KBC&A typically utilizes two widely used valuation methodologies:
Market Method – based on actual private/public company comparable transactions using multiples of EBITDA and/or Revenue as the appropriate metrics. Knowledge of the market and access to a database of transactions are key to using the Market Method.
Income Method – analyzing the value of a business by using one or more methods through which anticipated future financial benefits are converted to present value. A schedule is prepared which lays out current and projected earnings, taxes, investment requirements, and cash operating needs such as for working capital – resulting in projected cash flows over the plan period. A terminal or end value is also calculated – based on an assumed exit multiple or a capitalization method.
The projected cash flows are then converted to today’s value by applying a discount rate to reflect risk and target ROI, and using net present value (NPV) analysis. The result is what an investor should be willing to pay today for a business with future annual net cash flows as projected. Financial investors use this approach.
With over 20 years of M&A experience leading more than 200 transactions and as experienced owner/operators ourselves, we understand what drives enterprise value. Our experts have the relevant financial and modeling expertise to analyze the value of a business using the most sophisticated and appropriate methods, including both the Market Approach and the Income Approach.
The difference is that we are able to dig much deeper to identify, understand, and assess the many financial and non-financial factors that ultimately drive fair market value.
The professionals at KBC&A have completed scores of formal written valuations and provided expert witness testimony for clients that include major companies, leading commercial banks, Private Equity sponsors and attorneys as well as individual company owners and entrepreneurs.
Whichever valuation method is employed, a number of adjustments are normally made to the purchase price at closing based on the latest balance sheet of the company – such as for working capital, deferred revenue, and bank debt. Closing adjustments are standard practice in M&A transactions to determine the actual price paid to the seller for the equity or net assets of the business.
How much is my business worth?
For clients who are considering selling their company, retiring, looking for financing or a new investor – or who may be engaged in a legal action – KBC&A has the requisite experience and expertise to work with you.