News & Resources
You have received an offer for your business based on a multiple of EBITDA. What is EBITDA and are you sure the multiple is right?
Immersed in finance theory, my cohorts and I analyzed numerous public companies, performed financial analysis on their reported financials, and prepared valuation models using discounted cash flow (DCF) methodologies to find the intrinsic valuation of these companies. We then, with great confidence (and in hindsight, with great naivety), told the world whether the price of the stock was overvalued or undervalued.We were kings of Fundamental Analysis (FA). We viewed trendy valuation methodologies at the time (such as ‘value per engineer’) as pure gobbledegook. According to Investopedia, fundamental analysis is a method of measuring a security's intrinsic value by examining related economic and financial factors.
You may not know it, but some people go crazy for sneakers! So much so, there is even a “stock exchange” for buying and selling and tracking the value of sneakers called StockX. StockX’s last valuation round placed the company’s value at $1.1-Billion.Just for a day, we thought we would get into the craze! It all started when driving into work on a Saturday listening to CBC radio. The host was interviewing a local skate shop called Top of the World, that was lucky enough to have received 30 pairs of Nike’s SB Dunk Travis Scott limited edition sneakers. Don’t know who Travis Scott is? Neither did we. His claim to fame is that he dated Kylie Jenner.
The CFO plays a key leadership role in an organization, acting as the trusted business advisor to the CEO and the Board of Directors, by providing them an objective view of the financial performance of the business, while holistically assessing the company’s risks and opportunities.Today the CFO role is not viewed as solely keeping score or maintaining operational efficiency (cost containment, controls, quality of data, defined processes, etc.) it’s about “operational agility” and the CFO’s ability to collaborate, focus on growth, embrace a culture of adaptive learning and to effectively deliver analytics that are both meaningful and change agents for the company.
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If you ask any entrepreneur or executive who has made the leap of faith to sell their business, it can be one of the most exciting, rewarding, and difficult journeys of their professional careers.
One of the most contentious issues that continues to plague deals is around working capital – specifically the purchase price adjustments that result from setting working capital targets. If consensus cannot be easily reached, working capital discussions can prolong negotiations, leading to deal fatigue, increased costs and a risk of losing the deal.To address some of the pain points associated with traditional completion accounts, the use of a Locked Box Mechanism is becoming increasingly prominent, as it can help lead to greater deal transparency, better decisions, and smoother negotiations.
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