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, 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.