valuation and 360 overview sample client

Valuation and 360 Overview Sample Client

This document is a guide for business owners and directors. The purpose is to give an understanding of how Nash Advisory present a perspective of a business valuation method and several ideas on where the business can be improved.

This is not designed to be a formal valuation, rather a view of value from multiple commercial angles.

Goals ʖ Improve short term profitability and cash flow

ʖ Increase company value

ʖ Increase the potential buyer pool for the company

ʖ Improve the likelihood of a fully executed sale

Why work with Nash Advisory?

Acquisition Search

Divestments / Sale of

Business

Valuations

Sale of Business

Preparation

Raising Capital

5 Key Reasons

ʖ Owned by Staff: All our staff have a monetary interestin the firm and therefore, fees generated from our suc-cessful engagements are shared amongst allteam members (not to overseas partners or passiveowners)

ʖ Experienced Staff: The majority of our staff havesignificant corporate and transactional experience,both domestically and internationally. We are heavyon senior staff, and underweight graduates

ʖ 100% skewed to success: We only take on engagements we can complete. As such, we are 100% skewed towards successful transactions with clients we work with

ʖ Value Add: If we feel we can not “value add” a situation, we will not progress with the engagement. For all outcomes, Nash must provide Value Adding advice

ʖ Invested: Our Team are investors in several businesses and understand the perspective of owners

MelbourneLv 12, 459 Little Collins St

SydneyLevel 15, 1 Castlereagh St

BrisbaneLevel 22, 127 Creek St Our

Locations

Lucas Couper Director

Sean O’Neill Director

Tom ButlerAssociate Director

Comfort Paul Senior Associate

Kevin Han Senior Analyst

Kieran Ellis Analyst

Team Nash has invested ~$2M of personal capital into its partner companies or ~ 10% of all invested deals

Core Team About usNash is a Melbourne based boutique investment firm that specialises in commercial business advice and investments

Currently manage ~$25M across 3 assets

We are licensed under Australian Financial Services License 424970

Predominantly we:

ʖ SELL Businesses between $5M to $100M in enterprise value

ʖ INVEST in opportunistic mandates when there is a clear value proposition

We are team of experienced but relatively young and new age individuals that use relationships as well as data and technology

Our team were trained at the “large” firms, but have an entrepreneurial spirit. All of our team participates in the upside on a successful transaction

Our team is based at our office in 459 Little Collins St

BackgroundThrough our discussions to date, we have been extremelyimpressed by Sample Client Company and yourselves.

We believe strongly in the potential for the company to grow inthe short and medium term, and to achieve a business sale thatexceeds your expectations.

We would be pleased to assist you over the coming years with:

ʖ Consulting services

ʖ Exit planning

ʖ An eventual sale

Our team will actively manage key developments in your businessplan with a view towards maximising the outcome for you.

On the following pages we list out some of our observations andrecommendations from our current understanding of the business.In the coming weeks and months we will discuss these with you indetail, and help you to execute changes where agreed.

0 1 2 3 4 5 6 7 8 9

Operators Recruitment

Pipeline

Vehicle Process / Pipeline

Work pipeline strong

Clear business goals

Owner reliance

Accounting/Auditing Reporting

Processes in Place

Safety and systems

Positive momentum and morale

IT System

Where business needs to be

Current business score

5

1

3 5

3

1

4

5

6

2

5

6 6

1 1 4

1 1

5

8

2

Brand

Offices

Website

Marketing

Customer mix

Contracts

Business development

New technologies

Accounting systems

Reporting

Auditing Managementteam

Long term business plan

Pipeline of future growth

Acquisitions

Working capital management

Debt

Being sale ready

Mapping the buyer pool and sensing them out

Innovation and staff training

Introduction to potential employees and networks

TargetRange

Lower Range 2

Lower Range less 10%

Mid Case

Upper Range plus 10%

Upper Range 2

$42.0M $46.7M $51.8M $57.0M $62.7M

Expect value to be between

$51M and $57M

40,000,000 40,000,000

12,000,000

-

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

Value Today Exit Outcome

We intend to help you to grow

the value ofthe Company

0

1 2

3

4

5

6

7

8

The company when Nash was engaged

Current assessment of the company

Target position at sale

Valuation Explained Valuation

Rationale Unit

Industry Multiple 6.30x

(-) 15% Discount for Private Business(sub 20M)

(0.95x)

New Target Multiple 5.36x

(-) Discount for lower Synergies base (0.40x)

(-) Discount for lack of management team (0.25x)

