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Sale of a Software Business

 

When the sale of a multi-million pound software company was falling apart...

 

...requesting American Appraisal to provide independent valuation advice got the deal back on track.

 


American Appraisal played a critical role in the multi-million pound sale of a UK-based software company. Our client approached us explaining they had an urgent valuation need. A transaction that had been agreed in principle was at risk of falling apart without an independently determined value of the business and the securities underlying it, as at the date of an earlier restructuring.

The client's valuation requirement necessitated determining the enterprise value of the business and, further, allocating that value between the various instruments with which the business was capitalised. The company's capital base comprised various loan notes, redeemable preference shares and ordinary shares.
Our valuation of the business involved a thorough due diligence exercise on the company's attributes and its market environment, culminating in application of DCF and market multiple methodologies.

This business enterprise value was then allocated between the various security holders using an option pricing technique.  This involved using a series of Black-Scholes Merton put call and cap call models, in combination with the securities sequential waterfall distribution set out in the articles of association, to distribute the proceeds of a hypothetical transaction involving the sale of the business between the various securities.

Following delivery of our work our client was able to successfully conclude a transaction, commenting, "Thank you for responding as quickly as you did to our need for a valuation at no notice.  It was greatly appreciated." Simon Jones, Director of American Appraisal's UK office said, "We take pride in being able to draw on our depth of industry and technical expertise in order to deliver a high quality work product that helps our clients achieve positive outcomes in challenging circumstances ".

 

 

 

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