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BOOKS
NEWSLETTERS
PUBLISHED ARTICLES AND RESEARCH
PRIVATE COMPANY OWNER ASSESSMENT
BOOKS
VALUATION FOR M&A: Building Value in Private Companies, SECOND EDITION
Co-authored by Chris Mellen and Frank Evans
Published by John Wiley & Sons
The book is available through:
For the Table of Contents, please CLICK HERE
For more information, please CLICK HERE
VALUATION FOR M&A: Building Value in Private Companies
E&A principal, Frank C. Evans, co-authored with David M. Bishop the best selling book, VALUATION FOR M&A: Building Value in Private Companies, published by John C. Wiley & Sons, Inc.
Read an Excerpt from the Preface to VALUATION FOR M&A
The mystery surrounding a company’s value often causes owners or executives to make bad investment and operational decisions. But these poor choices can be avoided. Accurate valuations are possible and M&A deals can succeed for both buyers and sellers. The keys to success are in the pages that follow.
Through providing valuation advisory services to hundreds of companies and thousands of corporate executives, we have developed tools to accurately measure and successfully build value in companies. By employing these techniques, owners and managers can determine their company’s value, what drives it, and how to enhance that value both in M&A and through daily operations.
In M&A, sellers, buyers and even their advisors struggle over the value of a business. Often, they are frustrated by what they see as the other side’s unrealistic expectations. The following uncertainties abound:
- Do profits, usually computed as EBIT or EBITDA, represent the company’s true return to shareholders?
- Is the forecasted performance realistic?
- What is an appropriate rate of return or multiple, considering the investment’s risk?
- Should the transaction be structured as an asset or stock deal?
- Has the seller properly prepared and packaged the company to get the best price?
- What personal issues are of critical importance to the seller?
- Has the buyer found the best target and accurately quantified potential synergies?
- Does the deal make sense at the quoted price?
Greater fundamental mystery exists in private companies- those not traded on a public stock market, including thinly traded public companies or divisions of large corporations. Most owners and managers operate these companies year after year without ever knowing the answers to these basic questions:
- What is the company worth?
- How much more would a strategic buyer pay to acquire it?
- What factors most affect the company’s stock value?
- What is the owners’ real return on investment and rate of return?
- Does that return justify the risk?
- Are owners better off selling, and if so, how and when?
This book provides the tools to answer these and related questions. It is written for investors and managers of companies who lack the guidance of a stock price set by a free and active market. Our solutions to valuation and return on investment questions create accountability and discipline in the M&A process. Our techniques incorporate value enhancement into a private company’s annual strategic planning to provide direction to shareholders in their investment decisions. In short, our book is a roadmap to building value in both operating a company and selling or buying one.
Many investors have heard about building value in a public company where the stock price provides the market’s reaction to the company’s performance. It is much more difficult to develop a successful strategy and measure performance accurately when no stock price exists. Difficult, but not impossible.
We invite our readers to employ these techniques to achieve accurate M&A valuations and to build value in daily operations. Trade the mystery for this roadmap to wealth.
Frank C. Evans
David M. Bishop
June 2001
To print a copy of the book excerpt, click here.
To order your copy, visit: www.wiley.com/WileyCDA
Chapter 5 - The Essentials of Business Valuation, Handbook of Budgeting, Fifth Edition
Frank C. Evans is credited with writing Chapter 5 - The Essentials of Business Valuation, in the Handbook of Budgeting, Fifth Edition, William R. Lalli Editor, published by Wiley & Sons, Inc.
Training Manuals
For information regarding training manuals Frank C. Evans has prepared, please visit the Speaking page of this website.
NEWSLETTERS
E&A newsletters, which are written by Frank C. Evans, present discussion and analysis of valuation related topics that owners and executives of private companies should consider in their quest to maximize the value of their private company investment. Recent issues discuss the following:
- Did the 2008 Stock Market Crash Cut Your Company's Value?
