Microsoft Word peachtree case study

Application of the Market Approach

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PEACHTREE-CASE-STUDY

Data or Comparable Transaction Method)

5.1 Application of the Market Approach
Since the Market Approach is the most direct method for establishing fair market value and there was ample data to support the calculations, the Market Approach was selected.
5.1.1 Private Company Transaction Method
Application Logic
The Private Company Transaction Method (also referred to as the Direct Market
Data or Comparable Transaction Method) uses sales of similar businesses to derive a value. Specifically, pricing multiples for actual sale/purchase transactions within the industry SIC code 1711 are searched for and found valuation multiples were developed and used as a tool in valuing the Company. In applying the Direct Market Data Method, private company transaction data as contained in The Institute of Business Appraisers (“IBA”) proprietary database was searched for transactions reported in SIC code 1711. The IBA database contains over 20,000 reported transactions in approximately 680 SIC codes.

Page 86 of 141 Pricing multiples were developed for sales and discretionary earnings (defined by the IBA as earnings before interest and taxes, plus owner’s compensation. As noted in Section 4.8 Financial Forecast, a trend line static method regarding operating results was considered appropriate to develop the bases to which the pricing multiples would be applied. These calculations are summarized in the table below

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