What We Do
Forecasts and Projections
The heart of any successful business plan and/or financing memorandum, and an important ingredient in most business valuations is a formal forecast or projection. A forecast or projection is similar in scope and appearance to the historical financial statements of a business, with one key difference – forecasts and projections deal with future periods, not those already completed.
For more than sixteen years Canova Bancorp has prepared forecasts and projections that have employed standards used in the various industries for which they were designed. Our forecast models have been used by clients to make strategic decisions and then manage operating performance, by buyers to determine the price that could be paid for an acquisition and the capital structures that could be put into place to finance the acquisition; and by debt financers to help get proposed loans approved and to determine loan covenants that could be met.
A financial forecast consists of prospective financial statements that present, to the best of the preparer’s knowledge and belief, an entity’s expected financial position, results of operations and cash flows. The forecast is based upon the preparer’s assumptions of conditions it expects to exist and the conditions it expects to take. A forecast can be expressed in specific monetary amounts as a single point estimate, or as a range within which results are expected to occur. In the latter case the range must not be presented in a biased or misleading manner.
A financial projection consists of projected financial statements that present the preparer’s expectations, given one of more hypothetical assumptions, of an entity’s financial position, results of operations and cash flow. A financial projection is sometimes prepared to present more than one hypothetical set of circumstances that will affect financial results, as a model for evaluation in response to the questions “what if?”. A projection is based upon the preparer reflecting conditions it expects would exist and courses of action it would take given one or more hypothetical assumptions. A projection is most often presented in a range format.
Debt and Equity Financing
Debt and equity financing comes into play when a company borrows money, engages in financial restructuring or sells a portion of its equity.
These transactions may be used to
- expand operations
- acquire assets
- buy out a shareholder
- convert equity into cash
- or any number of other reasons.
Canova Bancorp employs a very sophisticated process for arranging debt or equity financing. Our methodology, in summary, is:
- analyze company financial statements and other relevant information
- prepare a preliminary valuation
- develop a financing presentation or memorandum
- identify and contact qualified and appropriate investors and/or lenders
- The execution of this process is always extremely professional with the utmost
- regard for our clients’ needs, and with the objective of arranging the very best transaction possible.
Business Valuations
The most common mistake of entrepreneurs wishing to know what their business is worth is to ask us to “prepare an appraisal”.
We offer an array of valuation services that conform to established valuation standards – estimates, limited valuations, full valuations.
Estimates employ a limited amount of information provided by the client, with no independent verification on our part, and mutually agreed-upon methods of valuation (i.e. – going concern, liquidation etc.)
Limited valuations employ all information likely to affect the final opinion, verification of that information to the best of our ability, and application of valuation methods best suited to the situation.
Full valuations employ all information available about the client that can possibly affect the final valuation, verification of that information from company records and independent sources, and application of the methods that make the most sense in the context of the client’s situation and intended use of the valuation.
We present our valuations to clients in the report form – Summary or Restricted.
Summary reports summarizes the data used and the logic applied in creating the valuation. The reader should have some basic financial knowledge. Any information specific to the company or its industry that a reader would need is presented in the report.
Restricted reports are designed strictly for the use of company management, and may not be distributed to other parties. Accordingly, the report does not contain information that company insiders are expected to know.
Fees for valuations are charged according to individual circumstances, and do not include out-of-pocket expenses or any ancillary services that may be required of us after the fact. All fees are discussed and agreed upon prior to the start of a valuation assignment.
Acquisition Due Diligence
Due diligence is the process of examining the target to ensure that there are no painful surprises for the acquirer. It is one of the keys of the acquisition process, but it is frequently overlooked or under-appreciated, often leading to disputed transactions. Proper due diligence does not eliminate all risk of overlooking a critical element in the transaction, but it greatly reduces that risk.
Our financial due diligence services are most commonly performed for the benefit of a client engaged in acquiring or investing in an operating company. Our services are used not only to guard against overstatement of assets and understatement of liabilities, but also to help our clients analyze historic earnings and the likelihood that forecasted operating results can be achieved.
Dispositions
The decision to sell a company is most often reached after a prolonged, difficult process and it is always an extremely important decision. Few business owners have the time, experience and resources to handle such a transaction effectively.
Using an intermediary has several advantages ranging from objectivity and confidentiality to experience. The seller can concentrate on the company’s business without being distracted by the selling process.
Canova Bancorp follows a logical and disciplined selling process specifically aimed to meet the needs of its clients. This process can be flexible enough to meet the needs of any type of business. The steps followed are:
- Analyzing the Business
- Valuing the Business
- Designing a Marketing Strategy
- Setting a Timetable
- Packaging and Presenting the Business
- Contacting and Qualifying Prospective Purchasers
- Conducting Negotiations
- Analyzing and Responding to Offers
- Coordinating the Closing
At all stages during the process we provide our clients with objective and quality execution. Our philosophy is based upon integrity, confidentiality and thoroughness, and our overriding goal is to assist in obtaining the highest price for the business and to structure a transaction that best meets our clients’ needs.