show me the money! digital online valuation platform for ...competition intensity substitutes unique...

Show me the money! eValuation – Digital online valuation platform for Startups, Scale-ups and SMEs

IVSC-WAVO Global Valuation Conference 2019

Frankfurt/Germany, 14 June 2019

Dr. Steve Janner

PwC

Why is PwC Deals Investing in Digital Valuation?

June 2019DigitalValuation@PwCDeals

2

What‘s next in Valuation?

No significant innovation in the

field of corporate valuation over

the past 15 years

Cost Efficiency

Reduced manual work

Data Analysis

Large amount of data with powerful

visualization

Knowledge Management

Understanding an increasing

amount of information Digital Assistant

24/7 available decision bases

PwC

1.We want to be forward-thinkers and

drivers in the field of digital

transformation of M&A processes

2.We want to talk to our clients about

digital valuation and develop joint

visions

3.We want to authentically shape the

future

Digital M&ABoardroom


3

PwC Vision for Digital Valuation

• Simulation: Enables immediate application of

what-if-analyses to business scenarios or strategic

actions

• Predictive/Prescriptive: Advanced analytics

enable the development of complex forecasting

models and automated decisions-support systems

• Real-Time Analytics on Big Data: KPIs available

in real-time to gain ad-hoc insights

• Data-Driven Insights: Gaining new insights on

business development and processes from data

• Collaborative Decision Making: Enables

immediate, data-driven and collaborative decision-

making

• OneSuite: Integrated reporting, dash-boarding,

planning, simulation and predictive

• Integrated Planning: Mapping of integrated

business planning with workflows

CFO CEO

Head of Corporate

Development…

Head of M&A

PwC

1Data Management

Collection, consolidation and

correction of relevant data

2Analytics

Application of analytics methods to

gain new insights

3Visualization

Visualization of cause/effect

principles and making complexity

understandable

4Creating Benefit

Better, informed decisions – more

valid, faster and more efficient

Our Roadmap to Valuation 2.0


4

Fast growing volume of structured

and unstructured data from internal

and external sources

Descriptive, predictive and

prescriptive analytics with advanced

analytics, machine learning & AI

Improved productivity, customer

reach, growth, innovation,

compliance and fewer risks

eValuation by PwC as a central

platform

Digital Valuation

...

Bloomberg

CapitalIQ

Social Media

Cloud

...

ERP

Platform

Global Valuation

eValuation by PwC

www.evaluation-pwc.com | www.startup.evaluation-pwc.com

PwC

Status QuoManual processes, lots of Excel


6

eValuationIntegrated valuation platform

4 - 5 Days

10 MinutesCompany valuation as

a stiff, inflexible

process

Setting up valuation

models that are

prone to errors

Derivation of capital

market data

Effects of corporate

income statement and

balance sheet on the

enterprise value?

Validation by Stakeholders

CEO/CFO

Group Controlling

Sales regions

...

Tax Department

Accounting Department

M&A Department

Investment controlling

Simple definition of scenario

Automatic calculations

Transparency

2 - 3 Days

PwC

PwC Valuation Knowledge Digitalized -

eValuation for Established Corporates and

eValuation for Startups

• Development of the platform together with

investors and founders for a high degree of user-

friendliness

• Selection of up to 3 from 120 different industries

(GICS-industry structure) for a customized peer

group segmentation

• Multilingual application and availability of the

currencies Euro, British Pound, US Dollar, Swiss

Franc and Singapore Dollar

• Implementation of country-specific effective tax

rates, country risks, etc.

• Option of entering your own cost of capital

• Scenario analyses and monitoring various

valuation results

• Company valuation in real-time with digital

dashboard and PDF reporting

DigitalValuation@PwCDeals June 2019

7

PwC

Model Systematics of eValuation


8

Standardized

Report (pdf)

Online Dashboard

Multiple

Valuation

DCF

Start- &

Scale-up

Valuation

Core

Bloomberg

Pitch Book

Capital IQ

Client Data

Peer

Bench-

marking

Meta information

Name

Industry

Country

etc.

Financial KPIs

Balance and P&L

Historical data

Plan data

Pla

tfo

rm w

ith

hig

h d

eg

ree

of

user-

frie

nd

lin

ess

Inte

gra

tio

n o

f va

rio

us v

alu

ati

on

meth

od

s

Valu

ati

ng

mea

ns c

om

pari

ng

(100

da

ta p

oin

ts p

er

va

luation)

Use o

f ex

tern

al d

ata

so

urc

es

(1,6

00 p

eer

gro

up c

om

pa

nie

s w

ith

aro

und 9

0 d

ata

po

ints

)

PwC

eValuation – Business Our Valuation Approach


9

EBITDA – Trading MultiplesDCF – Entity Method

Weighted Average Cost of Capital

Option 1 Option 2

Peer Group / MSCI WorldCountry Risk Premium

Capital IQ / Damodaran

Individual WACC

Enterprise Value

- Net Debt

= Equity Value

Period

Discounting with

Terminal ValueDetailed Planning of Cash Flows

1 2 3 4 5

1(1+R)1

1(1+R)2

1(1+R)3

1(1+R)4

1(1+R)5

1

... (R-g)*(1+R)t

...

