Students to Start-ups® - The Paul Merage School of Business ...

workkinkajouΒιοτεχνολογία

5 Δεκ 2012 (πριν από 4 χρόνια και 4 μήνες)

167 εμφανίσεις

Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

Students to Start
-
ups

The Les Kilpatrick

Entrepreneurial Skills Workshop Series

The Art of Valuation


Alex Moen

Vice President, CB Capital Partners

CB Capital Partners

860 Newport Center Drive

Newport Beach, CA 92660

(949) 219
-
7462

alex.moen@cbcapital.com


Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

Executive Summary


Valuation Methodology


Comparable Company Analysis


Precedent Transaction Analysis


Discounted Cash Flow


Putting It All Together


Determining a Valuation
Range


Appendix


Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

Valuation Methodology

A potential institutional investor would typically utilize a combination of the following methods and
techniques to value the Company including:


Comparable Company Analysis


Value based on trading multiples of similar publicly traded companies


Similar Transactions Analysis


Value based on completed and pending transaction multiples in related industries



Discounted Cash Flow (DCF) Analysis


Value based on discounting the Company’s projected cash flows back to today’s value


Book Value


Minimum/liquidation value of the Company


Ignores the future earning power of the Company


Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

Comparable Company Analysis

Determines how the market would currently value the Company


Advantages


Reflects the market’s opinion of future growth, trends and risks


Includes premiums for size and maturity


Disadvantages:


O
ften imprecise due to non
-
comparable data, non
-
financial issues and low sample
size


Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

Medical Device Example

Comparable Company Analysis
Midcap Medical Applications and Technology Companies
Ticker
Price @
52 Week
Mkt Cap
EV
LTM
LTM
EV/
EV/
Company
Symbol
3/2/09
% Change
($mm)
($mm)
Sales
($mm)
EBITDA
($mm)
LTM
Sales
LTM
EBITDA
Midcap Companies
Beckman Coulter Inc.
BEC
40.60
$

-25.75%
2,570.0
$

3,640.0
$

3,100.0
$

549.9
$

1.2x
6.6x
Gen-Probe Inc.
GPRO
37.95
$

-22.44%
2,010.0
$

1,640.0
$

472.7
$

180.1
$

3.5x
9.1x
Kinetic Concepts Inc.
KCI
20.43
$

-60.14%
1,440.0
$

2,960.0
$

1,880.0
$

545.5
$

1.6x
5.4x
Mettler-Toledo International Inc.
MTD
49.18
$

-50.49%
1,650.0
$

2,170.0
$

1,970.0
$

339.9
$

1.1x
6.4x
Average
1.8x
6.9x
Median
1.4x
6.5x
High
3.5x
9.1x
Low
1.1x
5.4x
Dow
DJI
6,763
$

-44.83%
S&P 500 Index
SPX
700.82
$

-47.36%
Source: Capital IQ; Yahoo! Finance; Thomson Financial
Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

Precedent Transaction Analysis

Determines amounts paid for recent acquisitions of companies similar to the
Company


Advantages
:


Includes control, synergy and auction premiums


Provides precedent for transaction value range


Reflects supply and demand for similar companies


Disadvantages
:


