Stanzial Inc Mark FieldingPritchard mefielding com 1 Asset

Stanzial Inc Mark Fielding-Pritchard mefielding. com 1

Asset Valuation Assets 11806 Goodwill (170) Patent 10000 Reduction in long term receivables 100 - 100/1. 14 (12) Inventory 3400 – 30% (1020) Liabilities (5520) Total 15084 mefielding. com 2

Profits Profit after tax (983) Exceptional Item 2005 1022 Tax (30%) (307) Profit 715 EPS 715 /(4 x 2000) 8. 9 c mefielding. com 3

Profits P/e of quoted co 30 Risk adjustment (50%) (15) 15 Control (30%) 4. 5 19. 5 Value 8. 9 c x 19. 5= $1. 74 or $13920 for whole company mefielding. com 4

Dividends mefielding. com 5

Cash flows Sales Operating profit (8%) 2007 28100 2248 2008 35125 2810 2009 43906 3513 2010 48297 3864 Interest Cash received Tax WC Increase (350) 1898 (569) (172) (438) 2372 (712) (214) (547) 2966 (890) (268) (602) 3262 (979) (134) Cap Ex Non cash Expenses Total cash flow (1250) 1025 932 (1563) 1281 1164 (1953) 1602 1457 (2148) 1762 1763 mefielding. com 6 Working capital 2005 517 2006 686 2007 858 2008 1072 2009 1340 2010 1474

Cash flows a) Total cash flow Discount Factor (14%) Total {1763/0. 14}x 0. 675 mefielding. com 2007 932 0. 877 817 2008 1164 0. 769 896 2009 1457 0. 675 983 2010 1763 2696 8500 11196 7

Comparison of Values a) Assets 15084 Profits 13920 Dividends 7360 Cashflows 11196 Assets is very simplistic. It doesn’t include sale expenses which could be considerable. It s not relevant here as the assets will not be sold piecemeal, the business will be sold. Profits is the most relevant estimate here. We should be concerned about the exceptional item which is very large. However in the long term cash = profits so we would expect to pay something about $14 m for the company. Profits get heavily mefielding. com 8

Comparison of Values Dividends This is very subjective as it assumes the level of dividend is fixed for ever. In addition it uses the cost of capital which is almost impossible to calculate in real life. This could be a good value for the 100 private investors who will value their shares based on dividends Cash flow Technically the best method, cash flows ae usually taken from the cash flow statement. Biggest issue here is the discount rate, where does this come from and why is it fixed forever? The value of the company is likely to be about $14 m. It should be noted that bootstrapping is The process of purchasing unquoted companies and adding the to quoted groups. The P/e applied to the earnings will rise to (? ) 30 so the value will increase by 50% immediately on acquisition 9

Shareholder Mix b) On offer the purchaser, Stanzial, can employ a divide and conquer strategy. They are under no obligation to offer the same price to all sellers The senior managers will probably take a global view on their situation as their return from the company comes from employment and holding shares. If Stanzial can guarantee the employment for some future period they may see the acquisition as attractive. Success bonuses of new cars (for example) are common in these circumstances to sweeten the deal. You need these people to run the business so their buy in is essential, you don’t want them to sell their shares then set up in competition VCs presumably have a target return and will sell if you meet their target price mefielding. com 10

Shareholder Mix b) The individual may have many motives, he should be canvassed for his opinion. If he is difficult by the rest of the shares and remove him from the Board Individual shareholders presumably hold these shares as investments so offer the less mefielding. com 11

Success Factors c) The wi fi link has to be kept ahead of the market, so new product development/current product upgrades Setting and meeting strategic targets Developing good group relationships Offering the wi fi link a par of product bundles Integrating HR, R&D & marketing mefielding. com 12