Você está na página 1de 22


Executive Summary
Richmond Disposal Equities is a leader in the garbage disposal business. We provide garbage pickup and disposal services to municipalities across the state of Oz. Our clients consist, mostly of residential dwellings in affluent neighborhoods. We provide an essential services and our business has seen an explosion in growth as the population of the state and its municipalities continues to increase. Our landfill life expectancy and long term contracts with growing municipalities places us above the competition as we continue to rapidly grow and expand our operations. Business Richmond Disposal collects and disposes garbage. Richmonds collection of garbage is segmented into three categories (i) hauling, (ii) intermediate disposal (iii) final disposal. Presently we are engaged in the collection and disposal of garbage from over 116,000 residents. Our competitive advantage is the size and life expectancy of our landfills, along with our long term contracts with municipalities. Competition Our competitors are rapidly depleting the useful lives of their landfills. Once our competitors have run out of landfill space they will have no other option but to utilize our landfills. The central location of our Davies landfill will force our competitors to deal exclusively with us or risk going out of business. We have a competitive advantage because our landfills have a current life expectancy of 55 years. Most importantly we do not anticipate any new companies to enter the market. Risk The greatest risks associated with our business today are governmental regulations and the acquisition of long term municipal contracts. We have overcome these risks by working closely with governmental regulators and our records indicate that currently we are operating at or above government regulations. Secondly we have acquired long term contracts form local municipalities with options to further renew the contract. Historically 95% of our customers have renewed their contracts.

Sale of Richmond Disposal Equities Richmond has been negotiating with various parties for the sale of the company. The owners have worked extremely hard for the past twenty years in order to give Richmond an exceptional reputation in the industry. However, the owners desire to sell the company and retire. Richmond has negotiated a sale of the company and is currently in the process of transferring ownership to the new management. The details of this transaction are provided in this report.

Richmond Disposal Equities Sellers Perspective The first and foremost question to be addressed must be whether John wants to sell Richmond Disposal Equities to prospective buyers or transfer the company to his heirs. Alternatively, he may also want to sell the company but retain a certain amount of interest. Here are some of the initial factors to be taken into consideration when making this decision: John should sell and diversify earnings in stable investments Given the fact that Elaina needs money for her day-to-day living, her old age and illness, and the fact that her children show no interest in the company, Johns best option is to sell Richmond before Elainas interests are passed on to her children. Once the interests are passed, they will gain significant control of the company and given their inexperience, may want to make a quick cash deal to sell the company. In Johns old age and his desire to retire from the grind, he needs a stable portfolio of investments to generate cash. Currently, all of his wealth is tied in this business which presents a concentration risk. In order to avoid this risk, he should diversify his wealth by investing the cash from sales into mature, income generating stocks such as (insert examples). These businesses typically pay out quarterly dividends, which would allow John to live comfortably in his retirement.

Cash deal or Stock Options In trying to sell his Business, Johns first priority should be a cash deal because as mentioned earlier, his goal should be to diversify his wealth in different investments to be safe. The upside for receiving stock in a company in exchange for Richmond is that John can avoid paying taxes on the sale. This is the main advantage in this type of transaction; however concentrating his investment in a single company is too risky. Paying the taxes on a cash deal is a safer deal in the long run, considering that the value of money he receives at the time of sale is worth more than the value it would have later. The money he pays in taxes for the deal can be effectively re-generated by investing the cash in income generating companies. A stock deal will not give John the type of satisfaction he is looking for in his old age because he would still be participating in the companys growth and benefit instead of relaxing. Maintaining Auction Tension John also needs to maintain auction tension during the selling process by communicating to potential buyers that there are multiple parties bidding on Richmond, this will keep the process competitive. As a seller, John should make sure that he does not seem like a desperate seller. In furthering this goal, he should not extend any time lines for any potential bidding parties and should get as much interested parties in the bidding process as possible. Strategic v. Financial Buyers The question is simple, who would pay more, a strategic buyer or a financial buyer? A strategic buyer would be a company that is already within the waste disposal business whereas

