Summary
- 30-year-old business was up for sale
- Valued by a bank at 4x EBITDA
- EverEdge identified significant intangible assets (data)
- Sales scope opened for a new pool of buyers
- Business sold for 32x EBITDA
Client Information
A 30-year-old business was hoping to package its assets and sell them to a willing buyer. The company asked a global investment bank to supply it with a valuation.
The Problem
A standard valuation service will generally judge the worth of a company by first looking at its physical assets and cash flow, among other key balance sheet factors.
This rule-of-thumb assessment calculates a company’s full-year earnings before income tax, depreciation and amortisation (EBITDA) and assumes this result will perpetuate at much the same rate for the next four years.
This approach means analysts generally value a company at 4x EBITDA. In fact, if accountants had one button on their calculators, it would be the number “4” since they use it so regularly in valuations.
The Solution
EverEdge knew the company was holding multiple significant intangible assets, particularly about 30 years’ worth of weather data that was gathered incidentally as part of its larger operations. However, this data did not appear as an asset on the company’s balance sheet and therefore wasn’t included in the sales process at all.
However, a company’s true value depends on much more than its tangible assets.
EverEdge was asked to take over the sales process and began targeting a new set of potential buyers interested in securing the unique data rather than those who might only purchase the operating business. EverEdge’s reasoning was that companies which buy data tend to have much larger chequebooks.
Results & Benefits
EverEdge successfully located, codified and communicated the company’s data assets and developed a strategy to place those assets in front of buyers who were best aligned.
By putting the data assets front and centre in the sales pitch, EverEdge increased the odds of selling the company significantly. A buyer soon appeared, and the company was sold for 32x EBITDA.
This result represented the difference between a nice payday (had the company gone with the initial valuation) and generational wealth for the owners.
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