A number of factors come into play when valuing a business. Explains an independent report arranged by Renaissance from well known accounting firm Kordia Mentha to value it's distribution business.
The report is sober reading and explains a difficult history with the division under considerable pressure for quite some time. The report identifies it's key issues as:
From extrapolating the division’s budgeted $1.2 million profit for financial year 2012 and using the valuation reports statement that eXeed is paying 4 x earnings, one could assume the transaction is worth north of $4.8 million. But deep in the paperwork one discovers that Yoobee will not be buying its Apple product from eXeed. Instead it has inked a direct supply agreement with Apple Australia. In the report this is pointed out and a discount has been applied because eXeed will not have the benefit of the margins from supply to Yoobee stores. The sale price is therefore more like $2.8 million plus stock. This is broken down to $2.3 million in goodwill and $510,000 in fixed assets.
Let’s hope the clever minds of Justin & Andrew at eXeed can extract the synergies and value they’re clearly anticipating from the acquisition
Good luck to them!