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competitive advantages. These advantages s are e often n rooted in the e uniquefamily y and
family-business culture.Next-generation family-business leadersrecognizethat theircul-
turalfoundationisnoteasytochange,notwithstandingwhatmaybetheurgentneedtodo
soinresponsetosignificantchangesintheircompetitiveenvironment.Inpartnership,the
incumbentandnextgenerationsassumetheresponsibilityforleadingthechangeeffort.In
thebestofcases,theincumbentgenerationfocusesitseffortsonpruningfromthefamily
businessunnecessarylegacyeffects(e.g.,highlycompensatedfamilymemberswhoareno
longeraddingvaluetothebusinessandoldagreementsandpoliciesthatnolongermake
sense)sothatthenextgenerationcanfocusonthepresentandthefuture.
344
FAMILY BUSINESS
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CASE
13
PRIVATECOBUSINESS
VALUATIONREPORT
MARKETVALUATION
of
PrivateCo
preparedby
RobertT.Slee,CBA
CertifiedBusinessAppraiser
ValuationDate:June30,2008
DateofReport:July22,2008
ROBERTSON&FOLEY
6201FAIRVIEWPARKROAD
CHARLOTTE,NC
ROBERTT.SLEE
MANAGINGDIRECTOR
July22,2008
PERSONAL&CONFIDENTIAL
Mr.BobMainstreet
1234OakAvenue
Anytown,USA28819
Re: MarketValuationofPrivateCo
DearMr.Mainstreet:
Iwillusethislettertodeterminethemarketvalueof100percentofPrivateCo(the
“Company”).Thepurposeofthisappraisalistodeterminealikelysellingpricefor
yourshares.
For these e purposes, , market value e is defined as the highest t cash h purchase price
availableinthemarketplaceforthestockoftheCompany.Thisletterwillusethe
followingformat:
I.
DiscusstherecentoperatingandfinancialresultsoftheCompany.
II.
Establishtheconceptofmarketvalueanddescribethevaluationprocess.
III.
Derivethemarketvalueof100percentoftheCompany.
345
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SinceyoufoundedandoverseethemanagementoftheCompany,thereisnoreason
forustoretelltheentirePrivateCostory,ortorecountallofthedetailsconcerning
operatingtheCompany.Therefore,wewillsummarizetheseissuesnext.
I.THECOMPANY
PrivateCo Corporation n wasfounded in 1980 asa a manufacturer of laminated d panel
products primarily supporting g the e commercial aerospace industry. . PrivateCo is s a
worldwide supplier of laminated d products, using g lightweight structural materials
designedandmanufacturedtomeetitscustomers’costandperformancerequirements.
TheCompanyhas assembled d over50yearsofmanufacturing,engineering,mar-
keting, and product development t experience e to o provide e customers s with quality
productsandservice.PrivateCoiscontinuouslydevelopingnewpanelsandproducts,
givingittheopportunitytoexpandfromtheaerospaceindustryintothearchitectural,
computer,high-speedrail,marine,medical,space,andtoolingindustries.
Inneedofexpansion,inMay2000theCompanyopenedanew32,000-squarefoot
buildingto supportfuture demands.Thefacilityhousesanewmanufacturingcom-
puternetworkwhichgivesPrivateCotheabilitytobettermonitororders,processes,
and costs s more efficiently. Quality, service, and delivery are keys to its continued
growthandsuccess.
PrivateCo manufacturesastandard lineoflaminatedpanelsused throughoutthe
aerospace, clean n room, , construction, computer, marine, medical, tooling, rail, and
space industries. . The e products are typically manufactured with strong lightweight
honeycombusingfiberglass,aluminum,andcarbonskinmaterials.
PrivateCohas10customersthatbuymorethan$100,000inagivenyear.Thesetop
10customersrepresentabout45percentoftotalsales.Nosinglecustomercomprises
morethan15percentoftotalsales.About65percentoftheCompany’ssalesareto
aviation-relatedcustomers.
The Company uses awork-ordersystem to manage itsplantand measure shop
costs.Costsareanalyzedforeveryjob.Becauseoftheimportanceofitspanelsonthe
customer’spart,thereiscompletematerialtraceabilityatPrivateCo.
Some PrivateCo o panels require e certification. These e include e some e FAA A (Federal
AviationAdministration)panelsandseveralaircraftfloorpanels.
TheCompanyisanScorporation.
F
INANCIAL
R
ESULTS
TableFshowssummarizedincomestatementresultsfortheCompanysince2005.
