Valuing Your Government Contractor Business John T Schell
Valuing Your Government Contractor Business John T. Schell Special Briefing The Mc. Lean Hilton October 3, 2001 Holland & Knight Consulting Strategic Business Solutions H&K Strategic Business Solutions
What is Your Business Worth? • • Book Value? Liquidation Value? Fair Market Value – Financial Buyer • • • – Stock Price (Public Company) Adjusted Cash Flow (Private Company) Revenues (Small, specialty only) Strategic Buyer • • • Market (Agencies, programs, expertise, etc. ) Buyer can consolidate and improve cash flow. Buyer can generate cash flow from other areas. Holland & Knight Consulting Strategic Business Solutions H&K Strategic Business Solutions
What Kind of Cash Flow? Plus Less Plus EARNINGS Non-cash charges Owners’ Perks and Excess Salary Non-recurring Expenses Non-recurring Revenues ADJUSTED INCOME Interest Taxes Depreciation Amortization EBITDA Key Issue: Historical or Forecast? Holland & Knight Consulting Strategic Business Solutions H&K Strategic Business Solutions
Valuation of Cash Flow • Relevant Methods – Discounted Cash Flow – Capitalization of Earnings. – Payback on EBITDA. • Calculation vs. Market Comparables. • Reduce by Outstanding Debt. Holland & Knight Consulting Strategic Business Solutions H&K Strategic Business Solutions
Estimate of True Value • Contractors Providing Services: 3 x-5 x EBITDA – • Titan/BTG: 4. 24 x 2001 EBITDA Adjust for Variables, e. g: Interest in Government Sector. – Agencies served (Intelligence, GSA, etc. ) – Contract Backlog, Terms, Follow-on Work. – Modify for Earn-outs, Stock, Seller Financing. – Abundance and Viability of Contract Vehicles. – Value-Added Work, Technical Skills and Margins. – Task Order Win Rate. – Holland & Knight Consulting Strategic Business Solutions H&K Strategic Business Solutions
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