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Presentation showing key business valuation concepts and how to improve your bsuiness valuation.
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Business ValuationCraig West
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 :
Yahoo!7 buys group buying site Spreets for $40m
(Jan 2011)
Spreets was only launched in February 2010
VALUATION EXAMPLES :
EBITDA * earnings multiple = valuation
VALUATION FORMULA :
Earnings before interest, tax, depreciation and amortisation.
Normalized earnings - add backs, adjustments, market salary etc.
EBITDA
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
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
Valuation Formula
"Price is what you pay – Value is what you get "
Warren Buffett
1.Earnings
2.De-risk
3.Multiple
Value drivers
EBITDA
Financial analysis
Gross profit + 5 %
Reduce expenses - 5%
Increase sales + 5%
Earnings
Financial Analysis
Now Change New
Sales 2500 + 5% 2625
Gross Profit 1400 + 5% 1543.50
Expenses 850 - 5% 807
EBITDA 550 33.9% 736.50
Decrease risk
Strategic buyer
Listed company
Sales multiple
Non- financial analysis
Owner dependence
Reverse due diligence
Advisory board
Key people
Decrease risk
Non Financial Analysis
“When I go into any business deal my chief thoughts are on how to save myself if things go
wrong”
J Paul Getty
1 + 1 = 3
Offshore buyer
Listed company
Strategic buyer
Valuation
Australian Business Pty Ltd
$500K profit
EX
IT
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
Net proceeds is the important $
CGT – small business concessions.
Structures – who owns assets – before and after
Other costs - legal, accounting, other fees.
Case Study - Answers
WAME: $1,080,000
Multiple: 3.80
Valuation: $ 4,104,000
What Next?
Further information on our website:www.successionplus.com.au
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