Business Transition Strategies’ Estimate of Value (EOV) provides owners with a realistic understanding of their company’s value in today’s marketplace. Our cost-effective EOV is a science and an art. By evaluating your company and the current market, we can help secure your company’s future. We have more than 15 years’ experience in mergers and acquisitions and time-tested EOV procedures. We provide accurate, timely, and realistic information for well-informed business decisions.
Our EOV process uncovers data crucial for:
• Evaluating exit options available to business owners
• Establishing a baseline value when buying or selling a
business
• Transitioning internally to the next generation from current management
• Benchmarking and strategic financial planning
EOV Process
Step 1: Comparing Industry Business Sale Data
Our EOV process begins with multiple databases that detail company valuations and prices based on actual transactions in the private sector. The financial metrics we focus on include sales, gross profit, and adjusted cash flow-based earnings (EBIT and EBITDA).
Step 2: Internal Financial Model Used to Assess Market Value
Our internally developed financial model utilizes a private company specific cost of capital approach to help determine earnings multiples and, thus, value ranges. In addition to this financial analysis, we use sales data from the current market to help assess the fair market value of a business.
Step 3: Normalizing Adjustments
By utilizing financial statements previously prepared for tax reporting purposes, we adjust the evaluation to more accurately represent the value of a business to a third-party buyer. These adjustments are crucial to presenting a fair and complete view of the company on the market from an unbiased perspective.
Step 4: The End Result
The result of Touchstone’s EOV is a comprehensive report including every component we used to evaluate and arrive at our market-based recommendation. When working with larger companies, we often reach out to Private Equity Groups to request their opinion about the value of your company. These active financial buyers provide a range they would expect to pay for a business of your size, sector, and level of revenue and EBITDA, that we can incorporate into our report.
In conjunction with any transfer of interest it may be useful for the seller or the buyer or any applicable heirs, to have an independent view of the value of a business as part of any exchange.
As part of any capital raising, whether debt or equity, or in dealing with third-party financing institutions it is helpful to have an independent view of a business’s value to make optimal financing decisions.
Independent valuations may be required to conform with generally accepted accounting principles (GAAP) and accounting pronouncements. This may be the result of periodic accounting requirements or as the result of a business combination.
This report will give a preliminary estimate based on financial data from the business and market data generated through research. The report also explains the types of buyers in the market now for related entities, and outlines the process and methods that would be used to sell the business now or down the road. It is a great way to get a discussion going about the best transition pathway to consider.
As part of our sales engagement process, we generally create an Intermediary’s Opinion of Value. This is a comprehensive report targeting the market value range of the business, and is used as a way to make sure all parties are on the same page as to the expected transaction value.
The IOV measures businesses against completed transactions in the specific industry in which you operate. The four most important metrics that are considered are: Gross Sales, Gross Profit, Earnings before Interest, Taxes, Depreciation, Amortization (EBITDA) and Discretionary Earnings. The importance and weight given to each metric varies depending on the industry, and can also vary depending on the type of acquirer. Various other methods such as comparisons to public companies, discounted cash flow and asset-based valuations will sometimes be used as a verification or double check.
There is a lot of information in the public domain that can mislead about true market potential. It is not uncommon for exceptional, one-of-a-kind value ranges to be repeated as though these results will play out in all situations. The IOV uses a consistent process, based on data sources, to provide a clear and realistic value range.
The IOV can also help an owner highlight potential areas of improvement, based on comparisons with other industry peers or with similar industries. After an in-depth review of the financials the Intermediary may also suggest areas where the financial presentation can be adjusted to clarify and define expenses. The process helps make the true financial performance easier to understand for an acquirer, as well as facilitate the due diligence process.
Not sure which type of valuation is right for your circumstances? Contact BTS and a member of our team can answer your questions.
Any fees for the IOV are credited towards a success fee if the client goes to market with the BTS team.
“I wanted to thank both of you on behalf of Equity Management Partners for the helpful and very professional manner in which you managed the sale of New England Techni-coil, Inc. As you know well, these types of transactions are often long and complicated and I doubt it could have been successfully completed without your close ongoing involvement.”