a financial buyer can be private equity funds, or investment banks. The financial buyer would likely milk the business until Richmonds contracts are up for renewal, put a lot of debt on the company, and look to sell. John should sell to a strategic buyer because this type of buyer would generate more synergy from the business by getting rid of redundant functional areas and jobs. This potential for generating synergy will influence the buyer into paying more for the company as opposed to financial buyers that are strictly concerned with capital. The Buyers Perspective Exclusivity The buyer in this transaction wants exclusivity. The buyers position is that it will pay a good amount of money for the business but John cant run an auction and has to deal strictly with the buyer. The main reason that the buyer is looking for exclusivity is to avoid competing with other potential buyers. The buyer should propose that John cannot reach out to other companies for the 60 days and must deal with the buyer alone. If john is unwilling to deal exclusively with the buyer, the buyer may offer a go-shop in order to reach a middle ground. This way the buyer will make the offer and then allow John to solicit bids for 2 weeks to see if he can get a better offer. Offering this provision in the contract will of give John some comfort when making a semi-exclusive transaction.

Due Diligence The most imperative concern for the buyer is due diligence. The buyer has to confirm all the aspects of the business including the financials and Richmonds contracts. Any change of control provisions within the contracts between Richmond and its customers would seriously affect the position of the buyer. This type of provision gets triggered when a business decides to sell to a buyer and lead to nullifying to existing contracts. Richmonds fundamental activity is the contracts which generate income. Therefore, the buyer needs to perform due diligence and visit Richmonds existing clients to be assured that the client is ok with the change of management. Evaluation Liquidity Appendix G shows that Richmonds current ratio of asset to debt (0.40) is below the bench mark of 1.5 -2.0, which shows a negative aspect towards short term financial responsibilities. This is a red flag for the buyer because it is a sign that Richmond will not be able to pay off its short term debt obligations and still fund its ongoing operations. Currently, Richmond will only be able to pay off 40% of its debt obligations when considering the amount of capital available to pay these debts. Solvency Richmonds debt-to-equity ratio is 0.40. In another words, its total liabilities are roughly equal to less than half of its owners equity. This ratio indicates that Richmond has not been

financing its growth with debt accumulated from outside financing. The buyer can look at this number as a good sign because companies that are too highly leveraged, even a slight downturn in profitability could leave the company incapable of repaying its creditors. Richmond on the other hand, for every dollar of assets, financed only about 30 cents with debt and the other 70 cents with owners equity, this generally indicates that Richmond is using less leverage and has a strong equity position. Managerial Efficiency Richmonds ratio of accounts receivable to sales revenue is roughly 11%, this means Richmonds accounts receivables are 11% of its annual revenues. If we assume that revenue had been generated evenly throughout the year, we can see that it takes customers about 41 days to pay off their accounts. This is a very reasonable period because we can see that Richmond can take, on average 68 days to pay off its accounts payable. Therefore, between the number of days it takes for customers to pay their accounts and the number of days Richmond has to pay off its debts, there is a 27 day cushion. Profitability The margin ratio reflects the percentage of sales that remain after direct cost (cost of goods sold) and indirect costs (operating expenses) were reduced. Richmonds margin shows that every dollar of sales generates 14 cents of operating income. The return on asset (ROA) shows the amount of income that each dollar of assets generate. Richmonds ROA is around

