The Government has chosen privatization of its Public entities as one of the Strategic Drivers for Economic and Human Development indices growth. There remains issues of fair pricing, employees welfare, deal transparency and public communication.
The Government decided to explore and effect all possible means to maximise the net worth of the owned firms before pursuing sales transactions. Some public firms are profitable while others are not. Some public firms have reached maturity stage while others are still in emerging stage. The Government asked us to support in evaluating selected set of public firms, mapping potential exit strategies, means to maximising the returns and protect the continuity of employees welfare and social responsibilities.
CONTEGRA Services Team ran a due diligence on the selected companies business model, governance, management system, outstanding legal commitments and human resources. The services included the development of a Discounted Cash Flow model of the profit making companies and Asset Valuation of the loss making ones. During the process, the Services Team was able to identify various improvement areas. The deployment of which should impact the bottom line of the immediate fiscal year and accordingly can influence the valuation to a higher level.
Methodology
In valuing a business, there are two perspectives of value: Equity Value (which represents the value attributable to the owner after paying debts and Enterprise Value (which represents the value of all capital invested in the business) .
Review Equity Value Trailing/ Leading Multiples to facilitate comparison against other companies in same industry and country. Seek sources of projections such as Bloomberg, FirstCall , Multex or Investex. This should enable the owner to find the company relative value.
Based on cash flow generation potential of business Discounted Cash Flow (DCF) analysis; project future free cash flows and terminal value and discount to a present value using the weighted average cost of capital. This should enable the owner to find the intrinsic company value
If company under study is a loss making, however, Asset Valuation is applied and compliance in international accounting standards is observed.
Review the company vision, strategies adopted and annual business plan.
Identify areas of improvement and run sensitivity impact on the valuation model.
Evaluate, compare and select the exit strategy to adopt.
Formulate the Communication Strategy and Plan.
Value Delivered
Balanced privatization speed and returns.
Created possibilities of value chain mergers and/ or cross business traffic between current Public companies to maximize net worth.
Engaged top executive in the exit strategy.
Identified quick-wins improvement areas that strategically boost the company earnings and value.
Maximized buy-in by the employees engaged in the transformation process.
Cash out for the best yet fair price.
Supported the negotiations of the deal.
