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![VALUATIONVALUATION
Theories Behind Premiums and DiscountsTheories Behind Premiums and Discounts
Maximum value
attributable to a
strategic buyer
Sale value
MBO
LBO
Premium for strategic
value / synergies
Controlling interest
value
($ in millions, except share price)
Fully Diluted Shares 100.0
Share price $20.00
Market Value of Equity $2,000.0Controlling
Interest
Investment Value
IIRONRONHHORSEORSE LLCLLC
1414
MBO
LBO
IPO
Public trading
Non-public stock
Premium for
control
Minority interest
discount
Discount for lack of
marketability
Minority interest
value
plus: Total Debt (book) 1,500.0
less: Converted Debt 0.0
plus: Preferred Stock 200.0
less: Converted Preferred 0.0
less: Cash & Cash Equivalents 100.0
plus: Minority Interest in Subs 0.0
Enterprise Value $3,600.0
Discount for lack of marketability / liquidity
[NYSE vs. OTC:BB]
Non-Marketable
Minority
Value
Marketable
Minority
Value
Interest
Value](https://image.slidesharecdn.com/5f3560ef-e2b2-4b52-bb1e-408552d5d211-161209202018/85/IronHorse-Business-valuation-presentation-14-320.jpg)
![VALUATIONVALUATION
DriversDrivers (cont.)(cont.)
Qualitative characteristicsQualitative characteristics
•• Quality and depth of managementQuality and depth of management
•• Customer and vendor concentrationCustomer and vendor concentration
•• Industry dynamics [Market share, competition, rawIndustry dynamics [Market share, competition, raw
materials/commodities]materials/commodities]
IIRONRONHHORSEORSE LLCLLC
1717
•• Company’s position / reputation in the industryCompany’s position / reputation in the industry
•• DiversificationDiversification
Product offeringProduct offering
GeographyGeography
•• Vendor relationshipsVendor relationships
•• Seasonality / cyclicalitySeasonality / cyclicality
•• Power over vendors / customersPower over vendors / customers
•• Ability to expandAbility to expand
•• Emergence / intensification of foreign competitionEmergence / intensification of foreign competition](https://image.slidesharecdn.com/5f3560ef-e2b2-4b52-bb1e-408552d5d211-161209202018/85/IronHorse-Business-valuation-presentation-17-320.jpg)
Uploaded byTony Wayne
IronHorse Business valuation presentation
This document provides information on Ironhorse LLC, a business valuation and appraisal firm. It lists the services Ironhorse provides, including business valuation, litigation support, mergers and acquisitions advisory, and insolvency and bankruptcy support. It also provides biographies of the executive team members and describes Ironhorse's competitive advantages. Finally, it discusses valuation methods and considerations.
IronHorse Business valuation presentation
- 1. 11 IRONHORSE LLC Certified ValuationAnalysts 6709 W. 119th St., Suite 443 Overland Park, KS 66209-2013 PH: (913) 851-0027; (816) 589-4848 FAX: (913) 851-3844 twayne@ihorsellc.com dohara@ihorsellc.com
- 2. IIRONRONHHORSEORSE LLCLLC Business Valuation/ AppraisalBusiness Valuation / Appraisal Forensic Examinations & Litigation SupportForensic Examinations & Litigation Support Business SuccessionBusiness Succession Mergers, Acquisitions, Buy/Sell AgreementsMergers, Acquisitions, Buy/Sell Agreements 22 Mergers, Acquisitions, Buy/Sell AgreementsMergers, Acquisitions, Buy/Sell Agreements Estate & Wealth PlanningEstate & Wealth Planning E.S.O.P.E.S.O.P. Private Equity Investment Advisory Due DiligencePrivate Equity Investment Advisory Due Diligence Bankruptcy, Insolvency, & Preemptive Value AlertsBankruptcy, Insolvency, & Preemptive Value Alerts
- 3. IIRONRONHHORSEORSE LLCLLC Turnarounds& workoutsTurnarounds & workouts Financial restructuringFinancial restructuring Corporate Value RecoveryCorporate Value Recovery 33 Financial restructuringFinancial restructuring Crisis & interim managementCrisis & interim management Distressed enterprise investment bankingDistressed enterprise investment banking Operations improvementOperations improvement
