The Specify the Balloon Type step of the Extraction Template captures the information required to recognize balloons.
The rules that the wizard discovers are saved to the extraction template. The BOM Extraction wizard uses these rules to recognize the balloons in the drawings it migrates, and replaces them with balloons that can be edited by the AMBALLOON command.
The wizard requires you to select a balloon from the current drawing. If you cannot select the balloon using a single click, you can window select the balloon. It does not matter if the surrounding geometry gets selected, the wizard can intelligently filter out redundant components. However, the window selection must contain only 1 text object, which it assumes to be the balloon text.
Alternatively you can select the different elements of the balloon one at a time. For example, you can select the balloon text first, then the balloon circle or reference line, and then the leader. However, all the elements must come from the same balloon. You need not select the arrowhead on the balloon leader.
If necessary, you can skip balloon migration. However if you do so, the BOM Migration wizard is not able to place Part References at the correct location in the migrated drawings.