53%. The return on equity (ROE) measures the return on owners investment in a firm. Richmonds ROE is 75% leverage towards debt. Determining the Purchase Price In order to figure out how much Richmond is worth when purchasing the business, it should be assumed, for the purpose of the evaluation that Richmond will be around forever. Discounted Cash Flow Analysis There is an assumption to be made here, based on the figures in table 1 relating to present value of free cash flow, we can forecast what the company is worth from 2016 to eternity. In order to utilize a practical way of evaluating how much capital Richmond will generate from 2016 forward, we will take the EBIDTA value and apply a multiple to it. The multiple used is 7 times. We got this multiple by looking at other businesses that were very similar, and what an investor is will to pay today for the businesses. (Reference to table) For example, in 2012, we took the total revenue of the company and subtracted the total operating expenses and then added other income to get the EBITDA value of $5540. This figure reflects how much Richmond will make in 2012 before income tax, interest for borrowing, depreciation and amortization. However, in order to evaluate how much cash will be generated, we subtracted depreciation and amortization which left us with the EBIT value. The main purpose for these calculations is to see how much cash is generated, we are not concerned with accounting profits here because they take into account non-cash items such as depreciation. We also deducted corporate tax at 39% and capital expenditures

(equipment purchases and other expenditures for the year). Finally, we deducted the change in working capital which was basically the difference between what Richmond owed to creditors and what Richmond was owed. These calculations reflect the amount of free cash flow Richmond possesses. In a world where there is no concept of present value, Richmond would generate the sum of the free cash flow figures from 2012 to 2016 plus the $84,000 figure (2016 EBITDA figure multiplied by exit multiple of 7). In order to figure out the present value of the cash that Richmond would generate, we took into consideration a present value factor. For example, in 2012, Richmond will generate 2280, however the buyer is not going to pay this amount for it today because cash is worth more today than it is worth in the future. Taking this figure of 2280 and multiplying it by the present value factor shows a present value of cash flow to be $2127. We similarly did this evaluation for all the years and reached a number of $11,532. We did the same present value calculation of the terminal year and got a figure of $41, 923. Adding these figures together and subtracting the negative cash flow ($70,000), we reached a total equity value $53,384. Trading Comparable Analysis One of the reasons why we decided to do this analysis is because we are making the assumption that similar companies in the industry should have the same evaluation, such as multiples. The market price of a company is derived from multiplying the stock price by the number of shares; however enterprise value also takes into consideration the debt value and adds that value to this figure. Table to shows the price to earnings multiple for 5 companies,

this multiple is important because it shows the figure that the company trades at. For example, if a companys earnings per share is $1 and their stock price is $10, the pe multiple would be 10, therefore it would be trading at 10 times its earnings. Waste Connection for example has a pe multiple of 9.2, meaning that its enterprise value is 9.2 times its EBITDA. These figures are important in our analysis because in calculating Richmonds enterprise value, we are using the multiples from these 5 companies. Therefore, based on the multiples of competitors, the value of Richmond could be between 32.6 million dollars and about 51 million dollars. The seller will likely try to add a premium to the value of the company because the seller wants some return; usually companies add a 30% premium to the enterprise value in order to earn profits. In the overall picture, Table shows that Richmond should be valued somewhere between 33 and 51 million with an average of 40 million. Adding a 30% premium leaves the value of Richmond somewhere between 42 and 60 million. This range reflects an acceptable range of values. Precedent Transactions Analysis This analysis reflects the multiples similar transactions that have taken place. In order to get an idea of the enterprise of value of Richmond, we can use these multiples. The EBITDA value we are using is for the last twelve months (LTM), $4,579. By multiplying this figure with the multiples of similar transactions, we are trying to figure out, how much Richmond may be worth when comparing other buy-outs. This analysis shows that Richmond is roughly worth $39, 244.


