In 2001, John and Mary Drake founded the Baltimore Resins Corporation (BRC). Their business was finding waste products and plastics manufacturing that had been simply discarded, and finding ways to harvest this material and actually sell it for profit to possible manufacturing groups that could use this material. At the time, a big company (Waste Management) was actually charging customers to pick up and discard what was once considered waste. BRC was an innovator; it began to get these “waste” items for re-cycling and new uses by paying creators of this “waste” a penny a pound.
Staff was hired, and the business grew. In March of 2013, John and Mary were divorced. The court specified a division of assets.
Subsequently, several years later, Mary Drake brought suit against the attorney that had represented her in the divorce proceedings. Her claim was that that attorney had not commissioned a business valuation, and therefore the proper value of the company wasn’t established, and hence the cash consideration associated with the judge’s decree was inappropriate or lacking in full factual basis.
In this legal malpractice suit, Mary Drake the plaintiff, commissioned a financial economist to place a value on the company around the time of the divorce decree. However, several facts make this choice of date less than straightforward.
First, the husband John Drake, had apparently for several years been planning to found a new company (called Towson Resins Corporation) to which he migrated several of the clients of Baltimore Resins Corporation. In other words there was some pilferage of Baltimore Resin’s business. Second, in addition despite vigorous efforts at what lawyers call discovery, the last set of financial documents for Baltimore Resins Corporation that is available to the financial economist are as of the close of calendar year 2011. In addition, the only balance sheet available was 2010 (note I may be able to add 2011).
In a separate document you are provided with several years of financial data, compiled from subchapter S corporation returns (Form 1120S) for Baltimore Resins Corporation. You are also provided with data for several SIC codes obtained from Business Valuation Resources Dealstats database. You are also provided with several background articles on the industry.
Here are the questions (think of this as a way to include topics and organize your full report):
1) Describe, as best you can, each of the Exhibits A through F (mostly Business Valuation Resources Dealstats data sheets) provided. State what you think each exhibit might be, and how each one might be be used by an analyst….it’s part of the digging process as one prepares to do a valuation. I hope you will post your thoughts and questions about this daunting task, in the DISCUSSION FORUM.
2) Giving considerable detail, propose which multiples and metrics from the Dealstats downloaded data sheets you feel would be valuable or appropriate in placing a value on Baltimore Resins Corporation as of the end of 2011. To be more specific: View the exhibit titled MAIN DATA-BALTIMORE RESINS CASE-EXHIBITS A-F. Look at B,C,D,E AND F. Each one is a download of BVR’s DEEALSTATS reported transactions. But on each one, I specified slightly different search criteria, such as SIC code or sales level, etc (read the heading very carefully to see what I did). Your task is to glean from this mass of data what you feel are appropriate valuation multiples/metrics to actually apply. For example, for one of the group of metrics that you apply, you might choose the average of MVIC/NET SALES from Exhibit B and Exhibit C. You must justify your choices. When you look at Exhibit F, you might choose specific transactions that have the word resins or plastics within. Your pdf “app” may have scanning ability-for example Adobe Acrobat can scan for words within a pdf document.
3) Using the background articles provided (last six files), write between two and five pages about the industry in which Baltimore Resins Corporation operates. Consider both microeconomic and macroeconomic trends. Consider industry-specific information that you glean from the documents. You may also find the following three websites relevant.
4) Now proceed to a final write-up, which summarizes all the steps taken above. This will lead to and support your formal valuation estimate of Baltimore Resins Corporation. Your write-up should have a well-formatted reference list and whatever exhibits you choose to create and to provide.
Submit your team’s report (show the team name and the names of all participants) as a WORD or a pdf document. To share your calculations with me, submit an EXCEL file, with the team members names on the EXCEL workbook. You will also provide a team presentation, either via Camtasia/PPT, or Screencast-o-matic, or ZOOM, or PANOPTO. YOUR GRADE WILL DEPEND SOMEWHAT ON THE EXCEL FILE AND ON THE PRESENTATION DOCUMENT/FILE, BUT MAINLY ON THE WORD/PDF DOCUMENT.
This is how it would be in a real consulting context. A client would concentrate on your report, even if you made a presentation, or shared calculations.
In conducting this work, you will employ various documents that are posted in SAKAI. In this assignment, you do not have to gather additional outside industry information (you may be asked to do that on other cases). It is sufficient to process and summarize, in your own words, a subset of the information in the articles and sources that I provide. In summary, you will submit:
1-WORD or pdf document describing everything describing your research and calculation. Format this in any way you think adds to the reader’s comprehension, I am agnostic with respect to formatting. PUT THE NAMES OF CONTRIBUTORS ON THE DOCUMENT.
2-EXCEL document showing valuation calculations. PUT THE NAMES OF CONTRIBUTORS ON THE DOCUMENT.
3-PPT document which is your “presentation.” This does not need to have video of the team doing the talking, but it does have to include audio. PPT lets you record your voice, but there are many equivalent routes. You can do this with Panopto, Camtasia, ZOOM, Screencast-o-matic, Screencast, etc. There are many recording PPT programs available. I recommend Screencast-o-matic or ZOOM. PUT THE NAMES OF CONTRIBUTORS ON THE DOCUMENT.
Re CH 10 TRUGMAN TEXTBOOK—Private transactions PRATT’s STATS (now named DEALSTATS)
Our Business Valuation Resources Dealstats license is only available to me…. a single seat licence. So, to give you experience with this resource, to which your author Trugman refers, I have attached several of the print-outs to the Baltimore Resins Case (ASSIGNMENT FOLDER). A big part of your job is to choose which list of comps tom use. Post questions in the FORUM, not email.
MSB standards and writing hints can be reviewed at https://www.youtube.com/watch?v=68uSxu2nylg&feature=share a Youtube recording from Prof Pevzner.
Additional resources for assignment