Recast EBITDA A reflects the amount t of adjusted d operating g cash h flow that t the
Companygeneratesona pretax x and nonleveraged basis.Thus,someownerdiscre-
tionaryexpensesandotherone-timeexpenseshavebeenaddedback.Onlyshareholder
compensationabove$150,000peryearisshowninthatrow.
Themid-2008resultsshowasubstantialincreaseinrecastEBITDAoverprioryears’
levels.Onanannualizedbasis,the2008recastEBITDAequalsmorethan$1.2mil-
lion.The big question is:Whatlevel ofrecastEBITDA would buyersuseto value
PrivateCo?Ontheonehand,thefutureisquitebrightfortheCompany.Ihaveevery
reasontobelievethatPrivateCowillcontinuetogrow,intermsofsalesandprofits.On
theotherhand,theCompanymaynotrealizerecastEBITDAof$1.2millionin2008.
346
FAMILY BUSINESS
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Itisplausiblethatfinancialinvestorswouldformulatetheirofferbasedonarecast
EBITDA ofabout$1 million.Strategic buyers,on the otherhand,mightviewthe
EBITDAasahighernumber,asthefollowingsectionindicates.
II.MARKETVALUE
WearedeterminingthemarketvalueoftheCompany.Theconceptofmarketvalue
requiressomeexplanation.
Privatesecuritiesdonotenjoyaccesstoanactivetradingmarket,andthereforemust
relyonpoint-in-timevaluationortransactionalpricing.Thismeansthateitheraprivate
valuationmustbeundertaken,oratransactionmustoccurtodeterminethevalueofa
private securityforsome reasonatsome pointin time. Aprivate appraisal mightbe
neededformanyreasons,andthesereasonscan leadto dramatically differentvalue
conclusions.
Everyprivatecompanyhasanumberofdifferentvaluesatthesametime,depending
onthereasonsforthevaluations.Privatebusinessvaluationisarangeconcept.
Marketvalueisdefinedas:
Thehighestcashpurchasepriceavailableinthemarketplacefortheselectedassetsor
stockofthesubjectcompany.
Thisdefinitionassumesthattheassetsorstockofthesubjectcompanyarevaluedona
debt-free basis,which means s that all l interest-bearing debt t of the e subjectmustbe
deductedfromthederivedmarketvalue.Mostmarketvaluationsarealsodoneona
table
F
PrivateCoCorporation
RecastEBITDA
6Months
Ending
Year
Ending
Year
Ending
Year
Ending
Item
6/30/08
2007
2006
2005
Sales
$3,142,246
$5,471,823
$4,151,537
$4,569,512
Pretaxprofits
454,255
445,000
114,721
123,050
Adjustments
Depreciation
Amortization
24,566
64,000
58,200
79,000
Ownercompensation*
26,628
53,300
53,300
53,300
Countryclubdues
46,000
132,000
57,000
0
SHHautoexpense
2,721
7,300
3,000
1,300
SHHentertainmentandtravel
5,139
15,700
11,400
12,000
SHHlifeinsurance
14,964
37,500
18,800
22,400
SHHinsurance
5,588
5,300
5,000
10,400
Interestexpense
4,270
8,000
7,400
4,000
Contributions
10,623
30,800
45,700
66,000
Professionalfees
0
1,100
2,900
3,900
Retirementplan
5,911
11,000
10,500
39,000
(discretionary)
0
1,000
450
3,900
Seitz(formerpartner)payments
40,000
80,000
80,000
80,000
RecastEBITDA
$641,000
$892,000
$468,000
$498,000
*Ownercompensationinexcessof$150,000peryear
SHH=OwnerandMajorityShareholder
CASE 13 PRIVATECOBUSINESS S VALUATION N REPORT
347
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cash-freebasis,meaningthatthesellerkeepsthecashandmarketablesecuritiesinthe
companyattheclosing.
Everycompanyhasatleastthreemarketvaluesatthesametime.Thisiswhymarket
value,much like all businessvaluation,isarangeconcept.Each marketvalue step,
called“atier,”representsthemostlikelysellingpricebasedonthemostlikelybuyer
type.Thetiersare:Asset,Financial,andStrategic.
