Business Valuation

Other valuation methods

Mixed method Business Case INPUT
Marco Vulpiani

"What I have here in my heart is like faith, but not faith.

What I have here in this room is knowledge without proof..
What I have here in my hand is like knowing but deeper
It's why I have faith"
(Marillion, Faith)

Other valuation methods

Mixed method Business Case Solution
"Levered Approach"

Name: Tau S.p.A.;

Industry: Energy & Resources;
Valuation Date: 31/12/2013.

Marco Vulpiani. For information contact: mvulpiani@deloitte.it

Other valuation methods

Mixed method Business Case (Assumptions)
Balance Sheet at valuation date
Balance Sheet Tau S.p.A.
(EUR/'000)
Intangible Assets
Tangible Assets
Investments
Fixed Assets
Account Receivables
Other Receivables
Inventory
(Account Payables)
(Other Payables)
Net Working Capital
(Provisions)
(Severance Fund)
(Totale Funds)
Net Invested Capital
Net Equity
Net Financial Position
Total Sources
Marco Vulpiani. For information contact: mvulpiani@deloitte.it

2013
Actual
35,498
31,901
983
68,382
58,728
5,629
28,196
(47,939)
(7,393)
37,221
(4,160)
(2,568)
(6,728)
98,875
78,908
19,967
98,875
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Other valuation methods

Mixed method Business Case (Assumptions)
Business Plan
Profit & Loss Tau S.p.A.
(EUR/'000)
Revenues
(Raw materials)
(Services)
(Rents)
(Personell costs)
(Other costs)

2013
Actual

2014
PLAN

2015
PLAN

2016
PLAN

2017
PLAN

2018
PLAN

102,774
(60,605)
(7,529)
(230)
(12,112)
(990)

105,960
(61,332)
(7,619)
(237)
(12,245)
(20)

108,185
(62,068)
(7,710)
(242)
(12,380)
(20)

110,457
(62,813)
(7,803)
(247)
(12,516)
(20)

112,777
(63,567)
(7,897)
(252)
(12,654)
(20)

115,145
(64,330)
(7,991)
(257)
(12,793)
(20)

EBITDA

21,308

24,507

25,765

27,058

28,387

29,754

EBITDA margin

20.7%

23.1%

23.8%

24.5%

25.2%

25.8%

(Depreciation & Amortization)

(1,100)

(1,100)

(1,100)

(1,100)

(1,100)

(1,100)

EBIT

20,208

23,407

24,665

25,958

27,287

28,654

EBIT margin

19.7%

22.1%

22.8%

23.5%

24.2%

24.9%

(Financial Charges)

(1,010)

(1,170)

(1,233)

(1,298)

(1,364)

(1,433)

EBT

19,198

22,237

23,432

24,660

25,923

27,221

EBT margin

18.7%

21.0%

21.7%

22.3%

23.0%

23.6%

(Income taxes)

(5,951)

(6,893)

(7,264)

(7,645)

(8,036)

(8,439)

Net Income

13,246

15,343

16,168

17,015

17,887

18,783

Net Income

12.9%

14.5%

14.9%

15.4%

15.9%

16.3%

Marco Vulpiani. For information contact: mvulpiani@deloitte.it

Other valuation methods

Mixed method Business Case (Assumptions)
Cost of Equity
Tau S.p.A.
Cost of Equity (ke)
Risk free rate

4.3%

Beta unlevered

0.88

D/E

0.09

Beta relevered

0.94

Tax rate Beta relevered

27.5%

Market risk premium

5.7%

Size Premium

3.9%

Company Specific Risk Premium

0.0%

Ke

Marco Vulpiani. For information contact: mvulpiani@deloitte.it

13.6%

Other valuation methods

Mixed method Business Case (Assumptions)
Assumptions

Fair Value of Tangible Assets has been estimated on the basis of an

appraisal on December 2013. Results are reported in the following page.

Inventory current value has been estimated equal to 20,000 EUR/'000.

An adjustment for receivables which is not expected to be collected, has

been estimated equal to 5.000 EUR/'000.

Theoretical tax rate on potential capital gain is equal to 20%.

Consider an adjustment on depreciation ("D&A normalization") in relation

to the Fair Value of tangible assets, estimated as 3% on potential capital
gain.

