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1 Company Valuations & How You Can Increase Kevin Uphill Avondale

2 Strategic deals + Economies1 + Synergy1 + Value influence1 Sum6 The Market Avondale team of 20, 35 plus transactions per annum. Commercial specialists. Organic growth slow driving acquisitions (average 4 bids per project). Fast change driving interest in niche companies with products.

3 Personal/strategic cross roads Growth in sector House in order Leap of faith Acquisitions faster Own house in order Cashflow strong Organic growth slow Low interests rates Create shareholder value New products/team/ services Timing

4 Valuation Methods Discounted cash flow forecast or price earnings multiple of profits Debt free/cash free Adjustments to profits Valuations are financial forecasts to exceed in the process


6 Example hire business31/12/2013 Equipment undervalued£ 50,000 Debt free/cash free£-75,000 Adjustment to final price£-25,000 Surplus cash negotiate extra to deal for tax savings but be warned buyers will try and include as goodwill, if its there. Consider tax instrument to remove surplus – EFURB? Debt- Long term liabilities Less- Cash Adjusted Balance Sheet

7 Example hire business31/12/2012 Turnover£1,850,000 Gross£746,976 Operating Profit£177,725 Adjustments to net profit Director’s pension£3,600 Spouse salary (non operational)£21,859.00 Directors remuneration (part- time/strategic role)£78,005 NI On Directors£7,800 Additional rental-£15,000 Bank interest£639 Factoring£16,806 Hire purchase interest£3,542 Amortisation (of goodwill)£21,600 Depreciation real cost hire co Adjusted PBIT under management£316,576.00 Forecast Financial value x 4 est. 4 x £316k = £1.26 ml Actual Marketed on Offers 4 bids Offer achieved £1.9 ml --------------------------------- Dutch co seeking UK base Adjusted Profit & Loss

8 Deal Structure 1. On Completion £1,450,000 2. Deferred Payment £ 225,000 3. Earn out £ 225,000 4. Total £1,900,000 Deal structure is a multiple influencer Protections Charges on shares for deferred Earn out on gross not profit- easier to define Earn out on current not growth Protections business to be run materially same Quality buyer/covenant Access to records Reverse non compete

9 Positioning - Modelling - Deal Structure Strategic deals Case Studies TypeProfit/t/0ValueROI PENotes Construction Hire £316,000£1,900,00011%7 Dutch buyer needed UK presence Tuition (London)£70,000 pbit£240,00025%4 Actually 8 multiple plus as no owner manager cost- went to a charity Gateway Ltd £500,000 ebitda £3,500,00014%7 £100 million buyer, looking at new products Renewable energy distribution £3,600,000£20,000,00017 %6 Rare right buyer again £100 million turnover Kiddicraft£3,200,000£78,000,000 4% 24.3Online position- Morrisons Suermarket 35% of projects international buyers 2012

10 Value Drivers Company Foundation The Profit Engine Management Strategy Preparation (Value Build & Business Design) Current reality- future reality- options – strategy - implement The right advisor, buyer and process Right timing

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