Selling & Acquiring Training Companies

Valuation

Our Valuation Methodology

No, sorry, we can't give you a fixed formula - and you are supposed to have read all the previous pages first rather than this page first!

You will be expecting us to say 'a business is worth what a buyer is prepared to pay and what a seller is prepared to accept'. This is, of course, true but we have to work together to agree a price, or at least a minimum price.

A valuation is based on the trading history, current performance, future order book, financial results and the balance sheet. In addition factors such as intellectual property, new products and potential cost savings etc all impact on the valuation.

Initial Assessment

We start with a multiple of sustainable profit and refer to this as the 'adjusted EBITDA' (earnings before interest, tax, depreciation and amortisation). The multiple figure selected tends to be driven by market forces at the time of the sale. Typically deals range from a multiple of one (don't sell) to ten (grab that buyer). We work together to ensure this profit figure is as high as possible by determining what can be 'added back' to the profit figure via the Grooming Service. It is often possible to agree an additional sum based on the content of the balance sheet - this could include surplus cash in bank, property etc.

Business Valuation Software

The Initial Assessment is followed by the use of a computer application using an analytical approach to assess the value of the business. We assess the future cash flow generated and the risks associated with generating it and consider the external factors that will also determine the attractiveness of the investment. In addition we compile a discounted free cash flow to forecast the cash generation capability of the business and mesh this with the results of the first part of the analysis. The computer analysis provides a continuing value of operations following the deduction of balance sheet liabilities. Investment professionals favour this approach.

With 'luck' the valuation derived by both methods will be similar!

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