O
ften imprecise due to lack of data, non
-
financial issues and low sample
size

Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

Precedent Transaction Analysis

Announced/Initial
Filing Date
(Including Bids
and Letters of
Intent)
Target/Issuer
Exchange:Ticker
Industry Classifications
[Target/Issuer]
Buyers/Investors
Transaction
Status
Total Transaction
Value ($mm)
TEV/Forward
EBITDA - Capital IQ
[NTM]
[Target/Issuer]
TEV/Forward Total
Revenue - Capital IQ
[NTM] [Target/Issuer]
02/03/2009
PharmaNet Development Group, Inc.
(NasdaqGS:PDGI)
NasdaqGS:PDGI
Life Sciences Tools and
Services
JLL Partners
Announced
255.45
7.46
0.534
01/30/2009
Tepnel Life Sciences plc (AIM:TED)
AIM:TED
Life Sciences Tools and
Services
Gen-Probe Inc.
(NasdaqGS:GPRO)
Announced
95.92
90.4
-
01/11/2009
Advanced Medical Optics Inc. (NYSE:EYE)
NYSE:EYE
Healthcare Equipment and
Supplies
Abbott Laboratories
(NYSE:ABT)
Closed
2,902.29
10.2
2.45
12/01/2008
Mentor Corp.
-
Healthcare Equipment and
Supplies
Johnson & Johnson
(NYSE:JNJ)
Closed
1,210.57
14.0
3.16
08/13/2008
Andor Technology plc (AIM:AND)
AIM:AND
Healthcare Equipment and
Supplies
ICC Venture Capital; Delta
Partners Limited; Crescent
Capital
Cancelled
41.46
5.6
0.607
06/01/2008
WuXi PharmaTech (Cayman) Inc. (NYSE:WX)
NYSE:WX
Life Sciences Tools and
Services
Warburg Pincus LLC
Closed
63.0
3.9
0.886
04/07/2008
Alcon Inc. (NYSE:ACL)
NYSE:ACL
Healthcare Equipment and
Supplies
Novartis AG (VIRTX:NOVN)
Closed
10,605.43
10.7
3.94
03/26/2008
Athenahealth, Inc. (NasdaqGS:ATHN)
NasdaqGS:ATHN
Health Care Technology
-
Closed
21.0
31.3
6.25
Source: CapitalIQ
Average
12.9
2.9
Note: Numbers in bold are outliers and were excluded in the analysis.
Median
10.5
2.8
Max
90.4
6.3
Min
3.9
0.5
Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

Discounted Cash Flow


Determines the Company’s value by summing the net present value of free cash flows the
ensuing projected five years and the terminal value at the end of the fifth year using a terminal
value multiple

Advantages:


According to modern financial theory, this is the most "correct" form of valuation


The method is least influenced by stock market conditions or the M&A environment


Principal valuation techniques used by foreign, large corporate, and LBO buyers

Disadvantages:


Sensitive to assumptions of revenue growth, operating margins, fixed capital
investment, working capital investment and weighted average cost of capital


Does not account for a "control" premium


Does not account for the value of synergies


Does not account for potential auction premium

Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

Discounted Cash Flow

2007
2008
2009
2010
2011
2012
Revenue
1,000
$

11,141
$

51,001
$

100,783
$

190,330
$

301,752
$

Gross Profit
1,000
$

9,139
$

40,422
$

80,274
$

154,110
$

252,835
$

Gross Margin
100%
82%
79%
80%
81%
84%
Income from Operations
(6,320)


(10,905)


14,861


44,778


111,425


204,469


EBIT Margin
-632.0%
-97.9%
29.1%
44.4%
58.5%
67.8%
EBITDA
(6,267)
$

(10,710)
$

15,093
$

44,957
$

111,709
$

204,753
$

EBITDA Margin
-626.7%
-96.1%
29.6%
44.6%
58.7%
67.9%
Income from Operations
(Adjusted)
(1)
(6,320)


(10,905)


14,861


44,778


111,425


204,469


Less:
Taxes on EBIT
-


-


-


13,487


33,513


61,426


Plus:
Depreciation
53


195


232


179


284


284


Plus:
Inc. (Dec.) in Working Capital
(836)


357


(3,131)


(3,341)


(7,271)


(8,718)


Less:
Capital Expenditures
250


925


1,100


850


1,350


1,350


Free Cash Flow
(7,353)
$

(11,278)
$

10,862
$

27,279
$

69,575
$

133,259
$

Notes:
(1) Assumptions and Projections provided by management.
(2) EBITDA Margin reflects management projections.
(3) Working Capital assumptions reflects management projections.
Projected for Years Ending June 30,
Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

Discounted Cash Flow

Present Value of Free Cash Flow
Present Value of Terminal Value Using EBITDA Multiple
Discount Rate
PV of Free Cash Flow
2012 EBITDA
204,753
$