The Football Field Analysis In order to ascertain an acceptable value as to Richmonds worth, we used this analysis to take an average of the DCF analysis, the precedent transactions, and trading comparable. The result of this analysis reflects that Richmond is roughly worth $48, 156,000. The Negotiation Process First Meeting Seller valued company at $84,322,000 based on a discounted cash flow analysis. However the buyer had an issue with this figure because first and first most, it never took into account the present value factor. Money is worth more today than it is in the future, so buyer wanted to get a more accurate idea of how much the income generated in the future would be worth today. Adding the present value factor, the companys equity value was shown as $53,000,000. The buyer proposed that this is how much the company is worth TODAY. Even with this figure the buyer had a problem because it may not be an accurate statement of worth for Richmond. The seller is relying too heavily on the projected numbers and is not taking into account other factors that may significantly affect the value of the company: Buyers concerns: (1) the condition of the vehicle fleet and its current value (2) details of Richmonds contracts (3) Ensure that existing contracts will not be affected by new management (4) verify all financial statements with personal accountant (5) True capacity of


Richmond Landfills (6) IP rights to Richmond (7) No revenue in 2001? (8) Why does the regulatory agency report a only a 7 year useful life for this landfill (9) How long it will take for surrounding landfills to reach full capacity same with Canton life expectancy reported at 6 years by agency (10) If current amendment to city of Willard exporting rate is upheld, how much more volume will the Davies Landfill Receive (11) Why the lack of space in the Davies landfill during the last quarter of 2011 (12) $7 million of standby letters in off balance sheet liabilities (13) How far are the discussions regarding the acceptance of the 200 tpd of biosolid waste (14) Why isnt Davies landfill accepting more out of state waste stream even though it is more convenient and cheaper than both the Charle and Brendan landfills (15) Even if Richmond can secure the anticipated contracts it will bid for in 2012 and 2013, will it be able to handle the increased amount of waste? What impact would this have on the capacity of the current landfills owned by Richmond? Second Meeting For the assumptions in the Discounted Cash Flow Analysis the seller initially used a WACC or discount rate of 7%. This was based on the rate that other like companies were using. The buyer cant help but notice that these other companies are multi-billion dollar players, the seller should not be using the same discount rate as them because these companies are secure. Instead, the buyer proposed a discount rate of 15% in order to evaluate the company accurately because it factors in the increased risk with Richmond due to the fact that its a privately held company, the potential for union strikes, and significant reduction of income compared to the other companies.


The seller also valued Richmond based on trading comparables. The result of the analysis showed that Richmond was worth $53,000,000. This was based on EBITDA rate of Richmond multiplied by the exit multiples (what investors were willing to pay for these companies) that these companies used and averaged these figures. However, the seller also added a 30% premium to these figures because the seller stated that he wants some take out value from the company. Companies never sell for exactly how much they are worth; they always put a premium on the figure. Third Meeting The buyer evaluated Richmond in another way using precedent transactions Analysis. Buyer looked at similar transactions in the past and used Richmonds 2010 EBITDA rate and multiplied it by the multiple that these companies were using. The average of these transactions reflected that on average, Richmond would be worth $39,244,000. The seller proposed that instead of using a single method to evaluate the company, a more accurate method of looking at the total value would be to take an average of the results of these different analyses. Therefore, the partys agreed on a football field analysis which averaged out the DCF, trading comparable, and precedent transactions to give us a figure of $48,156,000. Based on the condition of Richmonds vehicle fleet and other concerns mentioned earlier, the buyer offered a price of $45,000,000. The seller did not accept this term for many reasons: (1) Future growth strategy promises significant income generation by Richmond (2) surrounding landfills reaching capacity meaning more business for Richmond (3) Good


Faith value of the company with Richmonds contacts, long-term contracts and promise of stability After this, buyers discounted this price by 15% to allow a possible return of on investments. . 1. 2. 3. 4. Buyer: Discounted by buyer at 15% this leaves the price at $41 million. Seller: Discounted price $2 million for vehicle upgrades ($46 million) Buyer: Also added $2 million for accounts payable ($43 million) Seller Argues these points in the negotiations: good faith value of company is not reflected in the numbers (20 years of good service + pending bio solid contract + growth strategy + other landfills filling up (competitors) + 95% chance of contract renewals 5. Buyer Argues: ($3 million in assumed contracts is speculation + cost of finishing single stream recycling project + union might strike + continuing payment on canton perpetual land fill (half million)) 6. After these negotiations the buyer was still left with a figure of $43 million and seller with $46 million. We decided that the final price of the company would be based on the payment structure of the deal. If seller is willing to take $43 million, buyer is willing to give cash. If Seller takes $46 million, buyers are willing to pay half in cash, and half in stock options. Type of Transaction Seller wants a cash deal, even though he would have to pay taxes for this transaction, he recognizes that by investing his cash in mature stocks, and he can make the money he paid in taxes back rather quickly. He does not want to own stock options because he wants to diversify his wealth and avoid concentration risk of investing all his wealth in one company. Buyer does not want to pay cash for the transaction because (1) by investing available cash buyer can generate income over time instead of paying the cash out to the seller (2) avoid


