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Company Valuator




 
An exclusive monthly news report for private company CEO's
March 28, 2005
Sign of the Times
Did You Know
Ask the Expert
Market Stats
Helpful Links
Quote of the Month:

"Men stumble over the truth from time to time, but most pick themselves up and hurry off as if nothing happened."

-Winston Churchill


Sign of the Times

A monthly market commentary

“Private Equity Groups- The Mighty Roar”

In another sign of the continuing expansion of the Private Equity Group sector, seven different PEG's have announced plans to acquire SunGard Data Systems?for $10.8 billion. No fools,?SunGard is not considered a typical technology company subject to the whims of a highly unpredictable and changing marketplace.?You have to harken back to 1989 for a bigger deal when KKR led the $25B buyout of RJR Nabisco.

These are the types of deals that draw the big headlines but, rest assured, in the middle market, private equity groups are just as active and they are aggressively pursuing acquisitions. The perception at this time is that the well managed approach of private equity groups investing in established companies with track records is reducing the risk of investors. With a risk-averse market that doesn't want to invest in initial public offerings of the startups that venture capitalists love to incubate, the deals that are landing in the market are often slower growth, seasoned companies.

The latest issue (April, 2005) of Entreworld, www.entreworld.org, has an excellent article (well, of course, I wrote it!) further detailing the increasingly long?reach the private equity group sector is developing. I love dealing with these guys because they are good businessmen, they don't waste a lot of time pursuing companies they aren't?absolutely serious?about acquiring, and they are fair minded.? As well, they aren't afraid to step up to the plate and pay a premium for a company they believe will perform?well in the future.

A?middle market privately held company looking for any kind of liquidity event would do well to expore the options sooner than later. With interest rates still incredibly low, price is not deterring the banks from leading the debt funding for?financing acquisitons, mergers and buyouts. While the?Sarbanes-Oxley Compliance Act has done more to slow down the growth of new companies than anything?in recent memory,?one could?build a case that it is?helping some private companies. For private equity groups contemplating an acquisition of a private company, not having to deal with the new reporting requirements can offer significant financial and practical relief. It is estimated that for a middle market public company, the annual?cost for complying with Sarbanes-Oxley is somewhere between?$500,000-$2,000,000, which obviously can be a much larger percentage of sales for a small company than a large one. Touching briefly again on the SunGard acquisition, this is currently?a?public company.?I am guessing the private equity groups will actually take the company private, make the investments they need to make to build a stronger company without being punished in the public market, and then eventually take the company public once again at a much higher price. Stay tuned.



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Did You Know

“The Alernative Minimum Tax (AMT) Bite”

The alternative minimum tax, originally aimed at the wealthy, is affecting a raidly growing number of middle-class tax payers.

The largest group of people affected by the AMT have incomes between $100,000 and $500,000.

Among the most likely to be affected are those in high tax areas (such as California) with large families.

The number of taxpayers who will pay more because of the AMT will soar to about 20 million next year , unless the law is changed.

For the still-small slice of taxpayers who pay it, the AMT is sneaky, complicated way to levy higher taxes that undoo the tax cuts Mr. Bush celebrates. For the government, it's money maker: about $20 billion this year and, if the law is unchanged, $53 billion next, according to the Tax Policy Center, a joint venture of the Brookings Institution and Urban Institute. By 2009, the center says, the AMT in current law will yield more revenue than the regular income tax.



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Ask the Expert

“Who Says There Is No Free Lunch?”

Ever wonder what your company is worth or what methods are employed to calculate some kind of rational number? Why do some companies sell for 3x EBIDTA and others sell for 8x EBIDTA?

Take a look at the Bay Pacific Group proprietary COMPANY VALUATOR www.baypacificgroup.com found on our homepage. It's a free educational tool aimed at CEO's to give some preliminary insight as to the rationale for valuing companies. You can play with the various value drivers that affect increases and decreases in company valuations. Although it does not take the place of an always recommended professional valuation done by a valuation professional, it's a fun little tool.



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Market Stats

“Les Miserables ??????”

France is dropping its 35-hour workweek and Germany is cutting taxes. Faced with rising unemployment and stagnating living standards, French lawmakers ended the experiment and approved a bill to let private employers offer their employees longer hours and higher pay. The 35-hour experiment began on a voluntary basis in 1998 and was made mandatory two years later on the bogus theory that you could cure unemployment by forcing employers to hire more workers. Unemployment would drop, the economy would boom and those silly workaholic Americans would be put in their place. Voila!

But companies don't hire workers out of the goodness of their heart. They hire them so they can produce something of value that can be sold at a profit, as the French have found out. Earlier this year the jobless rate in France climbed back to double digits at 10.1% as economic growth slowed to a crawl.



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Helpful Links

FIND AND ENJOY THE PICTURES ON YOUR COMPUTER IN SECONDS with Picasa www.picasa.com, a FREE software download from GOOGLE.

Picasa is software that helps you instantly find, edit and share all the pictures on your PC. Every time you open Picasa, it automatically locates all your pictures (even ones you forgot you had) and sorts them into visual albums organized by date with folder names you will recognize.

Picasa also makes advanced editing simple by putting one-click fixes and powerful effects at your fingertips. And Picasa makes it a snap to share your pictures- you can email, print photos home, make gift CDs, and even post pictures on your own blog.? Good stuff.



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