- What lessons can private company owners learn about the value of their own business in light of the 2008 stock market crash? Examine specific ways to build, protect and harvest your private company wealth.
- Why Planning for a Private Company Sale is Critical -
And Reasons Why You Should Think About This Now- Planning when and how to exit from a private company is often so uncomfortable many owners refuse to seriously think about it. But some change ultimately has to occur. So, the key to success is to give yourself and other owners the time and a process to plan, first at the owner or shareholder level and then at the corporate level. This issue explains what this involves and why you should start years in advance.
- How to Best Achieve Your Goals: As a Stand Alone Company or Through a Combination
- Private company owners should recognize that their best growth option could be through combining with another company rather than remaining as a stand alone business. This newsletter explains the process required to evaluate options to build your business as a stand alone company or through a combination.
- Should Owners and Executives Directly Negotiate Transactions
- Business owners or executives occasionally must purchase, sell or otherwise combine a company or business segment. This article offers insight on issues that are addressed in the negotiations. It further explains the risks of direct owner or executive involvement in the process and explains how a transaction advisor can provide critical assistance to help owners to achieve their goals.
- Unique Challenges of a Multiple Generation Family Business
- Private companies that are owned or operated by more than one generation of a family pose unique challenges in their quest for long term success. This newsletter identifies key issues for families to address and offers procedures to achieve sound decisions to meet the divergent ownership goals that may be present.
- Why Do You Own Your Private Company? Part I
- Private company owners who invest for the money - to earn a return on their investment - should clearly understand their motivations and whether or not they are achieving their financial goals. This newsletter provides the steps to measure financial return and illustrates a private company investment that makes sense and one that does not.
- Why Do You Own Your Private Company? Part II
- Owners of private companies frequently have significant motivations beyond financial returns that influence their investment decision. This newsletter identifies the most common non-financial reasons for private company ownership and offers owners a blueprint to address these issues to enable the owners to make sound, long term decisions to achieve their non-financial, as well as financial, goals.
- Exit Planning External Threats: Recognize When Your Ability to Compete is Declining
- External threats continually emerge from competitors. For private company owners, critical steps to success are:
- Recognize the threats your company will encounter.
- When possible, build competitive barriers to protect your space - differentiate.
- When your competitive position begins to decline, get out before your value is destroyed.
- Is Your Company Building Wealth-12 Critical Value Metrics to Constantly Monitor
- Owners and executives in private companies should carefully track 12 key metrics that can have a huge effect on their company's performance, competitive position and value. This article is a discussion of these 12 factors and how to assess your strengths in each area.
- Why 10%. of a Private Company is Worth Less Than 10%
- If 100% of a private company is worth $10 million, a 10% ownership interest in that business may not be worth $1 million and is probably worth significantly less. Private company shareholders should clearly understand how the degree of control and the accompanying degree of marketability of their ownership interest affect its value. They should also appreciate the value management opportunities that such ownership interests create.
- Succession Blues or Why Business Owners Get Insomnia
- When private company owners work so hard to build wealth in the family business, why is it that so many fail to successfully exit the business? Succession Blues explains four common errors that occur and provides a strategy to avoid them.
- Can You Double Your Company's Value - Here's a Blue Print
- Those owners and executive who recognize their private company as an investment focus on building, protecting and harvesting that wealth. This blueprint explains how to design a strategy to significantly increase your company's value.
- Why Deal Structure Is Critical In Merger and Acquisition
- Successfully buying or selling a private company requires a thorough understanding of how a transaction can be structured. These choices affect cash flow, taxes and risk and require careful advanced planning to maximize your benefits.
- Six Keys to Private Company Payoff
- What separates a sound private company investment from one that yields low or no returns? Here are six keys to achieving a solid private company payoff.
- Sarbanes Oxley-More Needless Regulations or a Nudge Toward Better Corporate Governance
- A primmer on private company governance including:
- Four essential governance reforms that every private company should practice to enhance value.
- Legal opinions every private company owner, director and executive should seek.
