The Market Today and Business Valuation. When to sell?

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Presentation transcript:

The Market Today and Business Valuation

When to sell?

When to Buy?

Valuations Various methods Discounted cash-flow IP/capital projects/Start ups Price Earnings Ratio PBIT/EBITDA What profits? Sustainable/art Revalue What assets? Include net assets Debt free/cash free/

P/E Multiples Multiples (years earnings) 50k250k500k750k1,500k2,500k3,500k Most likelyLeast likely PBIT/EBITDA £000’s

Adjusted Profits- example Example hire business31/12/2010Multiple Influencers Turnover£1,850,000 Gross£746,976 Operating Profit£177,725 Adjustments to net profit Directors pension£3,600 Spouse salary (non operational)£21, Directors remuneration (part- time/strategic role)£78,005In top 5 brands in UK NI On Directors£7,800Scalable/expanding niche Additional rental-£15,000Strong systems Bank interest£639 Balance sheet with surplus removed £220,000 Factoring£16,806Good forecast/client list Hire purchase interest£3,542 Amortisation (of goodwill)£21,600 Depreciation real cost hire co Adjusted PBIT under management£316,576.00X pre-tax multiple 4 =£1. 26 ml

Forecast - example Value: £316,576 x 4 Adjusted profit x Probable multiple= £1.26 ml Including balance sheet debt free/cash free £220,000 Marketed on Offers - Bids/auction (in top 5 in UK) Offer achieved £1.7 million - All Cash Dutch company seeking UK base.

Deal Structure Deals Structure effects multiples Earn-outs common Rules Avoid profit related Gross Profit easier to calculate Reverse Non Compete clause Performance related payments Can help buyers hedge risk Multiple Influencer Secure the Risks Guarantees/Debentures/Charges Access to Records Materially same as present Escrow

Art not science The Double Check