Business Valuation & Value Creation

Whether it is for establishing fair market value of a business, shareholder buy-sell agreements or for estate planning purposes, the valuation of a business is both a tax and business necessity. For many, the value of a privately held business is the owner’s single largest asset.

Valuations are especially important for privately held corporations because the stock for these entities does not typically experience market activity. Business valuations are performed for a variety of reasons, including the following:

• Buying/selling a business
• Allocation of purchase price
• Buy-sell agreements
• Estate and/or tax planning
• Employee stock ownership plans
• Incentive stock option considerations
• Insurance claims
• Damages litigation
• Succession planning
• Financing
• Charitable contributions
• Marital dissolutions

Compeer Partners' Value Creation Process

Compeer Partners helps growth-oriented organizations increase their enterprise value by using our three-stage process:

         ANALYSIS g STRATEGIES g IMPLENTATION

1.      Perform a comprehensive ANALYSIS of your company’s current financial condition and model three years of projected financial statements to determine a “Consultative” Business Valuation.

2.      Develop value creation STRATEGIES to increase your company’s free cash flow (FCF).  The change in FCF is a function of four factors:

1.      Improvement in the company’s cash flow margin;

2.      Improvement in the productivity of the company’s assets;

3.      The growth in investment; and

4.      Optimizing the cost of capital

4. IMPLEMENTATION of the Valuate Creation Strategies.

THE VALUE CREATION FACTORS EXPLAINED

These four factors are the main levers for creating value. Business owners hold these four levers in their hands.

1. CASH FLOW MARGIN: They can improve cash flow margins by better cost management and/or pricing strategy.
2. ASSET PRODUCTIVITY: Improvements in asset productivity come from more efficient resource allocation via, for example, better management of inventory or better utilization of fixed assets. Both are essentially inward looking, concerned with restructuring what the company already has.
3. INVESTMENT GROWTH: The third lever, investment growth, comes from things like transferring core competencies to new business areas, or from rolling out successful products or services into new geographical markets. It is essentially an outward looking activity, concerned with creating new assets.
4. COST OF CAPITAL OPTIMZATION: The cost of capital is the opportunity cost of all capital invested in an enterprise. Improving your capital structure (debt and equity) can take many forms such as better bank financing and alternative equity sources.

Compeer Partners can help your company pull the right levers. For more information, contact Mike Sauer at 614-760-9820 or by email at msauer@compeerpartners.com.