paying the cost of borrowing capital (3) spreads out risk to the seller by spreading out stock options Detailed Purchase and Contract Terms The parties came to an agreement on a total cash deal for $43,000,000. Elaina is entitled to half of this amount after taxes. The money will be paid out in the following manner: 1. $20 million in a cash lump sum payment which will be divided equally between John and Elaina 2. Of the remaining $23 million, the buyers will make annuity payments of $1 million per month for 23 months, which will also be divided equally between the two sellers Elaina will likely put her money in a trust for her children. This money will be transferred to her children at the time of her death. John will be taking the same measures in order to secure his retirement for as long as he is alive, and then transferring the money to his children. Impact of transaction on Spencer Family John: (1) He will be able to retire peacefully and will have financial security from transaction. He can spread out his investments into mature stocks Kory: (1) not very interested in the operations of the company but will benefit from the transaction because he will gain financial security for his future when trust is transferred to his name. This will give some financial security to his wife and children


Brendan: (1) Negotiated a three year contract between Brendan and buyer in order to keep Brendan employed after the transaction if he wants (Bidding and client relations). It would be good for the buyer because Brendan has 3 years experiences and a familiar face is always good when management changes. (2) Brendan will also gain financial security as half of Johns money will be transferred to Brendan at the time of Johns death Elaina: (1) She will receive a large cash payment in order to help with her living expenses in her old age (2) She can transfer money to her 2 children at the time of her death (3) she will not be concerned about the day to day operations of Richmond and will have financial security and funds for health expenses George: (1) can negotiate to keep George employed at the landfill (2) He will gain half of Elainas money at the time of her death Bob: (1) will receive future interests in a trust that will be transferred to him at the time of Elainas death. He can use this money to operate/expand his own business (2) doesnt seem like he cares about Richmond and it should not have much of an impact on him

Appendix A
Discounted Cash-Flow Analysis 2012E Revenue Landfill Transfer Station (3rd Party) Permanent Roll Off Commercial (Front Load) Residential-Municipal Contracts Residential Other Less: I/C landfill Revenue $6,501 1,016 2,948 2,132 14,554 3,994 452 (4,345) $27,252 Operating Expenses Payroll Expense DisposaI Costs Maintenance Expense Fuel Expense Equipment Leases and Rental Licenses and Permits Supplies Insurance Advertising ProfeSSional Fees Bad Debt Expense Bank Charges and Bonding Building Rent Property Taxes Telephone and Utilities Other Expenses Total Operating Expenses Other Income EBITDA Less: Depreciation and Amortization EBIT Less: Taxes Plus:Depreciation and Amortization Less: Changes in Working Capital Less: Capital Expenditures Free Cash Flow 39.0% $11,290 1,929 1,768 3,564 222 197 80 597 59 695 57 415 32 141 414 302 $21,762 50 $5,540 (3,801) $1,739 (678) 3,801 $1,583 (4,164) $2,280 $12,872 2,248 2,131 4,175 238 206 88 656 72 700 61 443 32 141 455 361 $24,879 51 $8,120 (4,587) $3,533 (1,378) 4,587 $797 (6,579) $960 $14,479 2,512 2,485 4,752 252 216 98 706 87 704 64 476 32 142 496 412 $27,913 51 $9,928 (5,072) $4,856 (1,894) 5,072 $677 (6,364) $2,347 $15,946 2,698 2,794 5,238 263 226 107 748 103 708 65 509 33 143 532 453 $30,566 51 $11,275 (5,589) $5,686 (2,218) 5,589 $559 (2,914) $6,703 $17,318 2,835 3,074 5,666 272 237 117 782 118 713 65 541 33 144 564 486 $32,965 52 $12,046 (6,026) $6,020 (2,348) 6,026 $443 (4,774) $5,367 $10,020 1,036 3,007 2,175 17,179 3,994 461 (4,924) $32,948 $12,381 1,057 3,067 2,218 20,179 3,994 470 (5,576) $37,790 $13,896 1,078 3,129 2,263 23,179 3,994 480 (6,229) $41,790 $14,582 1,100 3,191 2,308 26,179 3,994 489 (6,884) $44,959 2013E 2014E 2015E 2016E


