Mva Avalon Presentation 10 08

MARKET VALIDATION ANALYSIS A confidential comprehensive analysis of TRUE company market value. For company owners and shareholders, an MVA is a critical value audit prior to entering the mergers & acquisitions marketplace. Avalon Advisors, Inc.

MVA vs. BUSINESS APPRAISAL
A is generally a financial evaluation driven by historical performance, using existing financial and organizational resources.
An is a market-based valuation driven by potential future performance, with new financial and organizational resources coming from a premium strategic buyer.
Avalon Advisors, Inc. Business Appraisal MVA

VALUATION DIFFERENCES
“Seven offers ranged from financial valuation
—1.5 times cash flow to market valuation—7.6 times cash flow.
The spread is quite pronounced.”
Business Week
Avalon Advisors, Inc.

IRS R.R. 59-60
“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.”
Formulas can express value, but cannot determine value.

VALUATION ISSUES
Drivers
Growing Company
Growth Industry/Market
Experienced Management Team
Experienced Workforce in Place
Reliable Financial Reporting
Broad and Transferable Customer Base
Proprietary Products and Services

VALUATION ISSUES [cont.]
Detractors
Customer Concentration
Product/Supplier Concentration
Declining Industry/Market
Management Exit
Pending Litigation/Liabilities
100% Cash Purchase Terms
Talking to Only One Buyer
Negative Company Growth

FOCUS Economic & Industry Outlook
US/International Economic Outlook
Industry Dynamics/Trends
Competitive Environment
Porter’s Five Forces
Existing Rivalries
Barriers to Entry for New Competitors
Potential for Substitute Products/Technologies
Bargaining Power - Suppliers
Bargaining Power - Customers

FOCUS M & A Environment
Financial/Capital Markets
Cross Border Trends
“ The World is Flat”
Identify Potential Strategic Buyers
U.S. and International Research
Operating Companies
Private Investment Groups

FOCUS Company Analysis
Financial
Recast Historical Statements
Revenue Trends Analysis
Pro Forma/Forecast Statements
Financial Fitness
Growth Rate
Financial Strength
Management Effectiveness
Efficiency Ratios

FOCUS Company Analysis [cont.]
Products and Services
Markets and Customers
Sales and Marketing Strategy
Suppliers
Facilities
Ownership/Succession Plan
Operations

FOCUS Company Analysis [cont.]
SWOT Analysis
Internal Strengths
Internal Weaknesses
External Opportunities
External Threats

FOCUS Value Analysis
Income Approach
Discounted Future Earnings
Capitalization of Earnings
Market Approach
Comparable Transaction Analysis
Guideline Transactions (Public)
Asset Approach
Duplication Cost Analysis
Intangible Asset Analysis

CONCLUSION
Range of Values and Reconciliation
Fair Market Value/Strategic Investment Value
Making the Decision
Personal Financial and Tax Planning
Sale of Stock to the Public (IPO)
Outright Sale of the Company
Legal Issues Advisory
Develop Appropriate Exit Strategy

Mva Avalon Presentation 10 08

by Avalon Advisors, Inc. on Aug 21, 2009

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