Proposal for the Acquisition of Sample Industries, Inc.

Proposal for the Acquisition of

Sample Industries, Inc.

Prepared for:

Timothy Jones, CEO

ABC Actuarial, Inc.

Prepared by:

John Smith, CPA

ACME Valuation Services, LLP

500 North Michigan, Ave.

Chicago, IL 60600

The information contained herein is of a confidential nature and is intended for the

exclusive use of the persons or firm for whom it was prepared. Reproduction,

publication or dissemination of all or portions hereof may not be made without prior

approval from ACME Valuation Services, LLP.

This sample acquisition proposal was generated using Buy-Out Plan? and the Financial Report Builder?.

For more information call MoneySoft at (800) 966-7797. Note: this footer is fully customizable.

How This Report Was Generated

This report is a sample of the type of comprehensive acquisition proposal that you can quickly create with

MoneySoft¡¯s Buy-Out Plan? and Financial Report Builder? enhancement. Buy-Out Plan was used to

analyze the target company, determine purchase price and terms, and structure a workable financing plan.

The Financial Report Builder was then used to automatically create and format the acquisition proposal as a

Microsoft Word document!

If this were a ¡°live case,¡± descriptive text would be added about the company, its markets, management and

staffing, capabilities and operations, developing trends, and future prospects of the company. In addition, the

rationale for assumptions, potential synergies, changes to be made after the sale, capabilities of the buyer, and

a discussion of the strengths, weaknesses, opportunities and threats (risks) involved in the proposed

transaction could also be included in the presentation.

An Overview of the Scenario

In this sample case, the buyer is an investment group that has adopted a vertical build-and-hold strategy. The

target company is profitable, stable, fits well into the buyer¡¯s strategic portfolio and offers much needed

productive capacity. The Sellers are asking for $18,000,000 based upon an asset sale. The Buyer estimates

that the Enterprise Value of the company is approximately $16,245,656 and has offered $16,000,000. The

target¡¯s assets will be acquired by a newly formed entity that the buyer will control (¡°NewCo¡±).

This is a friendly transaction. Most of the management of the seller will be retained and have an opportunity

acquire an equity stake in NewCo. The acquisition will be funded with the buyer¡¯s stock, senior secured

debt, a convertible mezzanine strip, and some seller carryback. After the acquisition, the buyer intends to use

the target¡¯s available capacity to manufacture product currently produced by third-party vendors. In addition,

the buyer intends to upgrade equipment and install procedures that will improve collections and reduce

inventory levels. This Buy-Out Plan report pulls the deal together and provides a thorough bottom-line

analysis of the proposed deal.

The names and numbers used in this sample report are fictitious. Any similarity to the names or information

of actual companies is strictly coincidental.

A note about the colors used in this sample report:

As you review this sample report, you will notice that there are values inserted directly into narrative

paragraphs. All of these value insertions take on the text color of the surrounding text in the paragraph, i.e.,

black. You will also notice that some of the text is blue, dark red and magenta. The significance of each of

these colors is as follows:

?

Blue is used whenever the Report Builder creates a table that has a fixed width.

?

Tables with variable widths (dependent upon the number of years/periods selected) are indicated in

dark red.

?

Non-printable comments are indicated in magenta.

This sample acquisition proposal was generated using Buy-Out Plan? and the Financial Report Builder?.

For more information call MoneySoft at (800) 966-7797. Note: this footer is fully customizable.

¡ª Table of Contents ¡ª

?

*SPECIAL COMMENT*: To update the Table of Contents, click

anywhere in the following table and then press the [F9] function key.

