MARKET VALIDATION ANALYSIS A confidential comprehensive analysis of TRUE company market value.  For owners and shareholder...
MVA vs.  BUSINESS APPRAISAL  <ul><li>A  is generally a financial evaluation driven by historical  performance, using exist...
VALUATION DIFFERENCES <ul><li>“Seven offers ranged from financial evaluation    1.5 times cash flow to market valuation  ...
IRS R.R. 59-60 <ul><li>“No formula can be devised that will be generally applicable to the multitude of different valuatio...
VALUATION ISSUES <ul><li>DRIVERS </li></ul><ul><ul><li>Growing Company </li></ul></ul><ul><ul><li>Growth Industry/Market <...
VALUATION ISSUES <ul><li>DETRACTORS </li></ul><ul><ul><li>Customer Concentration </li></ul></ul><ul><ul><li>Product/Suppli...
FOCUS Economic & Industry Outlook <ul><li>US/International Economic Outlook </li></ul><ul><ul><li>Industry Dynamics/Trends...
FOCUS M & A Environment <ul><li>Financial/Capital Markets </li></ul><ul><li>Cross Border Trends </li></ul><ul><ul><li>“ Th...
FOCUS Company Analysis <ul><li>FINANCIAL </li></ul><ul><ul><li>Recast Historical Statements </li></ul></ul><ul><ul><li>Rev...
FOCUS Company Analysis  [cont.] <ul><li>Products and Services </li></ul><ul><ul><li>Markets and Customers </li></ul></ul><...
FOCUS Company Analysis  [cont.] <ul><li>SWOT Analysis </li></ul><ul><ul><li>Internal Strengths </li></ul></ul><ul><ul><li>...
FOCUS Value Analysis <ul><li>Income Approach </li></ul><ul><ul><li>Discounted Future Earnings </li></ul></ul><ul><ul><li>C...
CONCLUSION <ul><li>Range of Values and Reconciliation </li></ul><ul><ul><li>Fair Market Value/Strategic Investment Value <...
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Market Validation Analysis for selling owners and shareholders of privately held companies only

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The valuation process for selling owners and shareholders of privately held companies.

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Market Validation Analysis for selling owners and shareholders of privately held companies only