204,753
$

204,753
$

204,753
$

204,753
$

65%
$23,510
Terminal Value Multiple
10.0x
10.5x
11.0x
11.5x
12.0x
66%
22,846


2012 Terminal Value
2,047,530
$

2,149,907
$

2,252,283
$

2,354,660
$

2,457,036
$

65%
23,510


66%
22,846


Terminal Value Multiple
67%
22,203


Discount Rate
10.0x
10.5x
11.0x
11.5x
12.0x
65.0%
167,421
$

175,792
$

184,163
$

192,534
$

200,905
$

Net Debt
-
$

66.0%
162,439


170,561


178,683


186,805


194,927


65.0%
167,421


175,792


184,163


192,534


200,905


66.0%
162,439


170,561


178,683


186,805


194,927


67.0%
157,633


165,515


173,397


181,278


189,160


EBITDA Multiple
10.0x
Corp. Tax Rate*
0%
WACC
65.0%
Revenue Growth Rate
1%
Terminal Value Multiple
EBIT Margin
0%
Discount Rate
10.0x
10.5x
11.0x
11.5x
12.0x
65.0%
190,931
$

199,303
$

207,674
$

216,045
$

224,416
$

66.0%
185,285


193,407


201,529


209,651


217,773


65.0%
190,931


199,303


207,674


216,045


224,416


66.0%
185,285


193,407


201,529


209,651


217,773


67.0%
179,836


187,718


195,599


203,481


211,363


Shares Out
Discount Rate
10.0x
10.5x
11.0x
11.5x
12.0x
32,360


65.0%
5.90
$

6.16
$

6.42
$

6.68
$

6.93
$

66.0%
5.73


5.98


6.23


6.48


6.73


65.0%
5.90


6.16


6.42


6.68


6.93


66.0%
5.73


5.98


6.23


6.48


6.73


67.0%
5.56


5.80


6.04


6.29


6.53


Notes:
(1) Assumptions and Projections provided by management.
(2) EBITDA Margin reflects management projections.
(3) Working Capital assumptions reflects management projections.
(4) Early stage discount rate of 65% (average of 55% for a pre-IND lead product) over 1 year back to 2008s.
(5) DCF assumes an EBITDA Multiple of 10x as referenced in the precedent transaction analysis.
Terminal Value Multiple
Implied Per Share Value
Inputs
Implied Equity Value Using EBITDA Terminal Value Multiple
Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

Takeaways from Discounted Cash Flow


Clearly define the DCF assumptions.


Emerging technology and life science companies will likely require
more significant discounting given the increased uncertainty that the
early company will meet its projections.


DCF analysis has been around (at least in some form) for centuries.


Early
-
stage investors will likely review a prospect’s projections and
DCF with skepticism


be able to defend your assumptions.


Be able to reference other valuation methodologies to further
support your analysis.

Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

Putting It All Together


Developing a Valuation
Range




Comp Group #1
Budget
EBITDA
EBITDA
2009
Median
Average
MedTech Company EBITDA
$1,917,172
2.4x
5.2x
5.7x
6.0x
41.3%
100%
39.1%
86.2%
$4,509,868
--
$9,942,296
Enterprise Value Conclusion
$4,509,868
--
$9,942,296
Comp Group #2
Budget
EBITDA
EBITDA
2009
Median
Average
MedTech Company EBITDA
$1,917,172
4.5x
10.3x
14.7x
13.1x
30.2%
100%
34.0%
78.6%
$8,543,919
--
$19,754,802
Enterprise Value Conclusion
$8,543,919
--
$19,754,802
Comp Group #3
Budget
EBITDA
EBITDA
2008
Median
Average
MedTech Company EBITDA
$1,917,172
4.1x
6.4x
7.9x
8.2x
52.6%
100%
50.3%
77.5%
$7,920,392
--
$12,195,538
Enterprise Value Conclusion
$7,920,392
--
$12,195,538
$6,402,188
--
$13,336,696
Notes:
(1) EBITDA Multiples adjusted downward by 40% given market conditions and size of company.
Selected EBITDA
Indicated
Selected EBITDA
Indicated
Multiple Range
% of Median
% of Average
Enterprise Value
Public Company Comparables Valuation Approach - EBITDA
Selected EBITDA
Indicated
Multiple Range
% of Median
% of Average
Enterprise Value
Multiple Range
% of Median
% of Average
Enterprise Value
Blended Value Conclusion (50% Group #1, 30%
Group #2, and 20% Group #3)
Note: The analysis above is a sample. Each valuation range will have unique
attributes given the company and the corresponding industry.

Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

CB Capital Contact Information



Alex Moen

CB Capital Partners

860 Newport Center Drive

Newport Beach, CA 92660

(949) 219
-
7462 (Direct)

alex.moen@cbcapital.com



Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

Appendix

Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

Appendix A
-

Medical Device Companies in Orange County

Source: Orange County Business Journal

Note: There are over 300 Medical Device companies in Orange County alone.

Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

Appendix A
-

Medical Device Companies in Orange County (cont.)

Source: Orange County Business Journal

Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

Appendix A
-

Medical Device Companies in Orange County (cont.)

Source: Orange County Business Journal

Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

Appendix B
-

VCs with an Interest in Medical Device Companies




Accuitive Medical Ventures


Invested in WaveTec Vision of Aliso Viejo in
February 2009


De Novo Ventures


Invested in WaveTec Vision of Aliso Viejo in February
2009


New Leaf Venture Partners


Invested in ReShape Medical of San Clemente
in February 2009


SV Life Sciences


Invested in ReShape Medical of San Clemente in February
2009


U.S. Venture Partners


Invested in ReShape Medical of San Clemente in
February 2009


Versant Ventures


Invested in WaveTec Vision of Aliso Viejo in February
2009





Note: There are hundreds of prospective Medical Device investors in the United
States and abroad.

Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

Appendix C
-

Prominent UCI Alumni




Adam Tomasi, Ph.D., Kauffman Fellow, Alta Partners

Adam joined Alta partners in 2006 as a Kauffman Fellow and focuses on investments in the life sciences. Originally trained
as an organic and medicinal chemist, Adam spent seven years in early stage drug discovery with Gilead Sciences and
Cytokinetics. In his last technical position, he founded and led the Anti
-
Infectives Medicinal Chemistry Program at
Cytokinetics, which was the first group to validate KIP
-
1 as an anti
-
fungal target, and played a key role in the creation of
Cytokinetics’ cardiovascular drug CK
-
1827452, which is currently in clinical trials.


Prior to joining Alta, Adam was a student in the Harvard
-
MIT Biomedical Enterprise Program; he completed internships at
MPM Capital and Lehman Brothers, where he was an Analyst covering the biotech sector, and attended the Harvard
Medical School. Adam completed his Ph.D. at the University of California, Irvine, where he was a Fellow of the American
Chemical Society and the University of California Regents, and was a post doctoral student with Peter Schultz at The
Scripps Research Institute/The Genomics Institute of the Novartis Foundation.


Adam holds a Bachelor of Science in Chemistry from the University of California, Berkeley, a Ph.D. in Chemistry from the
University of California, Irvine, and a Masters of Business Administration from the MIT Sloan School of Management.

Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

Appendix C
-

Prominent UCI Alumni




Brian Atwood, Co
-
Founder & Managing Director,
Versant Ventures

Brian Atwood specializes in biotechnology investing at Versant. Brian co
-
founded Versant Ventures after spending four
years at Brentwood Venture Capital where as a general partner he led investments in biotechnology, pharmaceuticals, and
bioinformatics. He also has more than 15 years of operating experience in the biotechnology industry, with emphasis on
therapeutic products, devices, diagnostics, and research instrumentation.


Prior to launching his career in venture capital, Brian was founder, president, and CEO of Glycomed, a publicly traded
biotechnology company. At Glycomed, Brian concentrated on business development and strategic alliances, closing deals
with Eli Lilly & Company, Millipore, Genentech, and Sankyo, before leading the sale of Glycomed to Ligand
Pharmaceuticals. Prior to this, he co
-
founded and served as director of Perkin Elmer/Cetus Instruments, a joint venture for
robotics automation and genomics research instruments and products later acquired by Perkin Elmer. Under Brian's
management, the venture developed and launched the GeneAmp® Polymerase Chain Reaction (PCR) system, the
fundamental DNA amplification innovation responsible for fueling the explosive growth of genomics research. Brian served
on the Board of Directors at Pharmion Corporation (sold to Celgene in 2008). Brian currently serves as a Board member at
the private companies ForteBio Inc., FivePrime Therapeutics, Inc., Veracyte, Inc., Trius Therapeutics, Inc., Synosia
Therapeutics, OpGen, Inc., PhaseRx, Inc., and Immune Design Corp., as well as public companies, Cadence
Pharmaceuticals (CADX), and Helicos Biosciences (HLCS).


