What Drives Up Multiples in Enterprise Value?

Corporate Financial Planning: What Drives up Multiples?  Last newsletter, I provided a short (as I could) explanation of how to calculate enterprise value (EV) and why EV is an important topic for internal planning, valuing private company acquisitions, management buyouts and partner buyouts. A common follow-up question I get related to EV is What factors can drive up the multiples used in the enterprise valuation calculation? I will try to try to briefly tackle that question.  Key Reminder  Before we get to far down the road, its important to remember actual selling price and enterprise value are two different things. Selling price is an actual value a willing buyer […]

Calculating Enterprise Value: Corporate Financial Planning

Corporate Financial Planning and Calculating Enterprise Value Calculating Enterprise Value:  A key aspect to corporate financial planning is looking beyond just driving revenue growth to ensure the Company is growing its value. There are multiple ways to value a business and they are all academically correct; however, there is one methodology, often called Enterprise Value, that is used more than others when valuing businesses, completing management buyouts, partner buyouts or raising capital.  Given its importance, here is a very brief description of enterprise value and a simple example. The Enterprise Value Formula  As shown below, enterprise value is basically a formula. That formula […]

What’s Your Available Cash? An important, overlooked Financial Key Performance Indicator (KPI)

Available Cash: What’s Your Available Cash?  An important, overlooked FINANCIAL KPI (Key Performance Indicator) Available Cash?  I recently got asked by a CFO a question, I thought worth sharing. “How much cash should we maintain on our balance sheet in our business’?  I believe its good for companies to have ‘available cash’ of a minimum of two months of operating expenses but ideally up to six months.  Here’s a look at that formula and why’s its important.  The formula for calculating “Available Cash” is as follows: Available Cash = (Cash + additional borrowing capacity) / Monthly operating expenses Defined as: […]

Leveraged Buyout Single Buyer – Get Quality Financial Projections!

Leveraged Buyout Single Buyer – Management Buyout Consulting Leveraged Buyout Single Buyer:  Provide Multi-Year Financial Projections: Owners of growing companies often get approached by prospective buyers, even when they are not looking to sell. Suddenly, they are faced with a leveraged buyout from a single buyer. But owners that engage in those discussions, often face a challenge as the talks intensify. The challenge is they are talking to a single potential buyer, so they can’t use competition (i.e. interest from multiple bidders) as a way to drive up the Company’s price during negotiation.  One way to create leverage in those situations […]

Using Capital To Grow Your Business As Featured On Texas Business Radio

Using Capital To Grow Your Business  As Featured on Texas Business Radio Texas Business Radio Featured Chris Risey, President of Lantern Capital Advisors as part of their national advisor showcase to discuss how entrepreneurs are using capital to grow their business.  Lantern Capital Advisors helps clients understand their options and match their financing needs as it relates to raising capital. Here is the transcript: Matt Register: Hey Guys, welcome to the show, Texas Business Radio. Texasbusinessradio.com is the Web site. We’re to a section we like to call National Adviser Showcase. There are a lot of really smart guys coming to […]

Determining Value Early On is a Good Idea for Business Partners

Partner Buyout:  Determining Value Early On is a Good Idea for Business Partners I was recently asked if I could help a company develop a valuation methodology for their business so that if one partner wanted to buyout the other, they would already have an agreed up on formula valuing the business.     Two weeks later I got a different call from another owner asking for the name of a valuation consultant because one partner had died and they needed to get a valuation to figure out the value of the Company.  The spouse of the deceased partner was getting […]

What’s your EBITDA?

What’s your EBITDA? When I give speeches I like to wrap up the presentation by doing a group exercise where the participants have to look at a simple set of financial statements and calculate a Company’s EBITDA (earnings before taxes depreciation and amortization). This is the most commonly used financial short hand for understanding the operating cash flows a company generates. What’s interesting is many business owners and CEOs have a tough time calculating EBITDA. Many go back through their the notes from my presentation to look up the formula. What this tells me is many owners and CEOs of […]

How Do You and Your Team Use Corporate Financial Planning?

Corporate Financial Planning:  How Do You and Your Team Use Corporate Financial Planning?   Do you have a financial planning process that improves your business planning process?  There are numerous ways to apply corporate financial planning to drive more growth and value in your business. If you want help or ideas about that, give us a call.  We’d be happy to share with you some effective planning techniques and/or help you implement them. Corporate Financial Planning Management Buyouts Lantern Capital Advisors helps growing companies find the financing solutions to fund management buyouts while keeping management in control and preserve and/or […]

Failure Is Not An Option

If you haven’t seen the ad by Chrysler featuring Enimem, well, we want to share it with you, provided that You Tube doesn’t take it down… What does your company know about luxury? The finest things in life. Especially when the questions are asked by someone that has never set foot in your business, in your world, in your shoes, in your town. The hottest fires make the hardest steel. What does your company know about being successful, especially when the talking heads swear that the sky is falling, and that there won’t possibly be anyone left to buy what […]

Weekly What If: What If We Consolidate On Our Own?

The Weekly What If…Chronicling companies that transformed their business by Exploring What if  Today’s biggest boat retailer was organized around this What If.  Today, Marine Max is America’ largest boating and yachting retailer with over 50 locations in 19 states.   In 2004, I interviewed company, CEO and Chairman Bill McGill and was surprised to learn more about their history.  Mr. McGill, an engineer by background, owned and ran a successful single location boat dealership in St. Petersburg Florida. In 1997, Mr. McGill and a handful of other successful dealers were approached by a private equity firm that pitched the idea of consolidating their […]