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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
June 2019DigitalValuation@PwCDeals
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
June 2019DigitalValuation@PwCDeals
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
June 2019DigitalValuation@PwCDeals
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
June 2019DigitalValuation@PwCDeals
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
June 2019DigitalValuation@PwCDeals
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
DigitalValuation@PwCDeals
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
DigitalValuation@PwCDeals
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
June 2019DigitalValuation@PwCDeals
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
DigitalValuation@PwCDeals
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
DigitalValuation@PwCDeals
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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
DigitalValuation@PwCDeals
16
PwC
Dr. Steve Janner
Senior Manager, Deals
Hamburg
PricewaterhouseCoopers GmbH WPG
Phone: +49 151 280 35 955
June 2019DigitalValuation@PwCDeals
17
Question?
Suggestions?
www.pwc.de
Thank you!
Die PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft bekennt sich zu den PwC- Ethikgrundsätzen (zugänglich in deutscher Sprache über
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.