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.
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, you input transaction variables such as: such as non-compete agreements. (Allocation also works in an equity purchase.)
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.