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The Market Today and Valuation

The Market Today and Valuation. Avondale - Master brokerage in commercial business sales, acquisitions and strategy. 40 transactions pa. Organic growth slow > Acquisitions high (average 4 bids). Strategic deals + Economies 1 + Synergy 1 + Value influence 1 6.

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The Market Today and Valuation

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  1. The Market Today and Valuation Avondale - Master brokerage in commercial business sales, acquisitions and strategy. 40 transactions pa. Organic growth slow > Acquisitions high (average 4 bids) Strategic deals + Economies 1 + Synergy 1 + Value influence 1 6 BUSINESS SALES | ACQUISITIONS | STRATEGY www.avondale.co.uk

  2. ValuationsVarious methods Discounted cash-flow • IP/capital projects/Start ups Price Earnings Ratio • PBIT/EBITDA Include net assets • Debt free/cash free/ What assets? • Revalue P/E What profits? • Sustainable/art Earnings BUSINESS SALES | ACQUISITIONS | STRATEGY www.avondale.co.uk

  3. P/E Multiples PBIT/EBITDA £000’s Forecasts . Sector . Sustainability . IP . Contracts . Risk. Prospects . Competition . Team . Brand . Track-record. Strategic deal .

  4. Adjusted Profits- example Forecast Financial value x 4 est. 4 x £316k = £1.26 ml Debt free/cash free • Actual Marketed on Offers 3 bids Offer achieved £1.8 ml (with earn out) --------------------------------- Dutch co seeking UK base

  5. Hire company case study (deal structures) 2. Deferred Payment 1. On Completion 3. Performance payment 4. Total ________ • Fixed guaranteed with a 2nd charge in case of default £ 225,000 • Monthly payments diminishing risk • Strong buyer covenant • Cash is king £ 1,350,000 • On current performance (not growth) £ 225,000 • On Gross profit (easy to define) • Business to be run materially same as present • Director retained for duration • Detailed heads of terms £ 1,800,000 • Retain shares, earn out on growth? • Access to records • Reverse non compete Structure is a multiple Influencer

  6. Care agency (deal structures) 2. Performance payment 1. On Completion 3. Total ________ • Cash is king • Included £300k Net asset value £ 2,200,000 • Average of next 2 yrs Earnings before interest, depreciation • Protections and definitions included in heads for EBITDA • Vendors retained 20% until final payment • Vendors to stay and ensure handover • On Gross profit (easy to define) • Business to be run materially same as present • 50% held on Escrow reduce risk • Director retained for duration £ 400,000 • Detailed heads of terms £ 2,600,000 • Access to records • Reverse non compete Structure is a multiple Influencer

  7. Types of deal (summary) Cash deal Earn Out Performance Related Elevator Deal Mix of All BUSINESS SALES | ACQUISITIONS | STRATEGY www.avondale.co.uk

  8. Maximising Value & Process Positioning the business correctly to the right strategic buyers in an auction can increase value by 200% or more 2012 (average 4 bids)

  9. THE SALE PROCESS DELIVERY COMPLETE ACCEPT COMPETITIVE OFFERS Conclude SHORTLISTEDBUYERS Exclusivity Best value RESEARCH & MARKING Aspiration Value INFO MEMORANDUM Determined Approaches International? BESPOKE6 - 12 months BUSINESS SALES | ACQUISITIONS | STRATEGY www.avondale.co.uk

  10. Negotiation & Project management Think 4 Moves Ahead Non Adversarial Alternatives Project Management Hardball with a smile The competition is... Get the right team Ensure information prepared Ruthless timetable. Winning isn't everything--but wanting to win is.” ― Vince Lombardi Listen, Anticipate, plan

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