Financial Model
Budget: $30 – $250 USD
In order for our Partner to acquire this firm, you must design an offer that is both attractive to both the seller and ourselves.
INSRUCTIONS:
• Build a simple 5-Year Pro Forma Valuation model for this prospect firm.
• Using a Multiple on EBITDA, design an offer that includes both Cash and Equity as forms of Consideration (structure timing and mix of payments as you see fit).
• Apply the assumptions below to your model. Feel free to include growth rates and/or additional operating expense adjustments to the pro forma as you see fit
• By way of email, summarize your offer. Provide any takeaways and/or reasoning behind the terms of your offer.
ASSUMPTIONS:
• The prospect firm’s most recent quarterly billing was $950,000 (the most recent quarterly billing is typically the best snapshot of an RIA’s book of business)
• Our Partner Firm (who’s making the acquisition) pays Advisors 25% of Revenue; Assume benefits / payroll taxes will be 7% of total compensation
• The market is currently paying 3.00x to 4.00x Run Rate Revenue for firms of this size
• Accretion / Dilution assumptions:
o Our Partner’s current Run Rate EBITDA is $25M, pre-deal;
o Firms similar to our Partner Firm are currently trading for 15x EBITDA in the marketplace
o Our Partner’s pre-deal debt-to-EBITDA ratio is 2.5x
o Target ownership/Dilution for the prospect should be 1.5%-3.0%
QUESTIONS / ITEMS TO CONSIDER FOR YOUR ANALYSIS:
• We typically defer cash payments over time; How would you structure cash payments in this offer?
• What is the “Effective Multiple” based on the inputs of your analysis?
• What Cash / Equity mix do you propose?
• How would you determine the post-closing Equity Value of our Partner Firm? What Equity % would the Prospect own in the post-deal Combined Entity?
INSRUCTIONS:
• Build a simple 5-Year Pro Forma Valuation model for this prospect firm.
• Using a Multiple on EBITDA, design an offer that includes both Cash and Equity as forms of Consideration (structure timing and mix of payments as you see fit).
• Apply the assumptions below to your model. Feel free to include growth rates and/or additional operating expense adjustments to the pro forma as you see fit
• By way of email, summarize your offer. Provide any takeaways and/or reasoning behind the terms of your offer.
ASSUMPTIONS:
• The prospect firm’s most recent quarterly billing was $950,000 (the most recent quarterly billing is typically the best snapshot of an RIA’s book of business)
• Our Partner Firm (who’s making the acquisition) pays Advisors 25% of Revenue; Assume benefits / payroll taxes will be 7% of total compensation
• The market is currently paying 3.00x to 4.00x Run Rate Revenue for firms of this size
• Accretion / Dilution assumptions:
o Our Partner’s current Run Rate EBITDA is $25M, pre-deal;
o Firms similar to our Partner Firm are currently trading for 15x EBITDA in the marketplace
o Our Partner’s pre-deal debt-to-EBITDA ratio is 2.5x
o Target ownership/Dilution for the prospect should be 1.5%-3.0%
QUESTIONS / ITEMS TO CONSIDER FOR YOUR ANALYSIS:
• We typically defer cash payments over time; How would you structure cash payments in this offer?
• What is the “Effective Multiple” based on the inputs of your analysis?
• What Cash / Equity mix do you propose?
• How would you determine the post-closing Equity Value of our Partner Firm? What Equity % would the Prospect own in the post-deal Combined Entity?