The company is 2 years old, family owed, operating in only 1 estate (needs the investment to expand), and operates in the Natural (organic, no GMO, etc...) ready-to-eat frozen food industry. They sell individual portions of carbs (rice, veggies, etc) and protein (meat, chicken and fish), all cooked and frozen, and also have a line of low-fat naturally made desserts
We normalize the income statement, compare with other frozen food companies that have been sold, then make an operating capital adjustment based on the type of sale foreseen.
It all comes down to cash flow. (assuming you're making money)
If you'd like to discuss this particular case just arrange a call.
David
www.DavidCBarnett.com
There are a few considerations and here is a general framework for this type of valuation exercise.
1. Who is the end user and for what purpose? The level of detail and sophistication needed, skewing to the high or the low side, and as a comparison to what situation? Is the transaction a sale to a competitor, an immediate liquidation, etc.?
2. A strong set of current data, information, and projections is needed. Sometimes private companies need help in getting to the point where there is a strong enough information base to begin.
2a. Information about the industry, competition, product positioning in consumers and retailers minds
3. Then different valuation methods will be applied. Discounted cash flow analysis, comparable transactions, common sense, control premiums, comparable companies, and then sometimes reality. The valuation can often come from the best offer on the table.
