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Valuing Your Government Contractor Business John T. Schell Special Briefing The McLean Hilton

Valuing Your Government Contractor Business John T. Schell Special Briefing The McLean Hilton October 3, 2001. What is Your Business Worth?. Book Value? Liquidation Value? Fair Market Value Financial Buyer Stock Price (Public Company) Adjusted Cash Flow (Private Company)

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Valuing Your Government Contractor Business John T. Schell Special Briefing The McLean Hilton

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  1. Valuing Your Government Contractor Business John T. Schell Special Briefing The McLean Hilton October 3, 2001

  2. What is Your Business Worth? • Book Value? Liquidation Value? • Fair Market Value • Financial Buyer • Stock Price (Public Company) • Adjusted Cash Flow (Private Company) • Revenues (Small, specialty only) • Strategic Buyer • Market (Agencies, programs, expertise, etc.) • Buyer can consolidate and improve cash flow. • Buyer can generate cash flow from other areas. Holland & Knight Consulting Strategic Business Solutions

  3. What Kind of Cash Flow? EARNINGS Plus Non-cash charges Plus Owners’ Perks and Excess Salary Plus Non-recurring Expenses Less Non-recurring Revenues ADJUSTED INCOME Plus Interest Plus Taxes Plus Depreciation Plus Amortization EBITDA Key Issue: Historical or Forecast? Holland & Knight Consulting Strategic Business Solutions

  4. Valuation of Cash Flow • Relevant Methods • Discounted Cash Flow • Capitalization of Earnings. • Payback on EBITDA. • Calculation vs. Market Comparables. • Reduce by Outstanding Debt. Holland & Knight Consulting Strategic Business Solutions

  5. Estimate of True Value • Contractors Providing Services: 3x-5x EBITDA • Titan/BTG: 4.24x 2001 EBITDA • Adjust for Variables, e.g: • Interest in Government Sector. • Agencies served (Intelligence, GSA, etc.) • Contract Backlog, Terms, Follow-on Work. • Modify for Earn-outs, Stock, Seller Financing. • Abundance and Viability of Contract Vehicles. • Value-Added Work, Technical Skills and Margins. • Task Order Win Rate. Holland & Knight Consulting Strategic Business Solutions

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