Want to raise your company’s share price or valuation? Look beyond the benchmark. In this slide presentation from our October 2013 webinar with Proformative, RoseRyan CEO Kathy Ryan and Assay Founding Partner Adrian Bray reveal the science of increasing value throughout an organization and identify key factors that affect company valuation.

1. Ask, Share, Learn – Within the Largest Community of Corporate Finance Professionals
Best Practices in Understanding and
Increasing Your Company’s Valuation

2. Learning Objectives
A"er
par(cipa(ng
in
this
event
you
will
be
able
to:
 Understand
the
key
factors
driving
your
company’s
valua(on,
and
the
importance
of
having
an
equity
strategy
in
place
 Discover
ac(onable
advice
about
delivering
best
in
class
analyst
presenta(ons,
equity
storyboarding
and
more
 Learn
how
investors
look
at
financial
integrity
and
accountability
and
its
impact
on
valua(ons

3. Proformative Event Notes
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© 2013 Proformative. Proprietary and confidential

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5. Ask, Share, Learn – Within the Largest Community of Corporate Finance Professionals
Best Practices in Understanding and
Increasing Your Company’s Valuation
Kathy Ryan
CEO, RoseRyan
Adrian Bray
Founding Partner, Assay

6. Agenda
• Introduction
• Getting to Benchmark
• Building Blocks of Value
• Q&A

7. Very Wide Audience
• Public Companies – market response provides immediate
quick response on how company is performing
• Private Companies – VC or Private Equity ownership
– Quarterly to annual conversations about exit
• Family built companies (e.g., first generation)
– No outside ownership
– Could be 20 years or a lifetime before valuation is known
• Nuances exist between each market segment
• However, underlying best practices are similar
• To maximize valuation you must prove you have mitigated
your risks and that you have assets that someone would
buy

8. Chutes and Ladders

9. Keeping Your Company at Benchmark
• All industry sectors have a benchmark
– Applies whether private or public
• Factors considered
–
–
–
–
P&L: revenue and costs
Balance sheet: assets and liabilities
Management team
External factors
• Best practices
– Financial integrity
– Prepare, prepare, prepare

10. How Not to Get Discounted
• Financial statements in good order
• How assets become liabilities
• How liabilities can take you out
• Risk mitigation
• Management team indicators
• External factors

11. Financial Statements in Good Order Private
• Completed
– Monthly basis
– Key financial metrics summarized
– Readily available
• Auditable systems
• US GAAP or IFRS
– Integrated financials: P&L, Balance Sheet,
Cash Flow
• Audited financial statements
– Best practice is 3 years

12. Financial Statements in Good Order Public
• Ditto from private company slide
• Have systems in place
• Hone financial close process
• Address talent gaps in finance
and accounting team
• Address technical issues early on
• Have an engaged disclosure
committee

13. How Assets Become Liabilities
• Objectionable Assets
– Significant idle cash
– Obsolete assets
– Personal assets: yachts, airplanes, art
collections, hobbies
• Intangible assets: know what you own
–
–
–
–
Patents
Trademarks
Copyrights
Intellectual property

14. Liabilities Can Take You Out
• Settle lawsuits
• Terminate unfavorable contracts – don’t hope they get
better
• Document loans to shareholders and employees
• Lack of accounting systems and processes can create
liabilities
• Contingent liabilities
–
–
–
–
Workforce
Warranty
Lawsuit
Guarantee of another party’s loan
• Foreign subsidiary
• Taxation

15. Risk Mitigation—Not Just for Big
Companies
• Financial Planning & Management
Discipline
– Build thoughtful projections to share
– Operating results relative to plan for recent
past periods
– Key financial metrics that management uses
to track the business
– Critical underpinnings of projections
• Corporate records in good order
– Board Minutes
– Cap Table – who owns what
– Corporation is in good standing with the filing
“bodies”
– Articles have the right approved shares

16. Risk Mitigation—Corporate Governance
• Corporate governance
– Internal audit
– Sarbanes-Oxley
• ERM (Enterprise Risk Management)
– Identifies key business risks in every aspect of your operations
– Gives management knowledge needed to develop a plan to
reduce risks

17. Confidence in Management Team
• Good financials
• Documents readily available
• Internal controls in place
• Having a plan and working to the plan
• Management succession, skills development and the
right profile for your strategy

18. Example: Public company
$35
$30
$25
FDA approval
Missed distribution strategy = Lower revenue projections
Proxy
fight
se@led;
new
CEO
$20
$15
Proxy
fight
begins
$10
$5
$0
Another
new
CEO

19. So What Does This Mean
• Minimizing / mitigating risk
• Gives investors / buyers / banks
confidence in your team and your
business
• Systematic approach to achieving
benchmark target
• These steps help you get to the
industry benchmark
• Without them, you’re leaving a lot on
the table

20. Thank
You
© 2012 Proformative. Proprietary and confidential

21. Ask, Share, Learn – Within the Largest Community of Corporate Finance Professionals
Building Blocks of Value
Adrian Bray
Founding Partner, Assay

22. Drivers
B/S

23. Drivers
P&L
B/S

24. Drivers
Strategic Assets
P&L
B/S

25. Outperform
Neutral
Underperform

26. Strategic Assets
P&L
B/S

27. What’s in your control?
Valua0on
=
Profit
X
Mul0ple

28. Best Practices:
Private / Family Owned
•
•
•
•
•
•
•
•
•
Know
your
secret
sauce
Understand
drivers
for
today’s
&
tomorrow’s
revenue
Use
a
business
plan
(even
1
pager)
Monitor
the
variance
to
the
plan
Create
a
Valua(on
plan
-­‐>
mul(ple
&
secret
sauce
Hire
the
right
team
with
the
right
skills
Do
the
right
things
Understand
your
resource
alloca(on
mix
Know
your
risk
profile
versus
your
team’s

