The Financial Analysis Tool (FAT) is developed within the Excel environment and is fully compatible with Office XP, 2003, 2007, and 2010 versions.
Developed by professionals for professionals, the FAT allows the user to make the most of their time while ensuring quality and accuracy in their work. The FAT also serves as a learning tool with in-depth comments and explanation of the theory behind most concepts, models, choices, inputs and calculations.
As a valuation tool, the FAT generates a Broker’s Opinion of the business value, or range of values. This is identified by the International Business Brokers Association Inc. ® (IBBA) as the Most Probable Selling Price (MPSP) which is derived based on the subject company’s historical performance, future projections, and analysis of comparable transaction or valuations. The FAT can also be customized to include or exclude normal net working capital requirements, average inventory, and possible deal structure (including debt financing).
In the valuation process, the FAT provides users three broad valuation approaches that consist of a total of 12 widely used, theoretically rigorous valuation models or methods. The FAT offers users the flexibility to choose and weight the different models based on their relevancy and reasonableness in evaluating a target or subject company. This tool includes a template that allows the analyst to conduct a financial performance analysis, NWC analysis, growth analysis, comparable analysis, and industry benchmark analysis, all of which are visible in both numerical and graphic formats.
In addition, the FAT has the function to automatically generate financial reporting and marketing materials that serve different audiences. The base documents provided include the MPSP report, Confidential Business Overview, Confidential Financial Overview, Confidential Financial Analysis and Financial Analysis Questionnaire (FAQ). All of these reports may be individually customized to further serve the user’s needs, desired branding, or other objectives.
The FAT is in a constant state of iterated improvement and evolution. Our financial analysts and tech support team are constantly looking to revise calculations and improve functionality in order to better serve our users and the industry that we all work in. These changes have, over time, greatly improved the entire FAT platform, giving users unparalleled flexibility to customize their valuations for various types of businesses.
Examples of developments since the FAT’s inception include worksheets allowing users to conduct Normal Working Capital (NWC) analysis and Revenue/COGS analysis. A new worksheet has also been added to show users the expected Transferred Balance Sheet for the Buyer as at the closing date. The Buildup Method is now available for users to calculate the Return On Invested Capital (ROIC) for firms that have specific risk factors.
Other improvements that have been made based on the feedback collected from users over the past several years include but are not limited to free cash flow analysis, Weighted Average Cost of Capital (WACC), opening and closing balance sheets, methodology enhancements, new reporting and marketing material export option, exit option analysis, Direct Market Data (DMD) method, Pratt Stats import functionality, and much more. A Monte Carlo Analysis feature is also currently in the beta stages of development and will be released pending further review.
The following list entails how the Financial Analysis Tool can help you in the valuation process:
- Income Statement Normalization
- Balance Sheet Normalization
- Historical Cash Flow Analysis
- Financial Ratio Analysis
- Cost of Capital Analysis covering WACC and Buildup Method
- Asking Price and Multiples Analysis
- Breakdown Analysis for Revenue/COGS/Inventory
- Key Industry benchmark analysis that allows you to compare the company performance with industry benchmark Seller’s Closing Balance Sheet and Buyer’s Opening Balance Sheet Analysis
- 12 valuation methodologies with detailed step by step instruction and analysis
- Five year future projection to help the user construct Pro Forma Income Statements, Balance Sheet and Cash Flow Statements based on revenue, growth pattern, and regression analysis (includes CF, FCFF, FCFE)
- Optional assessments based on Share/Stock sale or Asset sale
- Adaptable for SDE consideration, EBIT, EBITDA based valuation
- Automatic generation of marketing material, analysis report and financial analysis questionnaire
- Flexibility to customize the valuation based on a Buyer’s exit strategies
- Flexibility to choose and weight years of relevance, valuation methodologies, and value drivers based on the characteristics of the business and industry
- Flexibility to customize the valuation based on expected amortization schedules, acquisition expense, tax considerations selling expense, and more
- Financial Statement update function that allows the user to constantly update the valuation with new quarterly financials or fiscal year end financial updates.
- Buyer’s Financing Tool and Amortization Calculator helps the user forecast future cash flows based on varying financing structures
- Pratt Stats tools that allow the user to simply download the data from Pratt Stats Business Database, import it into the FAT, automatically perform regression analysis for the data, calculate summary statistics, adjust for target-vs-benchmark performance variance, and generate valuation multiples for DMDM and GLM