TheAssetTierreflectswhatthesubjectwouldbeworthifthemostlikelyselling
price is s based d on netassetvalue, , because the mostlikely buyer is not basing g the
purchaseonthesubject’searningsstream,butratheron the subject’sassets.In the
AssetTierthebuyerisnotgivingcredittotheSellerforgoodwillbeyondthepossible
write-upoftheassets(thatis,novaluefortheoperationsofthe subject).Forthese
purposes,goodwill istheintangible assetthatarisesasaresultofname,reputation,
customerpatronage,andsimilarfactorsthatresultin someeconomicbenefitthata
buyeriswillingtopaybeyondthesubject’sassetvalue.
TheFinancialTierreflectswhatanindividualornonstrategicbuyerwouldpayfor
the business.Witheitherbuyertype, the valuation is based only on thecompany’s
financialstatements.
The Strategic Tier r is s the market value e of f the e company when synergies s from m a
possible acquisition n are e considered. . Synergy y is s the e increase in performance of the
combinedfirmoverwhatthetwofirmsarealreadyexpectedorrequiredtoaccomplish
asindependentcompanies.
C
ALCULATING
M
ARKET
V
ALUE
TodeterminevalueattheAssetTieronesimplyderivesthefairmarketvalueofthe
assetsofthecompanyandthensubtractstheliabilities.Assetappraisalsaregenerally
requiredtoestablishvalueoftheleftsideofthebalancesheet;whereas,thefacevalue
oftheliabilitiesisusuallysufficienttodeterminetherightside.
CalculatingFinancialandStrategicmarketvalueisamoreinterestingexercise.At
these levels, an n income e stream, normally EBITDA,ismultiplied by an acquisition
multiple.BasicallythreelevelsofEBITDAcanbeused,asfollows:
ReportedEBITDA(pertheincomestatement—withoutmodification)
RecastEBITDA(ReportedEBITDAplussellerdiscretionaryexpensesplusone-
timeexpenses)
“Synergized”RecastEBITDA(RecastEBITDAplustheamountofsynergies
creditedtotheseller)
EverybuyerwouldliketoacquireusingreportedEBITDAasthemainelementofcash
flow;everysellerwouldliketouse“synergized”recastEBITDAasthebase.Inreality,
onlythemostsought-aftercompaniesreceivecreditforsynergiesfromthebuyer.The
reason:Synergiesarerealizedduringthewatchofthebuyer.Buyersgenerallydon’t
wanttosharethesepotentialfutureearningswiththeseller.
Assetbuyersdonotrely onearningstovalueacompany.Financial buyers’value
companiesusingrecastEBITDAastheearningsmetric;whereas,strategicbuyersuse
synergizedrecastEBITDA.
Acquisition multiples s reflect t the risk (from m the buyer’s view) of achieving g the
incomestream.Forinstance,a“5”acquisitionmultiplemeansthatthebuyerbelieves
348
FAMILY BUSINESS
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the risk k of the deal l is s 20 percent (the e reciprocal l of 5 5 is 20 percent). Acquisition
multiplestendtogroupthemselveswithinmarketsegments.TableGshowshowthe
capitalmarketsaresegmented,withresultingmultiples.
Small businesses s typically y sell l for r two o to o three times s EBITDA, , whereas large
companiesusuallysellformorethan10timesEBITDA.Lower-middle-marketcom-
panies(likePrivateCo)usuallysellforfourtoseventimesEBITDA.Itisquitepossible
thatacompanywillbeviewedbyinvestorsasmoreorlessriskythanitspeergroup.
Exampletraitsofbeingviewedasmoreriskyincludethelackofmanagementstructure,
high customer concentrations, , and poor financial systems. Companies s that t have
institutionalizedtheirprocessesandthathavesustainablenicheswillbeviewedatthe
highendofthemultiplerange,andpossiblyevenoutsideoftherange.
Themarketvaluetierswiththecorrespondingbuyerprofilesareshownbelow:
TheTiersofMarketValue
Tier
Comments
Strategic
Synergiescanresultfromavarietyofacquisitionscenarios.Perhapsthemostquantifiablegroup
ofsynergiesemanatefromhorizontalintegration.Ahorizontalintegratorcanrealizesubstantial
synergiesbycuttingduplicateoverheadandotherexpenses.Someofthesesavingsmaybe
sharedwiththeseller.Verticalintegrationcanalsocreatesubstantialsynergies.Thesetendtobe
strategic,inthatthetargethelpstheacquirerachievesomebusinessgoal.Synergiesalsocan
resultfromthedifferentfinancialstructuresoftheparties.Forinstance,thetargetmayrealize
interestexpensesavingsduetoadoptingthecheaperborrowingcostsoftheacquirer.
