Email:
[email protected]
Mobil: 21 30 27 22
CVR: 25376153
Nordic Valuation
www.nordicvaluation.dk
Morten Christensen
cand.merc., MBA
How to increase the value of the company
Applied valuation model including simulation of value:
Discounted Cash Flow - most commonly used.
Every business owner wants to know the value of the company, BUT as with any investment the concerns
of investors at some point is to have an Exit, and then it is more important to know how to increase the
value in the money earned.
Company which are valued incl. 3 concrete actions to increase the value
Name
Address
Zip & City
Eksempel A/S
Eksempel vej 11
Eksempelby
1111
12345678
CVR no.
Initial valuation - indicative value
The value calculated
before 3 actions
Value:
Initial valuation. sensitivity analysis is performed on
discount rate and growth in terminal value. Results can be seen here.
Value range in millions before the 3
actions
242 million
280
Lowest
sensitivity
Highest
sensitivity
260
224 million
240
220
265 million
200
low
value
high
Value optimization - the three actions overall
From:
To:
242 million
295 million
This shows how strongly the three measures together affect the value
of the company.
The three proposals are explained on the next pages.
Growth:
22,0% in value
242 million
Increase Sales
+ 53 million
Reduction in
working capital
08-12-2015
295 million
Realized budgets
after 2 years (WACC)
1
Email:
[email protected]
Mobil: 21 30 27 22
CVR: 25376153
Nordic Valuation
www.nordicvaluation.dk
Morten Christensen
cand.merc., MBA
Increased value - action 1 alone
Applied valuation model including simulation of value:
Discounted Cash Flow - most commonly used.
Every business owner wants to know the value of the company, BUT as with any investment the
concerns of investors at some point is to have an Exit, and then it is more important to know how to
increase the value in the money earned.
Action 1: Increase sales
Revenue from initial valuation (before the action 1):
R2014/15
478,0%
E2015/16
92,6%
E2016/17
246,9%
E2017/18
31,4%
E2018/19
5,0%
E2019/20
3,0%
5% point is added in 2018/19 og 2% point in 2019/20
Action 1: Cash flow and EBIT (Earning Before Interest and Tax)
Figures for cash flow and profit after tax
Realized the first 2 years and estimates the next 5 years
(million DKK)
EBIT
Free cash flow
31
26
33
38
43
28
20
3
-4
41
3
1
The increase in value by action 1 alone
From:
To:
242 million
242 million
255 million
This shows how much action 1 alone affects the value
of the company.
+ 13 million
255 million
Increase sales
08-12-2015
2
Email:
[email protected]
Mobil: 21 30 27 22
CVR: 25376153
Nordic Valuation
www.nordicvaluation.dk
Morten Christensen
cand.merc., MBA
Increased value - action 2 alone
Applied valuation model including simulation of value:
Discounted Cash Flow - most commonly used .
Every business owner wants to know the value of the company, BUT as with any investment the
concerns of investors at some point is to have an Exit, and then it is more important to know how to
increase the value in the money earned.
Action 2: Reduction of working capital
Effect of reduction of receivables from customers (faster payment) and increased capacity
has a direct impact on cash flow
Receivables from clients:, decreasing from 45 to 30 days (natural level) from year 3
Inventory: Turnover rate in days reduced from 60 to 30 days (natural level) from year 3
Action 2: Cash flow and EBIT (Earning Before Interest and Tax)
Figures for cash flow and profit after tax
Realized the first 2 years and estimates the next 5 years
(million DKK)
Free cash flow
26
26
EBIT
31
31
38
39
40
28
3
1
3
-4
The increase in value by action 2 alone
From:
To:
242 million
242 million
248 million
This shows how much action 2 alone affects the value
of the company.
+ 6 million
248 million
Reduction in working capital
08-12-2015
3
Email:
[email protected]
Mobil: 21 30 27 22
CVR: 25376153
Nordic Valuation
www.nordicvaluation.dk
Morten Christensen
cand.merc., MBA
Increased value - action 3 alone
Applied valuation model including simulation of value:
Discounted Cash Flow - most commonly used .
Every business owner wants to know the value of the company, BUT as with any investment the concerns
of investors at some point is to have an Exit, and then it is more important to know how to increase the
value in the money earned.
Action 3: Budgets are realized after 2 years
The discount rate includes additional surcharge of 2% due to lack of history
If the company is estimated to be effectively achieving budgets after 2 years this allowance
are removed. The discount rate (WACC) can thus be reduced from 14.7% to 12.7%.
Note how much impact these few percent has value.
Action 3: Cash flow and EBIT (Earning Before Interest and Tax)
Figures for cash flow and profit after tax
Realized the first 2 years and estimates the next 5 years
(million DKK)
Free cash flow
EBIT
32
26
33
38
26
41
43
28
3
1
3
-4
The increase in value by action 3 alone
From:
To:
242 million
242 million
271 million
This shows how much action 2 alone affects the value
of the company.
+ 29 million
271 million
Realized budgets after 2 years (WACC)
08-12-2015
4
Email:
[email protected]
Mobil: 21 30 27 22
CVR: 25376153
Nordic Valuation
www.nordicvaluation.dk
Morten Christensen
cand.merc., MBA
Increased value - all 3 actions
Applied valuation model including simulation of value:
Discounted Cash Flow - most commonly used.
Every business owner wants to know the value of the company, BUT as with any investment that at some
point have an Exit, it is more important for you to know how to increase the value in the money earned.
Three concrete actions to increase the value
Below is shown the effect of all three actions together.
Your company may choose to work with the three steps or more.
It has both great effect on daily performance and particularly value can be strongly influenced.
See next page where the overall model for increased value appears.
All three actions: Cashflow og EBIT (Earnings Before Interest and Tax)
Figures for cash flow and profit after tax
Realized the first 2 years and estimates the next 5 years
EBIT
Free cashflow
32
26
(million DKK)
33
38
26
41
43
28
3
1
3
-4
All three actions together - the overall increase in value
From:
To:
242 million
295 million
242 million
This shows how much all three actions together affect the value
for each activity
+ 53 million
295 million
Increase sales
Reduction in
working capital
Realized budgets
after 2 years (WACC)
+ 13 mio. DKK
+ 6 mio. DKK
+ 29 mio. DKK
The synergy of all 3 actions: + 5 mio.
08-12-2015
5
Email:
[email protected]
Mobil: 21 30 27 22
CVR: 25376153
Nordic Valuation
www.nordicvaluation.dk
Morten Christensen
cand.merc., MBA
Review Your company overall
Turn-around, optimization of capital, savings and growth companies
Business value and increasing the value of the company. The model below show the focus areas.
Shareholdervalue - how to increase it
Optimize the operations and capital structure
Please see below the areas that can be reviewed and optimized:
Risk management
Strategy
Growth in
sales
Return on
invested
capital
Reduction in
working capital
Increased cash
flow, EBIT and
value
Improving
daily
operations and
cutting costs
Cost of capital
(WACC)
Dependence of
suppliers and
customers
KPI - meassure
performance
Copyright 2014 NordicValuation
Budgets and
forecasts
Optimizing organisation/management and IT
08-12-2015
6