- The advantages and disadvantages that outside directors provide.
- Is Your Shareholder Agreement a Time Bomb
- While shareholder agreements are meant to provide a process for reasonable and orderly division of profits, determination of share value, and transfer of ownership interests, many agreements only create the need for litigation. Here is a list of key valuation related issues that your agreement should address.
- Is Your Private Company Return on Investment Adequate-How to Correctly Measure and Significantly Improve ROI- Short Version | Long Version
- Owners and investors in private companies almost always compute return on investment incorrectly and, as a result, frequently make poor investment choices. Here is the step by step process, with an illustration, on how to correctly compute and manage private company ROI.
- Critical Issues Every Private Company Owner Must Address
- Most private company owners fail to recognize that their business is an investment - often their largest - and they must carefully plan to build, protect and harvest their private company wealth. Essential steps to achieve this goal are presented.
- When should I get out?
- How do I get out?
- Protecting Your Private Company Wealth from the Government
- Private company wealth can be effectively sheltered from gift and estate taxes through Family Limited Partnerships. Assets can be transferred to beneficiaries at discounted values to reduce taxes, while the donor retains control over the transferred assets. IRS strategies that oppose such wealth transfers have been upheld in various court rulings. Private company owners should have their partnership agreements reviewed by their estate tax advisor to protect their wealth and minimize their taxes.
- Transfer Wealth at Discounted Values
- Opportunities exist to transfer wealth (but not necessarily control) of your private company at discounted values to minimize the government's take and maximize your wealth. Many tax planning techniques exist to accomplish this goal, but they require careful planning that withstands IRS scrutiny. Discounts to value that are taken must stand up at the end of the process, which may be in court, so they must be well thought out and documented.
Also: Different standards of value are discussed and how they apply differently in litigation engagements.
PUBLISHED ARTICLES AND RESEARCH
E&A principals have authored or co-authored numerous articles on valuation topics that have appeared in all of the leading business valuation journals. In addition, they have written articles that have appeared in various refereed and professional journals that enjoy wide circulation. The following is a list of selected articles. (For copies of any published articles, please contact our office at (724)346-0150 )
"Valuation Essentials for CFO's" - FINANCIAL EXECUTIVE - MARCH/APRIL 2002
"Use and Misuse of Dupont Analysis in Business Valuation" - BUSINESS VALUATION REVIEW - MARCH 2002
"Managing Your Business as an Investment: How to Build Shareholder Value in Private Companies" - THE JOURNAL OF CORPORATE ACCOUNTING & FINANCE - JANUARY/FEBRUARY 2002
"Reconciling Initial Value Estimates and Determining Value Conclusion" - BUSINESS APPRAISAL PRACTICE - FALL 2001
"Market Approach - Using Guideline Companies and Strategic Transactions in Valuations for M&A" - THE VALUATION EXAMINER - SEPTEMBER/OCTOBER 2001
"Measuring and Managing Value in High-Tech Startups" - VALUATION STRATEGIES - SEPTEMBER/OCTOBER 2001
"Adjusting Value Through Premiums and Discounts" - BUSINESS APPRAISAL PRACTICE - SPRING/SUMMER 2001
"Tips for the Valuator" - JOURNAL OF ACCOUNTANCY - MARCH 2000
"Making Sense of Rates of Return and Multiples" - BUSINESS VALUATION REVIEW - JUNE 1999.
"Debt and Equity Weightings in WACC" - CPA EXPERT - FALL 1998
PRIVATE COMPANY OWNER ASSESSMENT
VALUATION FOR M&A: Building Value in Private Companies
The Private Company Owner Assessment is a planning tool that assists owners to identify, clarify and prioritize their goals and objectives related to the ownership of their business. Completion of the assessment provides owners with a comprehensive view of their unique private company investment, their status as an owner and their priorities and directions to enable them to make critical decisions to achieve business success and personal peace of mind.
To view the Private Company Owner Assessment PDF, please CLICK HERE