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Valuing Your Government Contractor Business John T. Schell Special Briefing The McLean Hilton October 3, 2001. What is Your Business Worth?. Book Value? Liquidation Value? Fair Market Value Financial Buyer Stock Price (Public Company) Adjusted Cash Flow (Private Company) - PowerPoint PPT Presentation
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H&K Strategic Business SolutionsH&K Strategic Business Solutions
Valuing Your Government Contractor Business
John T. SchellSpecial Briefing
The McLean HiltonOctober 3, 2001
Holland & Knight Consulting Strategic Business Solutions
H&K Strategic Business SolutionsH&K Strategic Business Solutions
What is Your Business Worth?What is Your Business Worth?• Book Value? Liquidation Value?• Fair Market Value
– Financial Buyer• Stock Price (Public Company)• Adjusted Cash Flow (Private Company)• Revenues (Small, specialty only)
– Strategic Buyer• Market (Agencies, programs, expertise, etc.)• Buyer can consolidate and improve cash flow.• Buyer can generate cash flow from other areas.
Holland & Knight Consulting Strategic Business Solutions
H&K Strategic Business SolutionsH&K Strategic Business Solutions
What Kind of Cash Flow?What Kind of Cash Flow?EARNINGS
Plus Non-cash charges
Plus Owners’ Perks and Excess Salary
Plus Non-recurring Expenses
Less Non-recurring Revenues
ADJUSTED INCOME
Plus Interest
Plus Taxes
Plus Depreciation
Plus Amortization
EBITDA
Key Issue: Historical or Forecast?
Holland & Knight Consulting Strategic Business Solutions
H&K Strategic Business SolutionsH&K Strategic Business Solutions
Valuation of Cash FlowValuation of Cash Flow
• Relevant Methods– Discounted Cash Flow
– Capitalization of Earnings.
– Payback on EBITDA.
• Calculation vs. Market Comparables.
• Reduce by Outstanding Debt.
Holland & Knight Consulting Strategic Business Solutions
H&K Strategic Business SolutionsH&K Strategic Business Solutions
Estimate of True ValueEstimate of True Value• Contractors Providing Services: 3x-5x EBITDA
– Titan/BTG: 4.24x 2001 EBITDA
• Adjust for Variables, e.g:– Interest in Government Sector.– Agencies served (Intelligence, GSA, etc.)– Contract Backlog, Terms, Follow-on Work.– Modify for Earn-outs, Stock, Seller Financing.– Abundance and Viability of Contract Vehicles.– Value-Added Work, Technical Skills and Margins.– Task Order Win Rate.