- 4. IIRONRONHHORSEORSE LLCLLC AssetrecoveryAsset recovery Avoidable preferences/fraudulent transfersAvoidable preferences/fraudulent transfers Insolvency & Bankruptcy SupportInsolvency & Bankruptcy Support 44 Avoidable preferences/fraudulent transfersAvoidable preferences/fraudulent transfers ValuationValuation Financial & operating reportingFinancial & operating reporting Creditor & debtor advisoryCreditor & debtor advisory
- 5. IIRONRONHHORSEORSE LLCLLC Investment BankingInvestmentBanking Corporate FinanceCorporate Finance RestructuringRestructuring Seller advisorySeller advisory 55 Seller advisorySeller advisory Buyer advisoryBuyer advisory Initial, secondary offering assistanceInitial, secondary offering assistance Debt & equity placementDebt & equity placement Due diligenceDue diligence Fairness opinionsFairness opinions
- 6. IIRONRONHHORSEORSE LLCLLC Executive TeamExecutiveTeam CollectivelyCollectively, 30 years of combined success in corporate renewal, corporate finance, and senior, 30 years of combined success in corporate renewal, corporate finance, and senior operations managementoperations management--including the dramatic recovery and renewal of the largest racing andincluding the dramatic recovery and renewal of the largest racing and premium custom wheel manufacturer in North America.premium custom wheel manufacturer in North America. Dennis O’HaraDennis O’Hara--20 years in all phases of strategic planning, operations and financial management.20 years in all phases of strategic planning, operations and financial management. Senior finance executive for startSenior finance executive for start--up satellite television licensor that was successfully sold for $1up satellite television licensor that was successfully sold for $1 billion after just four years of operation. Managed due diligence process for over 50 acquisitions,billion after just four years of operation. Managed due diligence process for over 50 acquisitions, and directed the turnaround and recovery of several firms in various industries. B.S., Southwestand directed the turnaround and recovery of several firms in various industries. B.S., Southwest Missouri State University. Masters of Accountancy, University of Missouri. Certified PublicMissouri State University. Masters of Accountancy, University of Missouri. Certified Public Accountant.Accountant. 66 Tony WayneTony Wayne--15+ years experience as CRO, COO, and CFO, primarily with middle & small market,15+ years experience as CRO, COO, and CFO, primarily with middle & small market, privately held manufacturers/distributors. Extensive restructuring, reorganization, M & A, andprivately held manufacturers/distributors. Extensive restructuring, reorganization, M & A, and divestiture experience, largely within highly leveraged and financially “stressed” environments.divestiture experience, largely within highly leveraged and financially “stressed” environments. B.S.B.A., Accounting & Business Administration, University of Kansas. Executive Fellow & MBA,B.S.B.A., Accounting & Business Administration, University of Kansas. Executive Fellow & MBA, Rockhurst University. Certified Public Accountant, Certified Valuation Analyst, Certified InsolvencyRockhurst University. Certified Public Accountant, Certified Valuation Analyst, Certified Insolvency & Restructuring Advisor. Adjunct Professor of Accounting& Restructuring Advisor. Adjunct Professor of Accounting--Johnson County Community College andJohnson County Community College and Baker UniversityBaker University Members:Members: Turnaround Management Association, Association of Insolvency & RestructuringTurnaround Management Association, Association of Insolvency & Restructuring Advisors, American Bankruptcy Institute, National Association of Certified Valuation Analysts,Advisors, American Bankruptcy Institute, National Association of Certified Valuation Analysts, Association for Corporate Growth.Association for Corporate Growth.
