DealSense® is for Business Buyers, Private Equity Analysts and Buy-Side Advisors

Financial Data and Normalization Adjustments:

DealSense provides a smart way to prepare the Core Data used in the analysis, valuation/pricing and for putting together the elements of the deal. The Core Data is the set of historic financials and adjustments to reflect the actual economic position and performance of the acquisition candidate.

Analysis of Financial Statement Data:

DealSense generates the datapoints you need to perform a rigorous analysis of both the historic and adjusted financial statements—the Core Data. The analytics measure the company’s current position, past performance and trends and how it compares to industry peers. This information will help to inform your due diligence queries and negotiation approach as well provide a foundation for critical assumption that assumptions address future projections, deal price/terms and acquisition funding.

The Power to Develop Comprehensive Projections:

Financial projections are a necessary and extremely important part of acquisition analysis and planning. Glossing over this mission-critical planning element can be a serious mistake.

DealSense gives you the ability to create two sets of detailed line-item financial statements (Income Statements, Balance Sheets, and Statements of Cash Flow) and related analysis. The first set is based upon current ownership assumptions—the actual earnings stream you are buying. The second set of financials is generated using line-item operating assumptions and the deal elements. The “buyer projections” are used to evaluate return on investment and post-deal sustainability.

Classic Valuation Approaches and Methods:

DealSense provides an optional professional-grade business valuation component for buyers who want to perform a formal valuation (market value) for the entire business or a fractional interest. The system includes a wide selection of accepted and well-documented Valuation Methods that are available under the Income, Market and Asset Approaches to meet the needs of any business valuation assignment.

The valuation can be used as part of the pricing strategy and to prepare annual valuations of an acquired business interest or other companies in your portfolio. Or, if the preparation of a classic valuation is not necessary, you can skip this section and go directly to the pricing and allocation elements.

A Sensible Way to Price, Structure and Allocate a Transaction:

The Guideline Pricing and Allocation Tools are effectively a program within a program that provide a stepwise approach to putting a deal together. The analysis is driven from the first set of current-ownership projections—again, the actual benefit stream you are buying.

Purchase Price: The process of setting an initial purchase price starts with eleven key assumptions for items related to cash flow, exit, and debt assumptions. These assumptions are applied to calculate a maximum price that will meet your investment hurdle rate based upon either a buy-hold or a buy-now-sell-later strategy. These two prices can be regarded as a bracket to work within.

You can play “what if…?” games by changing any combination of assumptions. A scorecard makes it easy to evaluate the impact of the pricing assumptions. Metrics include Firm-Level Cash Flows, Payback and IRR on Firm Cash Flows as well as dividends or distributions. Let’s call it a “deal-sensible” way to arrive at a proposed purchase price that meets or exceeds required ROI.

Price Allocation and Terms: In one streamlined dashboard that is rich in information and detail, you can:

• Allocate purchase price (in an asset transaction) between tangible and intangible assets and other items such as non-compete agreements. (Allocation also works in an equity purchase.)
• Set how the purchase price will be paid to the seller(s): cash, notes, debt and assumed liabilities.
• Set variable and fixed transaction costs.
• Set how the transaction will be funded: cash invested, debt and/or buyer equity. Contingent compensation (earn-out) to the seller can also be included as part of the deal terms.

Built-in scorecards offer real-time feedback and the ability to test assumptions based a on both buy-hold or a buy-now-and-sell-later strategies. Metrics include IRR on Invested Cash Flows (Firm-Level) and Dividends (Distributions), spread over IRR hurdle rate, PV, NPV, payback and investment turns.

Robust Post-Transaction Forward-Looking Financial Statements:

The first set of projections reflect assumptions of the current ownership. Now, this second set of projections are based upon the buyer’s plans for the company and the resulting changes in revenues, expenses, capital structure and any assumed synergies.

Here you control all line-item assumptions for all income statement and balance sheet operating accounts including capital expenditures and asset disposals. The assumptions are combined with the price, form of acquisition, payment terms, allocation, and a variety of funding assumptions to prepare a second set of fully linked projected financial statements and cash flows (annual and monthly). A balance sheet at closing is also prepared based upon deal and funding terms and the allocation of purchase price.

The debt funding elements in DealSense can handle amortization, direct repayment, deferred and/or balloon payments with or without equity kickers/conversions.  Equity instruments include multiple investment tranches, Preferred Equity and Convertible Preferred.

Return on Investment and Sustainability Analysis:

The projected financial data provides the basis for further analysis of investment returns, payback and sustainability. This very granular analysis includes:

• Changes in Working Capital for greater insight into this all-important metric.
• Free Cash Flows for Invested Equity and Total Invested Capital.
• Discounted Cash Flows are calculated at the Firm-Level as well as the Stakeholder- Individual Investor-Levels based upon assumed distributions.
• When dealing with Stub Periods (less than a full year), DealSense will adjust the present value calculation for this irregular timing in order to arrive at an accurate Present Value of Cash Flows.
• DealSense gives you the option for discounting Cash Flows using a buy-sell or buy-hold investment strategy. The buy-sell approach includes your assumed Exit Multiple and Exit Year.
• Firm-Level returns are measured as follows: IRR on Invested Equity, Spread over Hurdle Rate, Present Value, Net Present Value, Profitability Index, Payback and Investment Turns.

Sustainability Analysis: DealSense includes a deep-dive analysis of the post-acquisition projections to help identify any systemic weaknesses and provide a reality check for complying with loan covenants. The analysis includes business ratios, common-sized statements and sustainable growth analysis.

Consolidated and Combined Financial Statements:

DealSense allows you to combine, adjust and consolidate the projected financial statements of a Parent and Target company after the acquisition, analyze the performance and capital structure before and after the consolidation and determine if the transaction will be accretive or dilutive to the Parent company in terms of Earnings per Share and Return on Investment. In addition, Free Cash Flows to Equity and to Invested Capital before and after the combination are compared to determine the amount of economic value that will be created.

Easily Create Custom Reports:

DealSense includes (without additional charges and upsells) an on-board report writer that streamlines the preparation of “number oriented” reports and proposals. Say good-bye to tedious cutting, pasting and link maintenance.

Reports are completely editable using Microsoft Word as appropriate and necessary for each assignment—not a one-size fits all or cookie-cutter solution. The existing library of Reports in DealSense includes: