Business Valuation
Vicky-shema
BaltimoreResinsCorporationBRCCasePPslides.pptxIntroduction
Baltimore Resins Corporation (BRC)
Owners: John and Mary Drake
Reason for Valuation: Marital Dissolution of Assets
Industry: Waste products and plastics manufacturing
Resin Industry & Market Background
Global Economy
U.S. in recovery from the financial crisis of 2008-2009
U.S. Government was shut down for sixteen
estimated loss of $24 million dollars from the economy
slowed down 2% of recovery growth
Europe was in a recession, but was able to lower unemployment rate and improve living standards
A structural shift from the developed world towards the emerging world
Africa’s economy grew more than 5%
UK was the fastest growing largest developed economy in 2013
Resin Industry & Market Background
Resin Industry
Revenue volatility in the plastic materials industry
the industry experienced a 13.1% increase in revenue
due to surge in value of construction
Significant percentage of industry revenue dependent
on exports, which was impacted because of the
financial crisis
The higher the plastic price is, industry revenue rises
The lower the plastic price is, the industry revenue falls
Resin Industry & Market Background
Resin Industry Cont.
Demand for downstream markets boosted the price of plastic materials
Manufacturers developed their relationships with distributors
Reliance on a singular distributor to sell goods
Distributors had guaranteed supplier contracts and gained a competitive advantage
The cost of manufacturing plastics rises and falls in accordance with oil and natural gas prices and crude oil prices
Crude oil prices rose in the beginning of 2013, but eventually fell.
The fluctuation in crude oil pushed for a need of plastic alternatives
Business Valuation Overview
Source: Rosenthal UB MBA
Part One: A
Balance Sheet Baltimore Resins Inc. 2010
Total Assets less Total Liabilities equals Owner Equity
Financial Ratios:
Quick Ratio
Cash to Current Liabilities
Debt to Equity
Accounts Payable/Accounts Receivable Period
Part One: B
2011 TAX RETURN serves as P_L-for other yrs. see spreadsheet
Tax Reporting vs. Financial Reporting
GAAP or Tax Oriented Guiding Principles
Inventory recognition (LIFO or FIFO), Accrual based accounting, depreciation of assets
Revenue less COGS equal Gross Profit
Less Deductions to provide true earned income
Part One: C
MAIN DATA-BALTIMORE RESINS CASE--EXHIBITS A-F & 2019 deal stats-companion-guide
DealStats collects and analyzes data of private and publicly held firms allowing the user to compare transactions to similar firms in their industry.
Comparable transactions
Data aggregation of financial statements (P&L, Balance Sheet), EBITDA, & Purchase Price allocations.
This data is combined and calculated into valuation multiples (ratio of the firm sale price compared to a specific financial earning measure).
Part One: D
32521 Plastic - Resin Manufacturing in the US Industry Report & 42461 Plastics Wholesaling in the US Industry Report
“Industry at a Glance”:
Steady demand and dependency on plastics
Revenue in the resins industry correlated to manufacturing, construction, consumer spend, oi prices, and raw material prices.
IBIS World expects the industry revenues to rise slightly in our recovery period (2018 – 2023)
Competitive landscape and Market Size
Baltimore Resins Valuation & Metrics
Valuation of Baltimore Resins
Valuation Metrics SIC 5000SIC 5100SIC 2821
VALUE/SALES0.450.421.16
VALUE/INCOME3.103.103.30
Value/BOOK2.202.007.30
WEIGHTS40%35%25%
VALUE/SALES0.617
VALUE/INCOME3.150
Value/BOOK3.405
Considering financial data from 2008-2011 because of the trend of increasing
sales, but decreasing income. Year 2011 is not adequate for valuation
Using the yearly averages from the P&L and Tax Return as it is common that they
may differ slightly
Did not include EBIT, EBITDA, or Gross Profit metrics as we didn't feel they were
applicable in this case and/or woud not produce a material change in the
valuation
*Assumptions/Comments:
Weighted MultipliersAverage from P&L
VALUE/SALES0.627,859,954.50$ 4,849,591.93$
VALUE/INCOME3.15106,343.75$ 334,982.81$
Value/BOOK3.411,576,510.25$ 5,368,017.40$
Value/DCF518,459.07$
WEIGHTS ON METRICS
VALUE/SALES20%969,918.39$
VALUE/INCOME40%133,993.13$
Value/BOOK20%1,073,603.48$
Value/DCF20%103,691.81$
SUMMATION100%2,281,206.80$
