Creating a financial model of your business can be complex, but there are some basic tools available that provide some actionable and useful insights into your business. Valitas is pleased to offer you a few of them below.
While the ultimate value of your business is what a buyer would pay, there are some tools that provide an estimate of the value and insight on what levers to pull to increase it. One such tool is the Discounted Cash Flow Valuation. Essentially, this tool calculates the value of your business as the present value of the cash it will generate in the future. This analysis is only as good as your assumptions. Several factors that influence the value of your business: sustainability of revenues, growth rate, and synergies with the buyer among others. This tool provides an estimate upon which to build. It also shows you how sensitive the valuation is to the characteristics of your business.
For many businesses, securing financing to fund an acquisition is an under-utilized path to value creation. The Acquisition Capacity Estimator looks at your financials before and after a hypothetical transaction. Using this information, we estimate exactly how much financing could be available to support a value-creating transaction. Often, what is overlooked is that the bank is not just assessing your borrowing capacity to determine the level of financing, but also the borrowing capacity of the combined future entity, since that is what will be servicing the debt. By using the combined entity’s borrowing capacity, you are leveraging the value of the target to obtain the financing to acquire the very same target!
The Shareholder Value Analysis tool calculates the additional shareholder value generated by executing high-return projects. Although some of these investments may require external funding, our tool clearly shows that the opportunity cost of not pursing these opportunities greatly outweigh the borrowing costs.