(+) Increase for IP in Software 0.50x

New Target Multiple 5.21x

FY 2017 / 2018 EBITDA (80%) 8,800,000

FY 2018 / 2019 EBITDA (20%) 10,250,000

Weighted Average EBITDA $9,960,000

(x) Target Multiple 5.21x

Enterprise Value $51,841,800

Valuation Ranges Multiple Enterprise Value

Lower Range less 10% 4.68x $46,657,620

Mid Case 5.21x $51,841,800

Upper Range plus 10% 5.73x $57,025,980

0 1 2 3 4 5 6 7 8 9


Pipeline




Owner reliance


Processes in Place

Safety and systems


IT System



5

1

3 5

3

1

4

5

6

2

5

6 6

1 1 4

1 1

5

8

2

Brand

Offices

Website

Marketing

Customer mix

Contracts


New technologies

Accounting systems

Reporting




Acquisitions


Debt

Being sale ready




TargetRange

Lower Range 2


Mid Case


Upper Range 2

$42.0M $46.7M $51.8M $57.0M $62.7M


$51M and $57M

40,000,000 40,000,000

12,000,000

-

10,000,000.00

20,000,000.00

30,000,000.00

40,000,000.00

50,000,000.00

60,000,000.00




0

1 2

3

4

5

6

7

8




We have valued the company at $51.8 million today based on the information provided.

There are a range of valuation methods than can be employed – Discounted CashFlow, Market Method, Multiples Method, Public Markets Comparisons, FCFE, FCFF.

Each of these have unique characteristics. To value the company we employeda Multiples Method with discounts applied for each segment.

This method has been employed since there are a number of relevant market comparisons.

ʖ In order to enhance company value our consulting plan will specifically addressthese short comings. This will deliver up to $5-12 million in incremental value.

Example KPI Map The chart to the right illustrates the key KPIs for the Company

In our experience, business sales generally fall over or don’t generate the expected sale value due to:

ʖ Too much reliance on the owner/founder

ʖ Poor reporting and systems

ʖ Lack of contracts or customer spread 0 1 2 3 4 5 6 7 8 9


Pipeline




Owner reliance


Processes in Place

Safety and systems


IT System



5

1

3 5

3

1

4

5

6

2

5

6 6

1 1 4

1 1

5

8

2

Brand

Offices

Website

Marketing

Customer mix

Contracts


New technologies

Accounting systems

Reporting




Acquisitions


Debt

Being sale ready




TargetRange

Lower Range 2


Mid Case


Upper Range 2

$42.0M $46.7M $51.8M $57.0M $62.7M


$51M and $57M

40,000,000 40,000,000

12,000,000

-

10,000,000.00

20,000,000.00

30,000,000.00

40,000,000.00

50,000,000.00

60,000,000.00




0

1 2

3

4

5

6

7

8




Improvement Area Score

1 Brand 5

2 Offices 6

3 Website 4

4 Marketing 2

5 Customer mix 2

6 Contracts 2

7 Business development 7

8 New technologies 6

9 Accounting systems 9

10 Reporting 4

11 Auditing 1

12 Management team 9

13 Long term business plan 4

14 Pipeline of future growth 4

15 Acquisitions 6

16 Working capital management 4

17 Debt 5

18 Being sale ready 8

19 Mapping the buyer pool and sensing them out 5

20 Innovation and staff training 6

21 Introduction to potential employees and networks 4

360 Overview

0 1 2 3 4 5 6 7 8 9


Pipeline




Owner reliance


Processes in Place

Safety and systems


IT System



5

1

3 5

3

1

4

5

6

2

5

6 6

1 1 4

1 1

5

8

2

Brand

Offices

Website

Marketing

Customer mix

Contracts


New technologies

Accounting systems

Reporting




Acquisitions


Debt

Being sale ready




TargetRange

Lower Range 2


Mid Case


Upper Range 2

$42.0M $46.7M $51.8M $57.0M $62.7M


$51M and $57M

40,000,000 40,000,000

12,000,000

-

10,000,000.00

20,000,000.00

30,000,000.00

40,000,000.00

50,000,000.00

60,000,000.00




0

1 2

3

4

5

6

7

8




Before starting an engagement we typically outline up to 20 to 30 areas of interest where our team will assessthe quality and areas for improvement. Typically, with enough planning, most businesses can improve their score and ultimately their business value.

Scope of Project

Observation Discussion Effect on Company Timing

BrandThere is the opportunity to reposition Fredo Company to become a healthcare brand and company.