Financial Mostindividualbuyersarefinancialbuyers.Anyinstitutionalbuyerthatdoesnotcurrently
participateinthesubject’sindustryorcannotleveragethesubject’sbusinessisprobably
alsoafinancialbuyer.Financialbuyersdonotbringsynergiestoadeal,therefore,goodwillis
limited.
Asset
Whenthesubjecthasnocurrentorfutureearningsprospects,oritisinanindustrythatdoesnot
givecreditforoperatinggoodwill,itsassetvaluemaybethehighestvalueitcanachieveor
expect.Acompanyinthesameindustrymaybuyanddeploytheassetbase,withoutpricingin
goodwill.
Indeterminingmarketvalue,itisimportantfortheappraisertocorrectlydetermine
the most t suitable e value e tier. The following g guidelines s can n be used to determine
whetherasubject’shighestvalueistheAssetTier.
table
G
MarketSegmentationbySalesandEBITDAMultiples
Sales
1,000 ($millions)
5
150
500
Small
Business
Lower
Middle
Upper
Large Co.
EBITDA
2–3x
4–7x
8–9x
9–10x
>10x
Middle Market Companies
CASE 13 PRIVATECOBUSINESS S VALUATION N REPORT
349
CHARACTERISTICSTHATDETERMINEWHETHERUSINGTHE
ASSETMARKETVALUETIERISAPPROPRIATE
a.Thesubjecthasnoearningshistory,andfutureearningsexpectationscannotbe
reliably estimated. In this s context, “earnings” are defined as s recast t earnings
before interest, taxes,depreciation, and amortization n (EBITDA). EBITDA A is
recastforone-timeexpensesanddiscretionaryexpensesoftheowner.Thislackof
anearningsbaseprohibitsthebuyerfromusingthesubject’searningsasthebasis
forthevaluation.
b.Thesubjectdependsheavilyoncompetitivecontractbids,andthereisnocon-
sistent,predictablecustomerbase.
c.Thesubjecthaslittleornovaluefromlabororintangibleassets.
d.Asignificantportionofthesubject’sassetsarecomposedofliquidassetsorother
investments,holdingcompanies.
e.Itisrelativelyeasytoentertheindustry;or
f.Thestrongpossibilityoflosingkeypersonnelcouldhaveasubstantialnegative
effectonthesubject;or
g.Thesubjectparticipatesin an industrythatdoesnottypically priceagoodwill
component into the deal structure. This s can n be the e case e in certain n custom
businesses,suchassawmills,orinsmallerdistributors,suchasbuildingmaterials
suppliers.
Ifthestatementsareall true,thentheAssetTierofmarketvalueistheappropriate
valuationtierforthesubject.Typically,however,asubjectmayexhibitsomeofthe
characteristicsabove,butnotall.In thesecases,theappraising partyshould do the
following:
1.Usejudgmentastowhichcharacteristicsaremostimportantinthiscontext.For
instance,thesubject’s lack ofrecastEBITDAand d industry segmentaremore
importantconsiderationsthanbarrierstoentry.
2.Considerthe nature of transactionsin the particular industry.Forexample,if
nearlyallthe transactionsinvolvingsmall privatecompaniesin anindustry are
assetsaleswithoutgoodwill,thisshouldinfluencethedecisionastotheappro-
priatevaluetier.
DiscussionQuestion1:ShouldPrivateCobevaluedattheAssetTierlevel?Why
orwhynot?Pleasediscussthereasonsforyourdetermination.
CHARACTERISTICSTHATDETERMINEWHETHERUSINGTHE
FINANCIALMARKETVALUETIERISAPPROPRIATE
Mostindividualbuyersarefinancialbuyers.Thefollowingcharacteristicscanbeused
tocorrectlydeterminewhetheraseller’shighestvalueistheFinancialTier.
a.ThesubjectexhibitsenoughrecastEBITDAthatearningscanbedeterminedby
theacquirerasthebasisforthevaluation.Bydefinition,however,nosynergies
areavailableintheFinancialTier.
b.Thesubjectis unlikely to o attracta a synergistic buyer, eitherbecause the likely
acquirerisanindividual,whocannotbringsynergiestoadeal,orthebuyerisa
nonstrategic institution, , which h does s not t bring g synergies to o the acquisition.
