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Case Study:SP&H Provides a Preliminary Estimate of Value for Exit Strategy
SP&H provided a preliminary estimation of value for a business in the food processing industry (the "Business") to aid the Business' owner in planning his exit strategy. By retaining SP&H to determine a preliminary estimate of value, the Business' owner was able to make an informed decision about retirement planning at a reasonable cost.
Case Background
The Business' owner retained SP&H to provide a preliminary estimate of value of the Business. The Business' owner was contemplating retirement and wanted to obtain a general idea of the Business' value. Since the Business owner was in the initial planning stages of determining his exit strategy, he did not require a full narrative report with thorough due diligence to determine a precise estimate of value. Rather, the Business' owner needed a limited appraisal to determine the estimated value of the Business.
SP&H's Preliminary Analysis
To develop the preliminary estimate of value for the Business, SP&H performed the following work:
- Limited review of the Business' financial history and future prospects
- Limited industry, economic and competition analysis
- Analysis of the range of valuation multiples paid for similar businesses
- Limited valuation analyses
The Business had approximately $25 million in revenues, earnings before interest taxes depreciation and amortization (EBITDA) equal to approximately $1.1 million, and strong future growth prospects. Based on the Business' general characteristics and SP&H's analysis of the valuation multiples paid for similar businesses, SP&H developed an estimated range of value for the Business.
Based on SP&H's preliminary estimates, our client decided to continue to operate his business and take steps to improve the Business' value. Rather than selling in the near-term, the Business owner decided to focus on competing for large contracts. If successful, the Business could potentially add significant revenues and profits, thereby increasing its value.
By retaining SP&H to determine a preliminary estimate of value, the Business' owner was able to make an informed decision about retirement at a reasonable cost.
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