Chapter 18
Case Study: Valuation on the Buy Side
In This Chapter
Saving money in the long run
Spotting problems . . . or missing them entirely
Using benchmarks properly
Understanding deal structuring
In this chapter, we give you the step-by-step valuation process for a potential purchase of a company, putting into practice the concepts and steps we outline in the other chapters in Part IV. We start with full disclosure. If you’re planning to use this chapter as a one-size-fits-all template to value a company you’re planning to buy, forget it. No two companies are alike, and no two buyers are alike; therefore, no two valuation assignments are the same, either.
The purpose of this chapter is to tell you a story about one owner’s ups, downs, and in-betweens in the valuation process. The story isn’t a true story; the names and details have been changed to protect real clients. But to say the least, the road to value doesn’t always run smoothly, which is the main point you should take from this chapter.
Use this chapter as a way to prepare for the unpredictability of the valuation process and a way to better prepare yourself before you attempt to buy a company.
Being Frank: Selecting an Industry
The story we’re about to tell you involves an entrepreneur named Frank. Frank was a 50/50 partner in a prosperous consulting firm that placed consultants for information technology projects. When Frank and his partner were unable to come to terms on the future of their business, Frank’s partner ...
