DMS seeks to acquire controlling interests in active businesses that will allow it to earn a return on equity of at least 20% over a business cycle and which meet the other criteria described below.

Financial Criteria
Pre-tax net income amount: $5 to $25 million (current or potential earnings)
Equity investment size: $5 to $75 million
Pre-tax return on equity: 20% plus (see note below)

Note: DMS' target return-on-equity depends on its perception of the predictability of the earnings of the business. DMS seeks a 20% ROE (or perhaps slightly below) for a business which historically has had, and which DMS believes will continue to have, a highly predictable stream of earnings over a cycle. DMS seeks higher returns-on-equity for businesses whose earnings are less predictable because of known risks facing the business. In assessing DMS' return-on-equity over a cycle, DMS factors in any concrete growth opportunities and employs leverage appropriate to the business.

Industry Criteria
Because DMS places a high value on management and company culture, DMS is flexible regarding industries in which it will invest. Like most investors, DMS prefers businesses in industries which have good growth potential, which have high barriers to entry, which enjoy superior and consistent margins, which are non-cyclical and which have stable customer relationships and defensible market positions. However, DMS has repeatedly seen businesses operated very profitably by talented management teams in industries not meeting these criteria. Thus, while DMS does generally avoid certain industries (see below), it is generally willing to consider a wide variety of industries provided the right management partners will be involved.

Examples of Businesses DMS Has Considered
See "Portfolio" for industries in which the Dobbs Family currently has investments.

In order to provide some further guidance, the list below outlines several types of businesses in which DMS has seriously considered investing.
- Wholesale and value-added distribution
- Business services (non-technology)
- Industrial services and maintenance businesses
- Heavy equipment dealerships
- Heavy truck dealerships
- Home health care and hospice agencies
- Insurance companies
- Benefit plan third party administrators
- Dental practice management and related services
- Auto parts wholesalers
- Light manufacturing
- Fire and security

Industries in Which DMS Will Not Ordinarily Invest
- High Technology or Internet ventures
- Biotechnology or drug development
- Medical devices
- Capital intensive manufacturing
- Commodity products
- Personal service businesses

Geographic Considerations
DMS will consider investments anywhere in the United States.

Startups
While DMS' principal focus is on acquiring existing businesses with a record of accomplishment, DMS will consider start-up businesses. DMS has a long track record of partnering with management through start-up ventures. DMS views management as especially critical in start-up businesses and looks for management teams who have a track record of success in the type of business being considered.

Turnarounds/Distressed Companies
DMS is willing to invest in turnarounds or distressed companies provided the company involved otherwise meets its investment criteria.

Transaction Types
DMS is especially interested in management buyout transactions where management is buying out an historic individual owner of a business or where a corporation has made the decision to divest a "non-core" operation.

DMS has expertise relating to family succession matters which allows DMS to participate in a more flexible manner than typical private equity investors. Our long-term focus and investment horizon often makes us a preferred partner in the partial sale or recapitalization of a family business undergoing a generational change in ownership.

Ownership Structure
DMS ordinarily owns businesses through a pass-through entity (generally a limited liability company or a limited partnership) which allows current distribution of profits without double taxation. This allows both DMS and its management partners to enjoy the fruits of successful operation without waiting for some kind of financial exit.

Long-term Investors
DMS' usual investment goal is to own companies for the long-term with cash distributions of profits being made currently (to both DMS and the managers) once the business is properly capitalized and current growth needs are satisfied. While DMS is certainly willing to consider exit strategies such as an IPO or strategic sale, a quick profit is not the principal goal of DMS.

DMS believes this long-term perspective gives it an advantage over many potential acquirers who often have 4-7 year time horizons for getting into and out of transactions. DMS structures partnerships that provide equity redemption arrangements for its management partners to allow them to achieve liquidity at an appropriate time. Our equity partners are treated as equal partners and, in our arrangements, their equity is economically equivalent to our own with no discounts or other mechanisms.

Assets Available For Investment
The Dobbs Family has several hundred million available for private business investing activities. Available capital, together with prudent leverage, allows us to consider companies with an enterprise value up to $150 million in many industries.