Present Value of Free Cash Flow Period Free Cash Flow PV Factor PV Cash Flows Terminal Year Cash Flow Period EBITDA Exit Multiple Terminal Year Value PV Factor PV Cash Flow Enterprise Value Less Debt Plus Cash Equity Value $53,454 0 ($70) $53,384

1.0 $2,280 0.9325 $2,127

1.5 959.8 0.8109 $778

2.5 2,347.4 0.7051 $1,655

3.5 6,702.9 0.6131 $4,110

4.5 5,367.4 0.5332 $2,862 5.0 $12,046 7.0x $84,322 0.4972 $41,923


Appendix B

Working Capital Schedule 2012E 2011 Revenue $26,021 $27,252 2013E $32,948 2014E $37,790 2015E $41,790 2016E $44,959

Accounts Recievables Days

$2,945 41

$3,084 41

$3,729 41

$4,277 41

$4,730 41

$5,088 41

Prepaid Expenses Percent of Revenue Other current Assets Percent of Revenue

$382 1.5%

$400 1.5%

$484 1.5%

$555 1.5%

$613 1.5%

$660 1.5%

$220 0.8%

$230 0.8%

$279 0.8%

$320 0.8%

$353 0.8%

$380 0.8%

Accounts Payable Days

$3,438 68

$5,078 68

$6,139 68

$7,041 68

$7,787 68

$8,377 68

Accrued Expenses Percent of Revenue Working Capital

$2,338 9.0%

$2,449 9.0% ($3,812)

$2,960 9.0% ($4,608)

$3,395 9.0% ($5,286)

$3,755 9.0% ($5,845)

$4,040 9.0% ($6,288)



Appendix C

WACC Exit Multiple 15.0% 7.0x Sensitivity Analysis ##### 6.0x 6.5x 7.0x 7.5x 8.0x 8.5x 9.0x 12% 53,406 56,823 60,241 63,658 67,076 70,494 73,911 13% 51,299 54,568 57,837 61,106 64,375 67,644 70,913 14% 49,298 52,426 55,554 58,682 61,810 64,939 68,067 15% 47,395 50,390 53,384 56,379 59,373 62,368 65,362 16% 45,586 48,454 51,322 54,189 57,057 59,924 62,792 17% 43,865 46,612 49,359 52,107 54,854 57,601 60,348 18% 42,227 44,859 47,492 50,125 52,758 55,390 58,023

Sensitivity Analysis WACC 6.0x Exit Multiple 6.5x 7.0x 7.5x 8.0x 8.5x 9.0x 12% 53,406 56,823 60,241 63,658 67,076 70,494 73,911 13% 51,299 54,568 57,837 61,106 64,375 67,644 70,913 14% 49,298 52,426 55,554 58,682 61,810 64,939 68,067 15% 47,395 50,390 53,384 56,379 59,373 62,368 65,362 16% 45,586 48,454 51,322 54,189 57,057 59,924 62,792 17% 43,865 46,612 49,359 52,107 54,854 57,601 60,348 18% 42,227 44,859 47,492 50,125 52,758 55,390 58,023