350
FAMILY BUSINESS
Individual buyers s tend d to o acquire e companies s in n transactions s of less s than
$2 million,whilenonstrategicinstitutions(e.g.,privateequitygroups) do not
haveafinancialconstraint.
c.Thesubject’sowner-managerwillnotentertainasynergisticsalesinceitwould
resultincompanyrelocation,payrollcutsandotherexpenseconsolidation.Many
ownersareconcerned forthe posttransactionwell-beingofthepeopleintheir
organization and d will notsell l to o a a consolidator,even n ifitmeans s foregoing a
highersellingprice.
DiscussionQuestion2:ShouldPrivateCobevaluedattheFinancialTierlevel?
Whyorwhynot?Pleasediscussthereasonsforyourdetermination.
CHARACTERISTICSTHATDETERMINEWHETHERUSINGTHE
STRATEGICMARKETVALUETIERISAPPROPRIATE
TheStrategicTierismainlyconcernedwithstrategicorsynergisticcombinations,such
as horizontal and d vertical l integrations, or any other r combination n with which the
acquirercan leveragethesubject’scapabilities.Synergiescanresultfromavarietyof
acquisitionscenarios.Perhapsthemostquantifiablegroupofsynergiesemanatefrom
horizontal integrations. . A horizontal l integrator r can realize substantial l synergiesby
cuttingduplicateoverheadandotherexpenses.Someofthesesavingsmaybeshared
withtheseller.Verticalintegrationsalsocancreatesubstantialsynergies.Thesetendto
bestrategic,inthatthetargethelpstheacquirerachievesomebusinessgoal.Synergies
alsocanresultfromthedifferentfinancialstructuresoftheparties.Forinstance,the
targetmay realize interestexpense savingsdue to adopting thecheaperborrowing
costsoftheacquirer.
Thefollowingguidelinescanbeusedtodeterminewhetherasubject’shighestvalue
istheStrategicTier.
a.The subjectparticipates in an industry that t is being g vertically or horizontally
integrated,oritcanbe determined thatanotherbuyertype can synergistically
leveragethesubject’scapabilities.
b.Synergiescanbequantifiedwithsomelevelofcertaintypriortoatransaction.
c.Some of the following strategic motivations exist t between n the e subject and
prospectiveacquirers:
1.Thesubjectpossessestechnology,patents,oraprocessthatisdifficultorimpossible
toduplicate;
2.Thesubjectemploysamanagementteamthatisconsideredexceptional;
3.Thesubjecthasastrongmarketpositionthatenjoysmonopolisticattributes;
4.Thesubjectusesbusinesspracticesthataredramaticallymoreefficientthanits
counterparts;
5.The subjecthas developed a unique businessmodel thatistransferable to an
acquirer;
6.Thesubjecthasaccesstoworldwidemarketsthatenableittopurchaseandsell
moreeffectivelythanthecompetition.
Ifallthestatementsaretrue,thentheStrategicTierofmarketvalueistheappropriate
valuationtierforPrivateCo.Researchcanbedoneinthesubject’sindustrytoseeif
CASE 13 PRIVATECOBUSINESS S VALUATION N REPORT
351
verticalorhorizontalintegrationsorotherstrategic/synergisticacquisitionshavebeen
takingplace.
DiscussionQuestion3:ShouldPrivateCobevaluedattheStrategicTierlevel?
Whyorwhynot?Pleasediscussthereasonsforyourdetermination.
III.DERIVINGTHEMARKETVALUE
OFTHECOMPANY
Weestablished several thingsabovethatwill help usderive themarketvalueofthe
Company.First,weestablishedthevaluetiersatwhichPrivateCo’smarketvaluewill
be determined.We then recastEBITDA for the tier or tiersselected. Finally,any
synergieslikelytoberealizedneedtobereflectedintherecastEBITDAcalculation.
Theamountsofenjoyedsynergiesaretheestimatedsynergiescreditedto,orkept
by,apartyinadeal.First,thetotalexpectedsynergiesinadealareforecast.Then,an
estimateoftheenjoyedsynergiescreditedtoeachpartyismade.Usuallythebuyeris
responsible forcreatingsynergies.Buyersdo notreadilygivethe value ofsynergies
awaysincetherealizationofthesynergieshappensonlywhiletheyownthebusiness.A
highlevelofrealismandsignificantexperiencearenecessarywhenquantifyingenjoyed
synergies.
Thefollowingsynergytypesmaybeavailabletothepartiesinatransaction.