Repositioning as healthcare orientated will increase company value

Short Term

OfficesOpportunity exists to present a more professional business to customers and potential buyers. Changes would also allow for growth in employee base, and a nicer working environment. This may attract and retain staff.

Potential to increase exit multiple

Medium Term

Website

The current website is focused on the “old” business. Opportunity is to reposition towards “current” business and generate in-bound customer leads from aged care homes.We have a range of experts in this field who can assist.

More customers…lower customer concentration…

higher revenue and profits…..higher company

value

Short Term

Marketing

Effective online marketing through Google Adwords and LinkedIn could significantly increase customer sales opportunities.We have a range of experts in this field who can assist.

As above Short Term

Scope of Project


Customer mixAt present the company has a high customer concentration. Increasing the number of customers will diversify the business and result in a higher exit multiple.

Increase value by customer

diversificationShort Term

ContractsContract lengths and the terms of a contract can affect a sale negotiation and valuation. We have the opportunity to review and plan for the best outcome.

Increase value bycontract diversification

Short Term


Hiring resources and targeting new customers may lead to more customers and diversity of the customer base.

We may be able to assist with introductions to some customers.

Increase value Short Term

New technologiesTargeting the “new technology” may result in new revenue opportunities, but will also reposition the company as a “technology” player, which leads trends.

Potential to increasevalue by riding future

waves

Medium Term (adding this to the pipeline of growth)

Scope of Project


Accounting systemsHaving specific data on projects, customers and margins is important tobuyers as it explains how the finances of a business operate. Differentparts of the business will attract different valuation multiples.

Being able to quickly report metrics on the

business units will increase company value

Medium Term

Structure & governance

Regular management reporting will ensure that we are tracking our performance against budgets and goals. Formalising aspects of the business will bring structure and governance to the business. A buyers level of confidence will be improved through strong historical reporting as it reduces the risk that things will deteriorate post a sale.

Should increase exit multiple

Short Term

AuditingCleaning up the books, and having an independent party audit the financials will give buyers confidence in the figures that are presented.


Medium Term

Management teamDepth of management team derisks the business upon a business sale as it reduces the reliance on the owners. The goal in the year before a sale is to extract the owners from the day to day.


Medium Term

Scope of Project


Long term business planHaving a track record of setting plans and achieving them illustrates the strength of the business. Having a codified plan for future growth at the time of sale will give buyers confidence in what they are buying.


Medium Term

Pipeline of future growth Being able to show the pipeline of future growth (customer or project opportunities) will increase the confidence level of buyers.


Short Term

AcquisitionsThere are likely small businesses in the sector with some attractive characteristics. An opportunity may exist to acquire some of these at low prices, and integrate them into the company.

May increase exit valuation Medium Term

Working capital managementShowing a consistent level of working capital and strong conversion of profit to cash flow will increase the attractiveness of the company to buyers.


Medium Term

Debt

Often private companies see debt as the enemy. However a business with $5m of EBIT will be able to source bank debt without personal guarantees at interest rates of 5-6% per annum. Aside from being a cheap source of capital, having a relationship and track record with a bank can provide buyers with confidence about the strength of the business.

May increase exit multiple Medium Term

Scope of Project


Being sale ready

A sale can take between 2 and 12 months. Being nimble and sale ready can result in a great outcome. Large buyers are opportunistic, and being able to execute a quick sale if the offer is attractive can be the right decision. We recommend building a base sale dataroom in the next year.

May result in an exit being achieved where otherwise

unlikelyMedium Term


We will assemble a large potential buyer pool and begin sensing out their interest in acquisitions early on. We will also start to consider international buyers.

Results in correct decisions being made and refining

business plan to suit buyer market

Medium Term

Innovation and staff trainingImplementing best practice and developing the employees will result in higher staff retention and new business opportunities.

Should increase profitability Medium Term


Through our networks we know people who may make great additions to thecompany.

May improve teams performance

Medium Term

Why Nash?Nash Advisory is a boutique mergers and acquisitions firm that focuses on financial advisory services for high growth companies, business owners and entrepreneurs, managers and investors. Our Melbourne based team, who are investors in several business themselves, can provide practical advice with unique and tailored solutions for every client. Nash Advisory is named after the Nobel Prize winner John Nash, who changed modern day economic theory through his Equilibrium Theory. Our role for most of our client engagements requires Game Theory – that is, analysing multiple potential outcomes by configuring a range of assumptions.

MelbourneLv 12, 459 Little Collins St

SydneyLevel 15, 1 Castlereagh St

BrisbaneLevel 22, 127 Creek St Our

Locations

1300 860 917 www.nashadvisory.com.au

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