  1. 1. MARKET VALIDATION ANALYSIS A confidential comprehensive analysis of TRUE company market value. For owners and shareholders, an MVA is a critical value audit prior to entering the mergers & acquisitions marketplace.
  2. 2. MVA vs. BUSINESS APPRAISAL <ul><li>A is generally a financial evaluation driven by historical performance, using existing financial and organizational resources. </li></ul><ul><li>An is a market-based valuation driven by potential future performance, with new (likely greater) financial and organizational resources coming from a premium strategic buyer. </li></ul>Avalon Advisors, Inc. Business Appraisal MVA
  3. 3. VALUATION DIFFERENCES <ul><li>“Seven offers ranged from financial evaluation  1.5 times cash flow to market valuation  7.6 times cash flow. </li></ul><ul><li>The spread is quite pronounced.” </li></ul><ul><li>Business Week </li></ul>Avalon Advisors, Inc.
  4. 4. IRS R.R. 59-60 <ul><li>“No formula can be devised that will be generally applicable to the multitude of different valuation issues… Valuation… is, in essence, a prophecy as to the future.” </li></ul><ul><li>Formulas can express value, but cannot determine value. </li></ul>Avalon Advisors, Inc.
  5. 5. VALUATION ISSUES <ul><li>DRIVERS </li></ul><ul><ul><li>Growing Company </li></ul></ul><ul><ul><li>Growth Industry/Market </li></ul></ul><ul><ul><li>Experienced Management Team </li></ul></ul><ul><ul><li>Experienced Workforce in Place </li></ul></ul><ul><ul><li>Reliable Financial Reporting </li></ul></ul><ul><ul><li>Broad and Transferable Customer Base </li></ul></ul><ul><ul><li>Proprietary Products and Services </li></ul></ul>Avalon Advisors, Inc.
  6. 6. VALUATION ISSUES <ul><li>DETRACTORS </li></ul><ul><ul><li>Customer Concentration </li></ul></ul><ul><ul><li>Product/Supplier Concentration </li></ul></ul><ul><ul><li>Declining Industry/Market </li></ul></ul><ul><ul><li>Management Exit </li></ul></ul><ul><ul><li>Pending Litigation/Liabilities </li></ul></ul><ul><ul><li>100% Cash Purchase Terms </li></ul></ul><ul><ul><li>Talking to Only One Buyer </li></ul></ul>Avalon Advisors, Inc.
  7. 7. FOCUS Economic & Industry Outlook <ul><li>US/International Economic Outlook </li></ul><ul><ul><li>Industry Dynamics/Trends </li></ul></ul><ul><ul><li>Competitive Environment </li></ul></ul><ul><ul><ul><li>Porter’s Five Forces </li></ul></ul></ul><ul><ul><ul><li>Existing Rivalries </li></ul></ul></ul><ul><ul><ul><li>Barriers to Entry for New Competitors </li></ul></ul></ul><ul><ul><ul><li>Potential for Substitute Products/Technologies </li></ul></ul></ul><ul><ul><ul><li>Bargaining Power - Suppliers </li></ul></ul></ul><ul><ul><ul><li>Bargaining Power - Customers </li></ul></ul></ul>Avalon Advisors, Inc.
  8. 8. FOCUS M & A Environment <ul><li>Financial/Capital Markets </li></ul><ul><li>Cross Border Trends </li></ul><ul><ul><li>“ The World is Flat” </li></ul></ul><ul><li>Identify Potential Strategic Buyers </li></ul><ul><ul><li>U.S. and International Research </li></ul></ul><ul><ul><ul><li>Operating Companies </li></ul></ul></ul><ul><ul><ul><li>Private Investment Groups </li></ul></ul></ul>Avalon Advisors, Inc.
  9. 9. FOCUS Company Analysis <ul><li>FINANCIAL </li></ul><ul><ul><li>Recast Historical Statements </li></ul></ul><ul><ul><li>Revenue Trends Analysis </li></ul></ul><ul><ul><li>Pro Forma/Forecast Statements </li></ul></ul><ul><ul><li>Financial Fitness </li></ul></ul><ul><ul><ul><li>Growth Rate </li></ul></ul></ul><ul><ul><ul><li>Financial Strength </li></ul></ul></ul><ul><ul><ul><li>Management Effectiveness </li></ul></ul></ul><ul><ul><ul><li>Efficiency Ratios </li></ul></ul></ul>Avalon Advisors, Inc.
  10. 10. FOCUS Company Analysis [cont.] <ul><li>Products and Services </li></ul><ul><ul><li>Markets and Customers </li></ul></ul><ul><ul><li>Sales and Marketing Strategy </li></ul></ul><ul><ul><li>Suppliers </li></ul></ul><ul><li>Facilities </li></ul><ul><li>Ownership/Succession Plan </li></ul><ul><li>Operations </li></ul>Avalon Advisors, Inc.
  11. 11. FOCUS Company Analysis [cont.] <ul><li>SWOT Analysis </li></ul><ul><ul><li>Internal Strengths </li></ul></ul><ul><ul><li>Internal Weaknesses </li></ul></ul><ul><ul><li>External Opportunities </li></ul></ul><ul><ul><li>External Threats </li></ul></ul>Avalon Advisors, Inc.
  12. 12. FOCUS Value Analysis <ul><li>Income Approach </li></ul><ul><ul><li>Discounted Future Earnings </li></ul></ul><ul><ul><li>Capitalization of Earnings </li></ul></ul><ul><li>Market Approach </li></ul><ul><ul><li>Comparable Transaction Analysis </li></ul></ul><ul><ul><li>Guideline Transactions (Public) </li></ul></ul><ul><li>Asset Approach </li></ul><ul><ul><li>Duplication Cost Analysis </li></ul></ul><ul><ul><li>Intangible Asset Analysis </li></ul></ul>Avalon Advisors, Inc.
  13. 13. CONCLUSION <ul><li>Range of Values and Reconciliation </li></ul><ul><ul><li>Fair Market Value/Strategic Investment Value </li></ul></ul><ul><li>Making the Decision </li></ul><ul><ul><li>Personal Financial and Tax Planning </li></ul></ul><ul><ul><li>Sale of Stock to the Public (IPO) </li></ul></ul><ul><ul><li>Outright Sale of the Company </li></ul></ul><ul><ul><li>Legal Issues Advisory </li></ul></ul><ul><li>Develop Appropriate Exit Strategy </li></ul>Avalon Advisors, Inc.

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