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Kevin Uphill Avondale

The Market Today & Business Valuations. Kevin Uphill Avondale. www.avondale.co.uk. The Market . Avondale SME/mid tier commercial focus. 35 transactions pa. Organic growth slow driving acquisitions (average 5 bids per project ).

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Kevin Uphill Avondale

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  1. The Market Today & Business Valuations Kevin Uphill Avondale www.avondale.co.uk

  2. The Market • Avondale SME/mid tier commercial focus. 35 transactions pa. • Organic growth slow driving acquisitions (average 5 bids per project). • Fast change driving interest in niche companies with products. www.avondale.co.uk

  3. Advanced economies no longer driving global GDP growth Global market • 2011 Global economy worth 69,659,626 million US dollars. • The United Kingdom is world’s 7th largest economy. • Over 300,000 companies in UK employ more than 6 people. Source: IMF, www.avondale.co.uk

  4. The UK M&A market UK output- Recovery lagging last two recessions Spare capacity increases competitive factors and creates driver for consolidation and Mergers and Acquisitions (M&A) activity. Interest rates low to 2015? 9 1981 8 7 1992 6 5 Weak credit arena/volatility creating drag. 4 2011 3 2 1 0 Overall 2012 M&A activity (by value) increased on 2011 with Europe most active due to consolidation. Activity down 20% on 2007 but down only 10% in sub £250m arena. 1st qtr2013 increased on 2012. 1 2 3 4 5 6 7 8 9 10 11

  5. Motivations • Sellers • Personal/strategic cross roads • Growth in sector • House in order • Elevator deal • Leap of faith • Buyers • House in order • Organic growth slow • Create shareholder value • Strategic • (New products/team/services) • Strategic deals • + Economies 1 • + Synergy 1 • + Value influence 1 • Sum 6 www.avondale.co.uk

  6. Valuation Methods • Discounted cash flow forecast or price earnings multiple of profits • Debt free/cash free • Adjustments to profits • Valuations are financial forecasts to exceed in the process www.avondale.co.uk

  7. www.avondale.co.uk

  8. Adjusted Balance Sheet Surplus cash negotiate extra to deal for tax savings but be warned buyers will try and include as goodwill, if its there. Consider tax instrument to remove surplus – EFURBS? Debt- Long term liabilities Less - Cash www.avondale.co.uk

  9. Adjusted Profit & Loss Forecast Financial value x 4 est. 4 x £316k = £1.26 ml Actual Marketed on Offers 4 bids Offer achieved £1.9 ml --------------------------------- Dutch co seeking UK base www.avondale.co.uk

  10. 2. Deferred Payment 1. On Completion £1,450,000 3. Earn out £ 225,000 Deal Structure £ 225,000 Deal structure is a multiple influencer 4. Total£1,900,000 Protections Charges on shares for deferred Earn out on gross not profit- easier to define Earn out on current not growth Protections business to be run materially same Quality buyer/covenant Access to records Reverse non compete www.avondale.co.uk

  11. Strategic Deals Case Studies Positioning - Modelling - Deal Structure 35% of projects international buyers 2013 www.avondale.co.uk

  12. Business Value by Design • Business Angel yourself (think like an investor) • How much time do you spend on strategy versus management? • How do you design a better value business? • What is your worst envelope? • RECURRING REVENUE | NICHE PRODUCTS | REDUCE RISK • BARRIERS TO ENTRY | TEAM- NOT OWNER DRIVEN • REAL TIME DASHBOARD | PROSPECTS Management Strategy The Profit Engine Company Foundation www.avondale.co.uk

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