- 7. IIRONRONHHORSEORSE LLCLLC Our advantageOuradvantage Industry focusIndustry focus--intuitive issue recognition, rapid response.intuitive issue recognition, rapid response. Unmatched chemistry & teamworkUnmatched chemistry & teamwork--30+ years combined success and proven, dramatic results.30+ years combined success and proven, dramatic results. UltraUltra--lean, yet scalable contingent organization.lean, yet scalable contingent organization. Complementary service offering.Complementary service offering. Local alternative.Local alternative. 77 Local alternative.Local alternative. Experienced in complex, emotional challenges of familyExperienced in complex, emotional challenges of family--owned business lifeowned business life--cycle transitions.cycle transitions. Certified Insolvency & Restructuring Advisor, Certified Valuation Analyst credentials ensuresCertified Insolvency & Restructuring Advisor, Certified Valuation Analyst credentials ensures commitment to outstanding quality service with adherence to the highest possible professionalcommitment to outstanding quality service with adherence to the highest possible professional standards.standards. “ Financial literacy” diagnostic model accelerates evaluation of:“ Financial literacy” diagnostic model accelerates evaluation of: External & internal reporting capabilityExternal & internal reporting capability Core business viabilityCore business viability Operational improvement opportunities.Operational improvement opportunities. Organizational & executive effectivenessOrganizational & executive effectiveness Likelihood of inLikelihood of in--court, vs. out of court solutions approachcourt, vs. out of court solutions approach
- 8. IIRONRONHHORSEORSE LLCLLC Recent valuationEngagementsRecent valuation Engagements 88
- 9. VALUATIONVALUATION FOUNDATIONFOUNDATION IIRONRONHHORSEORSE LLCLLC The Business PlanThe Business Plan The plan comes first, then the capitalThe plan comes first, then the capital structure and related valuation.structure and related valuation. 99 Plan components:Plan components: •• ManagementManagement •• Core business unitsCore business units •• Projected financial resultsProjected financial results
- 10. CORE BUSINESSCORE BUSINESS What business or segments are part of the on going business?What business or segments are part of the on going business? What external factors must be considered?What external factors must be considered? •• CompetitionCompetition Strengths/weaknessesStrengths/weaknesses •• IIRONRONHHORSEORSE LLCLLC 1010 •• LongLong--term dynamicsterm dynamics Production shifting offshore?Production shifting offshore? Currency /interest rate outlookCurrency /interest rate outlook Commodity pricesCommodity prices Trade policiesTrade policies
- 11. PROJECTED RESULTSPROJECTED RESULTS Review and challenge basic assumptions:Review and challenge basic assumptions: •• RevenueRevenue •• Operating resultsOperating results •• EBITDAEBITDA •• Free cash flowFree cash flow •• IIRONRONHHORSEORSE LLCLLC 1111 •• •• Working capital and the balance sheetWorking capital and the balance sheet •• Past performance vs. projected future performancePast performance vs. projected future performance OtherOther •• Market ShareMarket Share •• What do projections imply? Realistic?What do projections imply? Realistic? •• The telecom conundrum: 100 companies cannot each achieve 5%The telecom conundrum: 100 companies cannot each achieve 5% market sharemarket share
- 12. VALUATIONVALUATION –– INTRODUCTIONINTRODUCTION General Premise:General Premise: •• Present value ofPresent value of futurefuture benefitsbenefits •• IIRONRONHHORSEORSE LLCLLC 1212 •• Investor should only pay what one thinks benefits are worth given a rateInvestor should only pay what one thinks benefits are worth given a rate of returnof return •• Rate of return varies depending on type of investor, asset, risk, etc.Rate of return varies depending on type of investor, asset, risk, etc. •• Enterprise Approach vs. Equity ApproachEnterprise Approach vs. Equity Approach
