Valuation services for a company looking to perform a share buyback of one individuals’ shareholding

Our client is a London-based app developer that creates apps for Apple and Android platforms.

haysmacintyre prepared a memorandum that set out a range of company valuations, along with advice surrounding the tax implications of a 24% shareholding being bought back by the company.

We estimated that the minority 24% shareholding being bought-back held an estimated value ranging from £9m to £11m.

Company valuations can take a variety of forms, based on the different financial metrics, resulting in a range of different values. Depending on the sector and market in which a company operates, some of these company valuation methods would be more appropriate than others, and the range of business values can be refined.

Due to the split of our client’s revenue by Advertising and Subscription income, we calculated two sets of Enterprise Values and Cost of Capital metrics for each element of the company.

Using company forecasts, we presented a range of business valuations using the following valuation methods:

  • Discounted cashflow
  • Enterprise Value to EBIT ratio
  • Enterprise Value to EBITDA ratio
  • Enterprise Value to Sales ratio

Where company forecasts were presented for 5 years, this provided valuation ranges for each methodology which we used to give an illustrative average company valuation range.

We found that the total company value ranged from £44m to £53m, after using a variety of Enterprise Value ratios and a discounted cashflow valuation model.

When estimating the value of a 24% shareholding in the company, we applied a suitable discount to represent the minority stake and apportioned our company valuation by the percentage shareholding. This resulted in a valuation range of £9m to £11m.

 

Jon Dawson

Partner, Head of Creative, Media & Technology
+44 20 7396 4374
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