April 11, 2011

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Comment

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Ken,

I saw the email from the seller who is trying to raise capital and is being offered only 32x for his accounts. Whether that is a fair multiple depends on a number of factors, including the number of accounts he is selling, whether or not he owns his phone lines, whether he has good contracts, etc. If the correct combinations are in place, the accounts are easily worth more than the 32x. The way to get a higher multiple in this instance is to have more buyers looking at his account base. As the number of valuations increase, the likelihood of a higher multiple also increases. In my work with the 2 dozen buyers that look at the deals I am involved in, each has different parameters for what they would like to buy. All the seller needs is one buyer for which the account base is a great fit for the seller to achieve his higher sales price.

All the best,

Barry Epstein

Vertex Capital

bepstein4@sbcglobal.net

972-740-2740

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Comment on business issues

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Ken,

A couple of business comments on the emails.

To the Monitronics dealer. These appear to be what a dealer program calls a “house account.” It was rejected by the dealer program for some reason (renter, bad credit, etc…) and sent back to the dealer. It has now been “assigned” to the dealer. The dealer should get his own contract, and have a reputable attorney (like Ken Kirshenbaum) write it. Just because these contracts have been rejected doesn’t mean that they are not good customers. The dealer will be monitoring, billing, and servicing these accounts and they may even be saleable someday, so spending some money now on a well written contract makes business sense.

To the PERS dealer. When customers compare you to a company that does not use contracts tell them that he contract sets expectations for the customer as well as the company. Ask them if they think that it makes sense to trust their life safety to a company that doesn’t have written agreements describing the services to be provided. There is a huge dichotomy in the value of PERS contracts. There are well run companies the have solid values and command premium prices when they sell, and there are companies that cannot give away their agreements.

Mitch Reitman

S.I.C. Consulting, Inc.