VALUATIONS

EBIT Associates provides independent and objective valuation advisory services, which range from merger and acquisition transactions to asset appraisal and strategic planning.

A company appraisal commonly includes four major phases. Phase One typically consists of gaining a full understanding of our client’s requirements and the specific purpose of the business valuation. During Phase Two, our EBIT professionals will compile useful information about your company through the use of management questionnaires, interviews, document request lists, and facility tours. There are several factors EBIT considers when reviewing your company’s data during Phase Three. Some of these factors include economic factors, industry trends and influences, potential risk factors, and recent relevant transactions. Phase Four, the final phase, allows the EBIT team to test the validity of all assumptions and results, and review a draft report with the client. Only after all of these steps are complete will we issue the final report.

EBIT has developed a comprehensive process based on a Confidential Memorandum which examines all the factors involved in determining your company’s valuation. Created in three sections, the confidential memorandum is a complete package of all the information necessary for the buyer to make an informed decision about buying a business.

Section one consists of general business information including the purpose of the business, marketing strategy, industry background, employees and facilities.

Section two is financial disclosure. This covers three years of financial statements including balance sheets, profit and loss statements and tax and financial data.

Section three provides justification for the business’ worth. This section may be as large as a comprehensive evaluation or as short as a single page showing cash flow minus debt repayment. This illustrates the company’s ability to earn income and return on investment.

Would you value these two companies the same?

BUSINESS VALUATION – IS THERE AN EASY RULE OF THUMB?
REVENUE HISTORY COMPANY A COMPANY B
2002 $12,000.000 $12,000.000
2001 $8,000.000 $15,000.000
2000 $6,000.000 $18,000.000
TOTAL DEBT: $1,500.000 $7,000.000
AVG. EQUIPMENT AGE: 3.5 YEARS 20 YEARS
OWNER’S CASH FLOW: $1,250,000 $700,000
OWNER’S VACATION: 6-8 WEEKS NONE
SIMILAR INDUSTRY AND CUSTOMER BASE, SAME AMOUNT OF REVENUES
COMPANY A COMPANY B
REVENUES: $12,000,000 $12,000,000
NET INCOME: $500,000 $500,000

Overall, EBIT’s valuation professionals and business brokers utilize advanced valuation techniques and an understanding of economic conditions to provide effective valuation services.