VALUATION


PLANNING

Analysis:

Discounted Cash Flow (DCF)

A DCF model forecasts all future cash inflows and outflows of the business. The net results for each forecasted year are discounted to reflect the time value of money, and these are summed to give the Net Present Value (NPV) of the company. There are several variants of the DCF methodology and some are more appropriate than others for specific businesses.


Comparables Analysis

Comparables Analysis is an alternative valuation method which is based on actual market valuations rather than a theoretical value. The valuation is achieved by comparing the company to similar companies that are listed or have been sold recently and pro rating their values based on a suitable metric


Clients seeking to buy or sell a company or seeking to raise finance will inevitably need to value their company.

Why?

SOLUTIONS

Typical reasons for needing a company valuation include:

  • Seeking to sell a business

  • Seeking to buy a business

  • Seeking to merge with another entity

  • Raising finance (debt or equity)

  • Issuing shares or options

  • Wanting to understand the value drivers of a business

execution

Too often managers are over- stretched, focused on their product and clients and lack time and resources to analyse past performance or new opportunities.
Most businesses neglect to plan beyond 12 months. Orinoco helps clients with business planning by building a 5 years or more forecast model in line with corporate strategy and based on robust assumptions.

Typical reasons for planning include:

  • Investors or lenders want to see a long term outlook
  • Owners want to see a long term outlook
  • Managers need a long term forecast in order to plan for an unstable future, perhaps caused by:

                   - rapid market growth or decline

                   - disruptive technology

                   - change in legislation

Forecasting

A forecast can be anywhere between 3 years and 50 years. The aim is to forecast the market for a particular product, pricing and the client's market share. Realistic forecasting is achieved by studying historical market drivers that have remained stable and projected these forwards. Forecasts are rarely 100% accurate but the aim of the exercise is that they are realistic, reasonable and defendable.


Business Planning

Using a market forecast as a starting point, sales volumes can be projected as well as associated variable costs. Fixed costs are then added, and tax costs can be computed from the resultant profit calculations. If required full forward looking Cash Flows, P&Ls and Balance Sheet statements can be produced with as much detail as necessary to assist management with their planning, be it sales breakdowns, cash needs, manpower needs etc.


Optimisation

When planning for the future, management is always faced with budget dilemmas  such as how much and when to invest in capital goods or advertising spend, or recruitment etc. By modelling the business, it is possible to optimise the business subject to constraining factors such as capital and manpower and optimal solution can be found. This is a very powerful tool for management to maximise returns to shareholders.

Managers or owners need answers to a specific question or problem. For example:

  • which is the most profitable product?
  • which customer segment is the most profitable?
  • what is the return on investment for a proposed new project?
  • which is the manufacturing solution is the lowest cost?
  • what happens to the bottom line if prices drop 10%?

Management accounting and reporting

In addition to audited accounts, managements need many ad-hoc reports specific to their business. Such reports can be bespoke and automated for the client.


Detailed Profitability Analysis

Obtain highly accurate profitability data for your products, customers, territories. This is vital information for making informed strategic decisions.


ABC accounting

Most companies have detailed accounts by resource but have no idea how much each value added step costs. Should some activities be outsources? This decision can only be made if you have accurate ABC accounting.


Sensitivity analysis

Many models, such as forecast models or valuation models, are reliant on a few key assumptions. It is important to know who sensitive these models are to the key assumptions. Sensitivity analysis determines and measures the most influential assumptions in a model.


What if analysis/Scenario planning

These tools allow you to simulate your business under a different set of operating functions giving useful intelligence for making strategic decisions.


Data mining

Over the years, companies accumulate mountains of data. The sheer scale of which makes it difficult to analyse in order to obtain actionable conclusions.


  • Understand client's needs and agree objectives
  • Understand client's business
  • Creation of the model(s)
  • Interim review
  • Modifications and fine-tuning
  • Further review(s)
  • Finalisation
  • Hand-over
  • Post-project support