EBITDA x Multiple = Enterprise Value

Forward Multiples

Peer Group Selection

Source: Capital IQ

PwC

June 2019

eValuation – Business: The Scope of Application

eValuation Business

1 Quick check in

investment

management

3Indicative discussion

basis for reorganization

2Purchase and

sale of shares

5Industry-specific benchmark

analyses

& much more…

4Plausibility check of own

valuation approach

DigitalValuation@PwCDeals

10

PwC

June 2019

Valuation date

Historical analysis

Time

Discounting with return of alternative investment (R)

Company value

=

Value of EC

Planning analysisForecast of

sustainable surpluses

Terminal Value (TV)

as a perpetual annuity

Cash Flows

1 2 3 4 5

1

(1+R)1

1

(1+R)2

1

(1+R)3

1

(1+R)4

1

(1+R)5 ...1

R * (1+R)t

...

Problematic when valuating

startups!

Problematic when

valuating startups!

Problematic when valuating

startups!

eValuation – Startup: Challenges when valuing high-growth companies


11

PwC

June 2019

eValuation – Startup: Set of valuation methods

Several appropriate valuation methods need to be applied in the VC context

Re

ve

nu

e

Pre-seed-/ seed

phase

Startup

phase

Growth

phase

Maturity

phase

Discounted Cash Flow (DCF)

Discounted earnings method

Prices of listed shares

23Data access:

medium – high

Venture exit multiple approach

Multiples based on industry

benchmarks

Pre-/ post-money multiples on invested

amount

21Data access:

low – medium


12

PwC

Long-term growth

Calculation of the annual

free cash flows using

startup-typical “survival

rates”

Going concern by applying

long-term growth rate in

terminal value

Scorecard

Scoring based on qualitative

questionnaire on e.g. product,

team, market

Scoring in relation to

comparable companies leads

to enterprise value

Venture Capital

Central value driver: Revenues

in exit year

Application of industry-specific

multiples in the exit year and

risk-adequate discounting

eValuation – Startup: Our Valuation Approaches


13

Discounted Cash Flow

Multiples

Calculation of the annual

free cash flows using

startup-typical “survival

rates”

Going concern by applying

industry-specific EBITDA-

multiple in terminal valueIndustry 1 Industry 2 Industry 3

Experience

Value

Early Stage Startups Later Stage Startups

PwC

June 2019

eValuation – Startup: The Venture Capital method combines DCF and multiples

Cost of capital (rvc)

Discount rate matches return expectations of investors

Return expectations are determined through shares and contractual arrangements

Enterprise value0=SPn

(1+rvc)n

with

SPn=Selling price after "n" yearsrvc=Expected returns of VCn=Years until exit

Influencing factors in context of a VC valuation

Need for liquidity

Return expectations of investors

Necessary exit time

Expected business value at the moment of exit

KPI as indicated in business plan

Used peer group/multiples

Exit value (SP)

Approximation of selling price with multiple approach

Example: future net income multiple x planned net income in case of exit

Outcome

2011 2012 2013 2014 2015 2016 2017

Determination share value

Share value0=Amount invested0

Enterpise value0


14

PwC

June 2019

Risk assessment in detail

low medium high

Competition intensity

Substitutes

unique few various

BP plausibility

conservative realistic aggressive

Industry benchmark is..

below average above

Increasing risk

USP strength

Sustainability

high medium low

Quality of business plan

in-depth medium high level

Expansion stage

Early stage

Later stage

Inc

re

as

ing

ris

k

50% - 70% 40% - 60%

Risk premium is

30% - 50%

Lifetime

Risk assessment by lifecycle stage


15

eValuation – Startup: Venture risk premiums

PwC

June 2019

eValuation – Startup: The Scope of Application

eValuation Startup

1 Quick check in

investment and

innovation

management

3Plausibility check of own

valuation approach

2Plausibility check

of the fair value

disclosure accor-

ding to IFRS 9

5Support in corporate venturing

& much more

4Purchase and Sale of

investments


16

PwC

Dr. Steve Janner

Senior Manager, Deals

Hamburg

PricewaterhouseCoopers GmbH WPG

Phone: +49 151 280 35 955

[email protected]


17

Question?

Suggestions?

www.pwc.de

Thank you!

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www.pwc.de/de/ethikcode) und zu den Zehn Prinzipien des UN Global Compact (zugänglich in deutscher und englischer Sprache über www.globalcompact.de).

© June 2019 PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft. Alle Rechte vorbehalten. „PwC“ bezeichnet in diesem Dokument die

PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft, die eine Mitgliedsgesellschaft der PricewaterhouseCoopers International Limited (PwCIL) ist. Jede

der Mitgliedsgesellschaften der PwCIL ist eine rechtlich selbstständige Gesellschaft.

show me the money! digital online valuation platform for ...competition intensity substitutes unique...

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