Appendix D

Trading Comparables Waste Connections Market Cap. (US$MM) Enterprise Value (US$MM) 2012E-2013E EBITDA Growth 2012E EBITDA Margin P / CY 2012E EPS EV / CY 2012E EBITDA EV / CY 2013E EBITDA LTM ROCE Debt / CY 2012E EBITDA EV based on 2012E EBITDA Take out value (+30% premium) EV based on 2013E EBITDA Take out value (+30% premium) $3,582 $4,755 7.6% 32.0% 21.0x 9.2x 8.5x 8.1% 2.3x 50,968 66,258 69,165 89,914 Waste Management $16,737 $25,449 6.4% 25.0% 15.8x 7.4x 7.0x 8.1% 2.8x 40,996 53,295 56,514 73,469 Republic Services $11,869 $18,353 5.0% 30.4% 15.4x 7.3x 6.9x 7.2% 2.7x 40,442 52,575 56,104 72,936 Progressive Waste Solutions $2,566 $3,862 4.9% 28.9% 18.5x 7.0x 6.7x 6.7% 2.4x 38,780 50,414 54,531 70,890 Casella Waste Management $172 $625 11.2% 21.5% nmf 5.9x 5.4x 3.1% 4.5x 32,686 42,492 43,854 57,010 40,774 53,007 56,034 72,844



5540 8120

Trading Comp Min 32,686 Max 50,968 Average 40,774

Trading Comp + 30% Min 42,492 Max 66,258 Average 53,007


Appendix E
Precedent Transactions Transaction Florida Recycling / Waste Services (2003) Biffa / Montagu & Consortium (2008) IESI / BFI Canada (2004) WCA Waste / Macquarie Capital (2011) Waste Industries / WWIN Consortium (2007) WSII Jacksonville / Advanced Disposal (2008) Hydrochem Industrial / Aquilex (2007) Allied / Republic (2008) Waste Services / IESI-BFC (2009) Oakleaf Global Holdings / Waste Management (2011) Average 2010 EBITDA per Exhibit F EV/LTM EBITDA 11.8x 10.0x 9.5x 9.2x 8.6x 8.2x 7.9x 7.6x 7.6x 5.3x 8.6x $4,579.00 Est. Take-out value $53,857 45,579 43,501 42,346 39,419 37,613 36,060 34,938 34,800 24,326 39,244 ** Net Debt ~$0

Min Max Average

24,326 53,857 39,244


Appendix F
Actual Multiple Low DCF Precedents Trading Comps Trading Comps + 30% Premium 2012E EBITDA $5,540 7.5x 6.0x 9.5x 8.0x Mutiple High Min $51,322 $41,550 $33,240 Max $61,810 $52,630 $44,320 Min $51,000 $41,550 $33,200 Selected Diff. $10,800 $11,050 $11,100 Max $61,800 $52,600 $44,300 $56,400 $47,075 $38,750 $48,156 $48,156 $48,156










$61,800 $57,600 $52,600 $51,000 Average $48,156 $44,300 $43,200





Trading Comps

Trading Comps + 30% Premium


Appendix G
Liquidity Solvency Asset to Debt Debt to Equity $3,477 / $8,651 $11,112 / $26,121 $11,112 / $37,233 $2,945 / $26,021 $3,641 / $26,021 $19,717 / $37,233 $19,717 / $26,121 .40 .425 .2984 .1132 .1399 .5296 Negative aspect towards short term financial responsibility Negative aspect towards long term obligations 30 cents of every dollar for debt. 70 cents owners equity It takes on an average of 5.9 weeks for customers to pay their bill Every dollar of sales generates 14 cents of operating income Income that each dollar of assets generates

Debt to Total Asset Managerial Acct. Rec to Revenue Profitability Margin ROA ROE

.7548 Leverage against debt