Great Expectations: A Guide to Satisfying Clients through Accurate Valuation and Financial...
-
Upload
armstrong-teasdale -
Category
Business
-
view
69 -
download
2
description
Transcript of Great Expectations: A Guide to Satisfying Clients through Accurate Valuation and Financial...
•
•
Lawyer Appraiser
Accountant
•
•
•
Price Earnings
Known Company (Comparable)
Unknown Company (Target)
$20,000,000
$1,000,000
?
$500,000 = =
Comparable Transactions (numbers in millions)
Company Date EBITDA Sale Price Multiple
ABC 1/1/2013 10 99 9.9
DEF 2/1/2013 6 45 7.5
GHI 3/1/2013 5 35 7
JKL 4/1/2013 15 150 10
Average Multiple: 8.6
•
•
•
•
•
•
Free Cash Flow Growth
-
2.00
4.00
6.00
8.00
10.00
12.00
2010 2011 2012 2013 2014 2015 2016
Year
Ca
sh
Flo
w (
in m
illio
ns
)
CapEX
Cash Flow
Year Discount Rate
2010 2011 2012 2013 2014 2015 2016 NPV
Free Cash Flow
0% 6.0 6.3 6.7 7.1 7.5 8.0 8.5 50.3
12% 6.0 5.6 5.3 5.0 4.8 4.5 4.3 35.8
14% 6.0 5.5 5.1 4.8 4.4 4.1 3.8 34.1
16% 6.0 5.4 5.0 4.5 4.1 3.8 3.4 32.5
•
•
•
•
•
•
•
•
•
•
•
•
•
•
TARGET COMPANY: Motorcycle Sales
METRIC: 3x Sales
COMPARABLE: Harley Davidson
Reported Revenue Actual Revenue Overstatement
Reported Valuation
Actual Valuation Overstatement
$10,000 $9,000 $1,000
$30,000 $27,000
$3,000
Effect of Revenue Overstatement on P/Sales Valuation
$10,000 $9,000
$1,000
$30,000 $27,000
$3,000
Reported Revenue
Actual Revenue
Overstatement Reported Valuation
Actual Valuation
Overstatement
Do
llar
Val
ue
(in
1,0
00
s)
TARGET COMPANY: Motorcycle Seller
METRIC: 20x Earnings
COMPARABLE: Harley Davidson
Reported Revenue Actual Revenue
Reported Earnings Actual Earnings
Revenue Overstatement
Reported Valuation Actual Valuation
Overstatement
$10,000 $9,000 $1,500
$500 $1,000
$30,000 $10,000 $20,000
Revenue Overstatement in P/E Valuation
$10,000 $9,000
$1,000
$30,000
$10,000
$20,000
Reported Revenue
Actual Revenue
Revenue Overstatement
Reported Valuation
Actual Valuation
Overstatement
Do
llar
Val
ue
s (1
,00
0s)
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Revenue Cost of Goods Sold
Gross Profit
Administrative Expenses Net Income
Automobile Leases
Aircraft Costs Lease for Shared Office
Net Savings to Buyer
20x Earnings Value Increase
Value without Add-Backs Value with Add-Backs
$30,000,000 25,000,000
5,000,000
3,500,000 $1,500,000
$50,000 400,000
50,000 $500,000
$10,000,000
$30,000,000 $40,000,000
( )
( )
Showing Value of Add-backs
$30,000,000
$40,000,000
Value without Add-Backs Value with Add-Backs
•
•
•
•
•
•