Brian received a Bachelor's degree in Biological Sciences from the University of California, Irvine; a Master's degree from
the University of California, Davis, and an MBA from Harvard Business School.




*Disclaimer: Brian Atwood is focused on
biotechnology, pharmaceuticals and
bioinformatics.

Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

Kurt Miklinski Slideshow

Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

Who is SVB Financial Group?


Comprised of three segments:

1.
Silicon Valley Bank

2.
SVB Capital

3.
Other Business Services


31% Loan Growth (2007 to 2008)


$5.5 Billion of loans


$10 Billion of on balance sheet assets


Over 11,000 clients / 1100 employees


Global Presence (27 US offices plus India, China, UK,
Israel)


Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick


SVB Target Market



Technology, Life Sciences, Private Equity
and Venture Capital


Loans $1
-
20 Million


Senior blanket lien on all assets


Quad I, II, III, IV


Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

SVB Med Device Clients

Orange County



8 public


30 private


6 private equity raises in prior 12 months


Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

Most Active SoCal Investors

(with a SoCal office)

Firm
Deals
Redpoint
31
Rustic Canyon
21
Clearstone
17
Enterprise
13
Tech Coast Angels
13
Palomar
13
Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

Medical Device Themes



Aging population


Resiliency compared to broader market


High ticket and elective procedures
suffering


Market consolidation


Unemployment affecting volume of doctor
and dentist visits




Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

Success Factors/Strong
Valuations


Minimally invasive / Compelling ROI


Non
-
elective


New frontiers (Obesity, Diabetes)


International


General increase in standards of living


Increased healthcare spending


Nationalized healthcare


Avoidance of DOJ investigations / IP
litigation






Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

Jeremy Holland Slideshow

Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

Students to Start
-
ups

The Les Kilpatrick

Entrepreneurial Skills Workshop Series

Private Equity Trends


Jeremy Holland

Principal, Vintage Fund Management

Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

Executive Summary


US EV/EBITDA Multiples


Average Purchase Price by Transaction Type


Median Acquisition P/E Multiple by Transaction Size


Equity P/E Ratio vs. Number of Deal Announcements


2008 Private Equity


US Middle Market M&A Activity by Buyer Type


Private Equity


History


Prototypical Deal Capital Structure


Average Equity Contribution


Credit Markets Commentary


Valuation Issues and Problems



Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

U.S. EV/EBITDA Valuation Multiples

Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

Average Purchase Price by Transaction Type

Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

Median Acquisition P/E Multiple by Transaction Size

Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

Equity P/E Ratio vs. Number of Deal
Announcements

Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

2008 Private Equity

Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

U.S. Middle Market M&A Activity by Buyer Type

Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

Private Equity
-

History

Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

Prototypical Deal Capital Structure

Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

Average Equity Contribution

Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

Credit Markets Commentary

Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

Valuation Issues and Problems

Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

Vintage Fund Management

Contact Information



Jeremy R. Holland

Principal

Vintage Fund Management, LLC

11611 San Vicente Blvd, 10
th

Floor

Los Angeles, CA 90049

310
-
979
-
9090

jholland@vintagecapitalgroup.com




Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

Chuck Packard Slideshow

Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick

PACKARD BUSINESS RULES



Success Rules for

Successful Businesses


Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick


Successful businesses must be
adequately capitalized:


Human Capital


Financial Capital


Network Capital


Vendor/Supplier Capital

Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick


Experienced, Active Board of Directors



Recruit a Strategic Advisory Board




Operate at a Profit



Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick


Manage Cash Daily / Collect Accounts
Receivable




Develop business
-
specific Performance
Metrics




Business Capital / Business Experience


Students to Start
-
ups

Entrepreneurial Skills Workshop Series

The Les Kilpatrick


Develop the mindset of a successful
business




Must be able to Survive Death Valley


Staying Power