- 13. VALUATIONVALUATION Distribution Of CashFlow Among ConstituentsDistribution Of Cash Flow Among Constituents Lenders Company EBIT $ Interest IIRONRONHHORSEORSE LLCLLC 1313 Government Preferred Shareholders EBT Earnings Common Shareholders $ Dividends $ Taxes Dividends $
- 14. VALUATIONVALUATION Theories Behind Premiumsand DiscountsTheories Behind Premiums and Discounts Maximum value attributable to a strategic buyer Sale value MBO LBO Premium for strategic value / synergies Controlling interest value ($ in millions, except share price) Fully Diluted Shares 100.0 Share price $20.00 Market Value of Equity $2,000.0Controlling Interest Investment Value IIRONRONHHORSEORSE LLCLLC 1414 MBO LBO IPO Public trading Non-public stock Premium for control Minority interest discount Discount for lack of marketability Minority interest value plus: Total Debt (book) 1,500.0 less: Converted Debt 0.0 plus: Preferred Stock 200.0 less: Converted Preferred 0.0 less: Cash & Cash Equivalents 100.0 plus: Minority Interest in Subs 0.0 Enterprise Value $3,600.0 Discount for lack of marketability / liquidity [NYSE vs. OTC:BB] Non-Marketable Minority Value Marketable Minority Value Interest Value
- 15. VALUATIONVALUATION ApproachesApproaches MarketapproachMarket approach •• Comparable companyComparable company –– marketable minority basismarketable minority basis IIRONRONHHORSEORSE LLCLLC 1515 •• Comparable companyComparable company –– marketable minority basismarketable minority basis •• TransactionTransaction –– controlling basiscontrolling basis Discounted Cash Flow (“DCF”) approachDiscounted Cash Flow (“DCF”) approach Liquidation / Asset approachLiquidation / Asset approach
- 16. VALUATIONVALUATION DriversDrivers QuantitativecharacteristicsQuantitative characteristics •• Cash flowCash flow •• ProfitabilityProfitability •• Growth (historical and projected)Growth (historical and projected) IIRONRONHHORSEORSE LLCLLC 1616 •• Growth (historical and projected)Growth (historical and projected) •• SizeSize •• ReinvestmentReinvestment •• LiquidityLiquidity •• Capitalization / leverageCapitalization / leverage –– financial flexibilityfinancial flexibility •• Fixed charge coverageFixed charge coverage •• Activity ratios (e.g. asset and inventory turnover, accountsActivity ratios (e.g. asset and inventory turnover, accounts receivable and accounts payable DSO, ROI, ROE, etc.)receivable and accounts payable DSO, ROI, ROE, etc.)
- 17. VALUATIONVALUATION DriversDrivers (cont.)(cont.) Qualitative characteristicsQualitative characteristics •• Quality and depth of managementQuality and depth of management •• Customer and vendor concentrationCustomer and vendor concentration •• Industry dynamics [Market share, competition, rawIndustry dynamics [Market share, competition, raw materials/commodities]materials/commodities] IIRONRONHHORSEORSE LLCLLC 1717 •• Company’s position / reputation in the industryCompany’s position / reputation in the industry •• DiversificationDiversification Product offeringProduct offering GeographyGeography •• Vendor relationshipsVendor relationships •• Seasonality / cyclicalitySeasonality / cyclicality •• Power over vendors / customersPower over vendors / customers •• Ability to expandAbility to expand •• Emergence / intensification of foreign competitionEmergence / intensification of foreign competition
- 18. WHERE DOES SUBJECTIVITYWHEREDOES SUBJECTIVITY IMPACT VALUATION MOST?IMPACT VALUATION MOST? Discounted Cash Flow AnalysisDiscounted Cash Flow Analysis •• Discount rate usedDiscount rate used Cost of equityCost of equity Cost of debtCost of debt Terminal ValueTerminal Value IIRONRONHHORSEORSE LLCLLC 1818 Terminal ValueTerminal Value Multiple chosenMultiple chosen -- Based on market comparables?Based on market comparables? -- Choosing time to sellChoosing time to sell ––buy low, sell highbuy low, sell high Market Comparables and M&AMarket Comparables and M&A •• Period for analysis (LTM, Projected)Period for analysis (LTM, Projected) •• Choice of comparablesChoice of comparables Size, Business, Competitors not ComparablesSize, Business, Competitors not Comparables Choice of M&A CompsChoice of M&A Comps How do you look back?How do you look back? “Perfect” comps?“Perfect” comps?