S
YNERGIES WITH
Q
UANTIFIABLE
C
ERTAINTY
1.Costsavings
2.Revenueenhancements
3.Grossmarginenhancements
4.Strategiccombinations
Eachstrategicbuyerwillexperienceuniquelevelsofsynergieswithaseller.Strategic
buyersmayormaynotsharesynergieswiththeselleraswell.Inlargepart,identifi-
cationandsharingofsynergiesdecideswhichstrategicbuyerultimatelywinsadeal.
Astrategicbuyerwould mostlikely movePrivateCo’soperationsintotheirown,
therebysavingsomeoperatingcosts.Thesesavingsprobablyrangefrom$300,000to
morethan$1millionperyear.Wewouldneedtostudyeachinterestedstrategicbuyer
todeterminetheamountoftotal synergiesavailable.Then we would estimatehow
muchofthesynergypooltheywouldshare.Fromconversationswithseveralstrategic
buyers,weassumethattotalsynergiesequal$600,000peryear,andthatthebuyerwill
share(givecredittotheseller)40percentofthese.Thisadds$240,000totheseller’s
cashflow($600,000times40percent).Thismakesthe“synergized”recastEBITDA
$___________($__________recastEBITDAplus$240,000synergysharing).
DiscussionQuestion4:DeriveanestimateoftherecastEBITDA.Makeyour
assumptionsexplicitanddisplayyourcalculations.
T
HE
M
ULTIPLE
Acquisition multiples s tend d to group p by y market segment. . We e can determine a
suitable acquisition multiple e for r the Company y by several l methods, including
(1)Industry-Specificmultiples,(2)General Industry multiples,and(3) General
PrivateEquityGroupmultiples.
352
FAMILY BUSINESS
I
NDUSTRY
-S
PECIFIC
M
ULTIPLES
A number of f databases now exist t that contain completed transactions s for r private
companies. We have access s to several of f these, namely, the Institute of Business
Appraisers Transaction n database, , Bizcomps, and d Pratt’s s Stats.Welooked d fortrans-
actionsintheCompany’sindustrythatwereofsimilarsize,specifically:
l
withannualsalesintheyearofthesalebetween$5millionand$15million
l
withratiosofEBITDAtosalesofatleast10percent
Unfortunately,wefound no qualifying transactionsin thepast4 years.Wedo not
believethatoldertransactionswouldbeusefulforourpurposeshere,becauseacqui-
sitionmultiplesweredepressedduringthe2001–2004period.
G
ENERAL
I
NDUSTRY
M
ULTIPLES
—IMAPS
URVEYS
Agroupofinternationalprivateinvestmentbankers,calledtheInternationalNetwork
of M&A Partners (IMAP), surveys itsmembers each h year aboutcompleted d trans-
actions.Mostofthese involve companieswith annual salesof $5–100 million.For
2004,therewereatotalof94transactionsinthesurvey,withatotalvalueofmorethan
$2 billion.The surveyhasnotbeen updated,sowewill usethesefiguresonlyasa
guide.
Table H shows a comparison of multiples of earnings before e interest and d taxes
(EBIT) fora variety of companies in the 2002–2004 4 period.EBIT T itself mustbe
definedformeaningfulcomparison.EBITiscalculatedastrailing12-monthearnings
before interest t and taxes, adjusting g for nonrecurring g expenses s and d owners’ discre-
tionaryexpenses,togetherwithsalaryinexcessoffairmarketrates.Sellernotes,etc.are
discountedtopresentvalue.Tocomputethemultiple,onesimplydividesthepurchase
priceplustheassumptionofanyinterest-bearingdebtbytheadjustedEBITfigure.
table
H
GeneralIndustryMultiples
SALESOFCOMPANIES
Medianmultiple
*
Byproductortype:
2002
2003
2004
NonproprietaryManufacturers
4.7
5.4
6.3
Proprietaryconsumermfg.
5.6
5.7
5.1
Proprietaryindustrialmfg.
5.3
6.0
6.9
Distribution
4.8
5.0
6.3
High-tech,nonproprietarymfg.
7.2
5.5
8.7
High-tech,proprietarymfg.
4.4
8.0
6.3
Service,infotech
7.0
7.6
Service,non-infotech
4.6
6.2
*Multiplesusedwerewithinthemiddle50percentofcompletedtransactions.
Nonproprietarycompaniesincludecontract manufacturers(e.g.,stampers,molders,produc-
tionfabricators).
Informationtechnology(IT)consulting,integration,softwaredevelopment,ITstaffing.Service
companytransactionswerenotsurveyeduntil2003.
CASE 13 PRIVATECOBUSINESS S VALUATION N REPORT
353
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