing from you.

Best regards,
Lisa

Lisa McClure Byrnes
Principal, Technology Investment Banking

Canaccord Genuity
99 High Street, 12th Floor
Boston, MA  02110

Office:  617-371-3847
Mobile:  617-429-9905
<[email-masked]>[email-masked]<mailto:[email-masked]>

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