EXECUTIVE SUMMARY

1

ASSUMPTIONS AND LIMITING CONDITIONS

4

EXTERNAL SOURCES OF INFORMATION

5

INTERNAL SOURCES OF INFORMATION

5

COMPANY BACKGROUND

Company Identification

Nature and History of the Company

Stock Classes and Ownership

Management Team

Product and Service Information

Market Data and Analysis/Competition

Governmental or Regulatory Environment

Key Customers and Suppliers

Marketing Strategy

Business Risks

Current Operations

Company Expectations

Other Observations

5

5

5

5

6

6

6

6

6

6

6

7

7

7

NATIONAL ECONOMIC AND INDUSTRY CONDITIONS

General Economic Conditions and Outlook

Industry Conditions and Outlook

8

8

8

HISTORICAL AND NORMALIZED FINANCIAL STATEMENTS

Summary Historical Income Statements

Income Statement Adjustments

Normalized Historical Income Statements

Summary Historical Balance Sheets

Balance Sheet Adjustments

Normalized Historical Balance Sheets

Summary Historical Statements of Cash Flows

Normalized Earnings and Net Cash Flow Summary

Normalized Interim Financial Statements

9

9

9

10

10

11

11

12

13

14

ANALYSIS OF HISTORIC FINANCIAL STATEMENTS

Business Common-Size Financial Statements

Business vs. Industry Common-Size Financial Statements

Business Financial Ratio Analysis

Business vs. Industry Financial Ratio Comparison

16

16

17

19

21

VALUATION OF SAMPLE INDUSTRIES, INC.

Overview of Valuation Approaches and Methods

Preferred Stock Valuation

22

23

24

This sample acquisition proposal was generated using Buy-Out Plan? and the Financial Report Builder?.

For more information call MoneySoft at (800) 966-7797. Note: this footer is fully customizable.

Net Asset Value

Discount & Capitalization Rate Estimates

Capitalization of Earnings

Discounted Future Earnings

Projection Summary

Summary Income Statement Projections

Summary Balance Sheet Projections

Summary Retained Earnings Projections

Summary Cash Flow Projections

Summary Sources & Uses of Funds Projections

Overview of Projection Assumptions

Revenue & Expense Assumptions

Fixed Asset Depreciation Assumptions

Disposals of Existing Fixed Assets

Fixed Asset Purchases

Existing Notes Receivable Assumptions

Amortization of Intangible Assets

Existing Notes Payable Assumptions

Fixed Asset Purchase Financing Assumptions

Dividends Assumptions

Discounted Future Earnings Value Calculations

Discounted Net Cash Flow Value Calculations

Comparative Company Method

Search for Comparatives

Price to Earnings Multiple

Price to Revenue Multiple

Price to Gross Cash Flow Multiple

Valuation Summary

24

25

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27

27

28

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29

29

29

29

30

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31

31

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31

31

32

32

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35

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36

36

37

PROPOSED PURCHASE PRICE & TRANSACTION STRUCTURE

Price Premiums/Discounts

Key Pricing Multiples

Transaction Costs

Allocation of Purchase Price & Total Purchase Cost

Funding Requirements & Structure

38

38

39

40

40

42

PROPOSED ACQUISITION FUNDING

Proposed Term-Debt Funding

Proposed Equity Funding

43

43

44

POST-ACQUISITION PROJECTIONS

Post-Acquisition Projection Summary

Summary Post-Acquisition Income Statement Projections

Summary Post-Acquisition Balance Sheet Projections

Summary Post-Acquisition Retained Earnings Projections

Summary Post-Acquisition Cash Flow Projections

Summary Post-Acquisition Sources & Uses of Funds Projections

Overview of Post-Acquisition Projection Assumptions

Revenue & Expense Assumptions

Fixed Asset Depreciation Assumptions

Fixed Asset Purchases

45

46

46

47

47

48

48

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49

50

50

This sample acquisition proposal was generated using Buy-Out Plan? and the Financial Report Builder?.

For more information call MoneySoft at (800) 966-7797. Note: this footer is fully customizable.

Amortization of Intangible Assets

Existing Notes Payable Assumptions

New Funding Notes Payable Assumptions

Fixed Asset Purchase Financing Assumptions

Equity Funding

Dividends Assumptions

50

50

51

51

51

52

REVIEW OF POST-ACQUISITION FINANCIAL PERFORMANCE

Loan Compliance

Post-Acquisition Business Ratios

Post-Acquisition Common-Size Statements

53

53

53

55

RETURN ON INVESTMENT

Return on Total Invested Capital

Return on Total Invested Equity Capital

Projected Valuation

Internal Rate of Return

Per Share Analysis

56

56

57

58

58

59

This sample acquisition proposal was generated using Buy-Out Plan? and the Financial Report Builder?.

For more information call MoneySoft at (800) 966-7797. Note: this footer is fully customizable.

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