29. Best Practices:
Private Company with External Investor
•
•
•
•
•
•
•
As
Private
Understand
financial
partners’
expecta(ons
and
(me
horizon
Have
/
Know
Equity
and
Valua(on
Strategy
Plan
Build
the
team
to
deliver
their
exit
Create
board
presenta(ons
from
their
perspec(ve
Financials
show
the
past
–
you
must
demonstrate
the
future
Prove
the
assets
you
are
building

30. Best Practices – Public Company
• Have
a
Share
Price
Strategy
for
both
Profit
&
Mul(ple
• Create
an
equity
story
board
-­‐>
Investor
Rela(ons
Messaging
• Perform
investor
presenta(on
review
• Conduct
external
benchmark
for
investor
impact
• Understand
your
investors
• Be
honest:
do
your
investors
understand
you?
• Ensure
all
communica(ons
are
in
investor
language
• Deliver
on
your
promise
• Communicate
the
Strategic
Assets
and
their
value

31. Strategic Assets
• Future
profits
• Philosophy
/
DNA
• Creates
compe((ve
advantage
• Scalable
model
that:
– Creates
unique
opportunity
– Repeatable
– Harnesses
product
/
systems
innova(on

32. Example of Strategic Assets: Talent
Talent/
Culture

33. Example of Strategic Assets: Talent
• Gateway
to
the
other
ladder
rungs
• Determine
the
right
talent
• Manage
current
talent
issues
• Have
and
manage
your
talent
philosophy
/
culture
• Understand
what
is
different
for
$10M,
$20M,
$200M
or
$5B
business
• Must
be
PROVED
–
develop
quan(ta(ve
proof
points
to
support
your
claims

34. Talent Example #1 (Private Company)
Company
A
•
Telecommunica(ons
services
company
•
•
Owners
were
husband
and
wife
team
Strong
technical
and
project
management
skills
•
•
Internal
training
programs
-­‐>
at
least
two
systems
Delivery
checklists
to
ensure
components
to
deliver
98%
comple(on
rate
during
the
first
visit
•
Off-­‐the-­‐shelf
job
dispatching
system
married
with
a
predic(ve
tool
to
guarantee
technician
shows
up
exactly
at
appointed
(me
(not
the
2
to
4-­‐hour
window
standard
in
the
industry)
•
The
system
also
enabled
3
hour
emergency
call
responsiveness
•
Hired
engineers
who
were
aligned
with
their
customer
service
philosophy
Sold
company
for
7.5x
EBITDA,
a
premium
of
39%
over
the
industry
average
of
5.4x

35. Talent Example #2 (Private Company)
Company
B
•
Same
Industry
-­‐>
wanted
to
acquire
an
IT
services
firm
•
15
local
firms
-­‐>
2
serious
nego(a(ons
with
Companies
B
&
C
•
Companies
B
&
C
were
similar
revenue
size
•
B
growing
~
10%
per
year;
C
stagnant
for
a
number
of
years
•
Company
B
young,
invigorated
workforce,
management
team
using
technology
to
provide
services
remotely
=
fix
more
client
issues
per
hour,
genera(ng
more
revenue
per
employee
than
compe((on;
on-­‐
site
visits
were
scheduled
only
when
necessary
•
Conversely,
Company
C
used
its
original
system
and
approach
to
solve
customer
problems
on-­‐site.
Everyone
thought
being
in
front
of
the
customer
was
just
as
important
as
solving
their
problems.
It
was,
once.
•
Lot
of
customer
dissa(sfac(on
with
C
as
user
expecta(ons
evolved,
poor
response
(me
as
they
over
serviced
clients
and
increasingly
were
unable
to
solve
a
problem
the
first
(me
around.
Company
B
:
Acquired
and
was
rewarded
with
a
8x
mul(ple,
or
a
48%
premium.
Company
C:
Enterprise
value
was
in
the
range
of
2.75x-­‐3x,
a
44-­‐49%
discount
from
the
5.4x
industry
average.
Company
C
was
considered
too
high
risk,
requiring
too
much
investment

36. Other examples
In every sector there is a player that focuses on the talent
and culture:
– Finance Sector
– Real Estate
– Aggregates

37. Talent and Management Team
• Double
edged
sword!
– Business
Management
-­‐>
More
than
ensuring
profit
• Build
capability
for
tomorrow
• Create
the
talent
philosophy
underpinning
the
culture
• Ensure
that
the
talent
delivers
• Ac(vely
manage
the
culture
from
both
the
top
down
and
delivered
via
the
boCom
up
• Example:
Move
away
from
Print
to
Online
– Board
were
all
print
people
and
resistant
to
having
online
people
on
the
board
as
they
were
not
aligned
with
the
‘old
culture’
– Valua(on
of
the
business
reduced
by
over
50%
in
2
years

38. Summary
• Get your financial statements in order
• Manage your assets wisely
• Mitigate your risks
• Improve your valuation by focusing on the Multiple
• Develop an actionable “share price strategy”
• Know the key drivers of your share price strategy, and in which order
to build upon them, to maximize your outcome
Contact Us:
Learn more:
Kathy Ryan, kryan@roseryan.com
www.roseryan.com
Watch the valuation video:
www.bitly.com/valuation2
Adrian Bray, abray@assayip.com
www.assayip.com
Read the valuation paper:
www.bitly.com/valuation3

39. Thank
You
© 2012 Proformative. Proprietary and confidential