The Art and Science of Valuing a Middle-Market Business

About the Episode

Part art and part science – the different sides of managing an M&A transaction come together in this discussion about maximizing the value of a middle market company. Kevin Moyer and Megan Sartor combine their experiences to discuss the importance of valuation adjustments and expectation setting on the sell side. They offer explanations of EBITDA, free cash flow, and working capital along with how these areas can be utilized to maximize value, and the relationship between A/R, inventory, and accounts payable.

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In this Episode

3:11 What is the difference between an appraisal for M&A purposes vs. an appraisal for other purposes?
9:25 What is the #1 mistake made doing financial due diligence on the sell-side in terms of not maximizing the value of a company?
11:10 When doing an appraisal, what element is most often left on the table that could be used to maximize value?
14:15 How complex is the valuation formula?
15:57 Why is EBITDA the most popular measure of cash flow?
18:00 What’s the difference between EBITDA and free cash flow?
21:03 Why are companies valued using EBITDA?
24:30 What is the #2 issue when performing financial due diligence that can harm the value of a company?
25:52 What is working capital, and how is it calculated?
30:40 Why is working capital included in the purchase price?
32:38 What issues do business owners get hung up on in terms of valuing or maximizing their company?
37:45 What is the most important component of value maximization?
38:45 What is the #3 issue that can be addressed to maximize the value of a company?
45:27 From an operational standpoint, what is the biggest issue when it comes to valuation?
50:40 How much can the presence of risk affect an appraisal?

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Meet Our Guest

Kevin Moyer

Kevin Moyer

Partner at Sax Capital Advisors

Kevin Moyer joined Sax in 2022 as a Partner and Leader of the firm’s Transaction Strategy & Transformation practice. He brings over a decade of experience and is responsible for the overall strategy and delivery of client-related services. His robust transaction knowledge allows him to advise his clients on financial and operational diligence, finance transformation, and corporate restructuring mandates.

Prior to joining Sax, Kevin was a member of the Transaction Strategy & Execution Group at EY Parthenon (“EYP”), a top 5 global strategy consulting firm. Kevin also served as the CFO of a private equity-backed manufacturer during a large-scale turnaround and restructuring effort. His efforts led to the receipt of both the Small Market Turnaround of the Year Award from the Global M&A Network and the Restructuring Community Impact Award from The M&A Advisor. Kevin spent the initial part of his career in banking, where he focused on corporate credit analysis and loan origination within the lower middle market.

Meet Our Guest

Megan Sartor

Megan Sartor

Partner at Sax Capital Advisors

Megan Sartor is the partner-in-charge of Sax LLP’s Valuation, Forensic, and Litigation Group and has over thirteen years of experience in public accounting.

Megan is a Certified Public Accountant (CPA) in New Jersey and is accredited by the American Institute of Certified Public Accountants in the area of business valuation (ABV). She is also certified in Financial Forensics (CFF) by the AICPA and has been trained in the area of Collaborative Law. She received both her Bachelor of Science degree in Accounting and her Master of Science degree in Accounting from Fairleigh Dickinson University.

Megan is an active member of the New Jersey Society of Certified Public Accountants (NJCPA), where she has served on the Board of Trustees and as the leader of the association’s Business Valuation, Forensics, and Litigation Support Interest group. In 2022, Megan was a Forty Under 40 Honoree from NJBIZ, and in 2020, she was the recipient of the NJCPA Ovation Award in the Women of Note category.

Location Location: New Jersey
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