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Business valuation oct 2011

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Presentation showing key business valuation concepts and how to improve your bsuiness valuation.

Presentation showing key business valuation concepts and how to improve your bsuiness valuation.

Published in: Business, Economy & Finance
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  • 1. Business Valuation Craig West
  • 2. iSelect buys Infochoice, BidMyLoan and Once Life for $33.5 million (May 2011) iSelect announced this morning the acquisition of Once, which is the major shareholder in financial comparison site Infochoice. The company was founded 15 years ago, and in March recorded a 37% increase in revenue for the 2010-11 financial year, along with a full-year profit of $216,462. VALUATION EXAMPLES :
  • 3. Yahoo!7 buys group buying site Spreets for $40m (Jan 2011) Spreets was only launched in February 2010 VALUATION EXAMPLES :
  • 4. EBITDA * earnings multiple = valuation VALUATION FORMULA :
  • 5. Earnings before interest, tax, depreciation and amortisation. Normalized earnings - add backs, adjustments, market salary etc. EBITDA
  • 6. Case Study Worksheet : The Facts Dollar Value 2009 EBITDA $ 800,000 2010 EBITDA $ 900,000 2011 EBITDA $ 1,000,000 2012 Estimate $ 1,400,000
  • 7. Case Study Worksheet : The Facts Add Backs Director One is paid $450,000 p.a. - $ 250,000 Director 2 takes only $50,000 in Super $ 150,000 Net Adjustment - $ 1,000,000
  • 8. Valuation Formula "Price is what you pay – Value is what you get " Warren Buffett
  • 9. 1.Earnings 2.De-risk 3.Multiple Value drivers
  • 10. EBITDA Financial analysis Gross profit + 5 % Reduce expenses - 5% Increase sales + 5% Earnings
  • 11. Financial Analysis
  • 12. Now Change New Sales 2500 + 5% 2625 Gross Profit 1400 + 5% 1543.50 Expenses 850 - 5% 807 EBITDA 550 33.9% 736.50
  • 13. Decrease risk Strategic buyer Listed company Sales multiple
  • 14. Non- financial analysis Owner dependence Reverse due diligence Advisory board Key people Decrease risk
  • 15. Non Financial Analysis
  • 16. “When I go into any business deal my chief thoughts are on how to save myself if things go wrong” J Paul Getty
  • 17. 1 + 1 = 3 Offshore buyer Listed company Strategic buyer
  • 18. Valuation Australian Business Pty Ltd $500K profit EXIT To achieve a higher sale price, its much smarter to focus on HOW to sell and WHO to sell to, rather than trying to increase profit. Sale to Listed Company @ 6 x = $ 3 million Strategic Sale @ 4 x = $ 2 million Trade Sale @ 2 x = $ 1 million
  • 19. Net proceeds is the important $ CGT – small business concessions. Structures – who owns assets – before and after Other costs - legal, accounting, other fees.
  • 20. Case Study - Answers WAME: $1,080,000 Multiple: 3.80 Valuation: $ 4,104,000
  • 21. What Next? Further information on our website: www.successionplus.com.au Complete feedback form to be added to our newsletter Arrange a free 90 minute review
  • 22. Craig West 1300 665 473 cwest@successionplus.com.au Visit www.successionplus.com.au Follow us on:

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