IRES rate is equal to 27.5%, IRAP rate is equal to 3.9%.

Marco Vulpiani. For information contact: mvulpiani@deloitte.it

Other valuation methods

Mixed method Business Case
Tangible Assets valuation
Tangible Assets (EUR/'000)

Book Value

Fair Value

Plant 1

2,500

3,800

Plant 2

8,000

11,500

Plant 3

12,300

14,500

Plant 4

7,300

9,000

Plant 5

1,801

12,000

31,901

50,800

Tot Plant

Marco Vulpiani. For information contact: mvulpiani@deloitte.it

Capital gain

Other valuation methods

Mixed method Business Case
Adjusted Shareholders' Equity calculation
EUR/mln
Book value of Shareholders' Equity
Adjustments:
Tangible assets
Account Receivables
Inventory
Total Adjustments
Theoretical Tax Liability
Adjusted Shareholder's Equity

Marco Vulpiani. For information contact: mvulpiani@deloitte.it

Other valuation methods

Mixed method Business Case
Excess Earning calculation
EUR/mln
Excess Earning calculation
Discount period

2014

2015
1

2016
2

2017
3

2018
4

Cost of Equity
EBITDA
(D&A)
(D&A normalization)
Adjsuted EBIT
(Financial charges)
Adjusted EBT
(Income Taxes)
Adjusted Net Income
(Expected Return on Adjusted Shareholders' Equity)
Excess Earning
Discount rate
Discounted Excess Earnings
Marco Vulpiani. For information contact: mvulpiani@deloitte.it

Other valuation methods

Mixed method Business Case
Equity Value calculation
EUR/mln
Cumulated Discounted Excess Earning
Surplus Asset
Adjusted Shareholders' Equity Value
Equity Value

Marco Vulpiani. For information contact: mvulpiani@deloitte.it

10

Other valuation methods

Mixed method Business Case
"Unlevered Approach"

Name: Tau S.p.A.;

Industry: Energy & Resources;
Valuation Date: 31/12/2013.

Marco Vulpiani. For information contact: mvulpiani@deloitte.it

11

Other valuation methods

Mixed method Business Case
WACC

Tau S.p.A.
Cost of Equity (ke)
Risk free rate

4.3%

Beta unlevered

0.88

D/E

0.09

Beta relevered

0.94

Tax rate Beta relevered

27.5%

Market risk premium

5.7%

Size Premium

3.9%

Company Specific Risk Premium

0.0%

Ke

13.6%

Cost of Debt (Kd)

Kd before tax
Kd Tax rate
Kd after tax

4.7%
27.5%
3.4%

Financial Structure
Weight of Equity E/(D+E)
Weight of Debt D/(D+E)
WACC
Marco Vulpiani. For information contact: mvulpiani@deloitte.it

91.7%
8.3%
12.7%
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Other valuation methods

Mixed method Business Case
Adjusted Net Invested Capital calculation
EUR/mln
Book value of Net Invested Capital
Adjustments:
Tangible assets
Account Receivables
Inventory
Total Adjustments
Theoretical Tax Liability
Adjusted Net Invested Capital

Marco Vulpiani. For information contact: mvulpiani@deloitte.it

13

Other valuation methods

Mixed method Business Case
Excess Earning calculation
EUR/mln
Excess Earning calculation
Discount period

2014

2015
1

2016
2

2017
3

2018
4

WACC
EBITDA
(D&A)
(D&A normalization)
Adjuted EBIT
(Personell cost)
(Figurative taxes)
(IRES)
(IRAP)
Adjusted NOPAT
(Expected Return on Adjusted Net Invested Capital)
Excess Earning
Discount rate
Discounted Excess Earnings
Marco Vulpiani. For information contact: mvulpiani@deloitte.it

14

Other valuation methods

Mixed method Business Case
Equity Value calculation
EUR/mln
Cumulated Discounted Excess Earning
Surplus Asset
Adjusted Net invested Capital
EV
Net Financial position
Equity Value

Marco Vulpiani. For information contact: mvulpiani@deloitte.it

15

Other valuation methods

Mixed method Business Case

Thank you for Your Attention

Marco Vulpiani. For information contact: mvulpiani@deloitte.it

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