Discounted Cash Flow Method. The DCF Method is generally appropriate in situations where the entity’s cash flows can be reasonably estimated and are expected to differ significantly from the current situation (due to, for example, expansion of capacity, significant change of management and/or financial structure, cessation or sale of a portion of a business, or where the subject of the valuation has a finite life). Under the DCF Method, projected future earnings or cash flows are discounted by the desired rate of return, which considers a number of internal and external factors relating to the business being valued, as well as the time-value of money. In effect, the rate of return has regard to the various risks attached to, and the opportunity costs of, acquiring the business. In addition, if appropriate, the residual, or “terminal”, value of the business/assets at the end of the projection period is included in the calculation, as there is an assumption that the assets purchased will ultimately be disposed of (converted to cash). To the extent that the sales proceeds of such assets form all or part of the return of the initial purchase price, such proceeds are considered in the same manner as other income/cash in-flows received during the period and would be discounted back to the valuation date accordingly.
Discounted Cash Flow Method. XX conducted a sum-of-the-parts discounted cash flow analysis for the purpose of calculating an implied enterprise value range for Pangiam based on the Financial Projections. EY considered Pangiam’s development, security, and operations services supporting U.S. Federal Government programs (the “Government Business”) and its business of providing facial recognition, object detection software subscriptions, licenses, training, implementation, and consulting services (the “Commercial Business”). EY calculated the unlevered free cash flows, as of October 25, 2023, that each of the Government Business and the Commercial Business was forecasted to generate during the period from October 25, 2023 to December 31, 2023 through the end of calendar year 2027 based upon the Financial Projections. EY then calculated a range of terminal values for each of these businesses by applying, at the direction of BBAI’s management, terminal growth rates ranging from 2.0% to 3.0% in the case of the Government Business, and from 3.0% to 4.0% in the case of the Commercial Business (the “Xxxxxx Growth Method”). In the case of the Government Business, EY also calculated a range of terminal values by applying, at the direction of BBAI’s management, earnings before interest, taxes, depreciation, and amortization (“EBITDA”) exit multiples of 9.0x to 10.0x to normalized EBITDA of the Government Business at the end of 2027 (the “Exit Multiple Method”). The unlevered free cash flows and the range of terminal values were then discounted to present value, as of October 25, 2023, using a range of discount rates from 11.5% to 12.5% for the Government Business and 30.0% to 35.0% for the Commercial Business, which ranges were chosen by EY based upon an analysis of the weighted average cost of capital of the Government Business and the Commercial Business, as applicable. The indicated implied enterprise values ranged from $36 million to $44 million for the Government Business (utilizing the Xxxxxx Growth Method), $42 million to $47 million for the Government Business (utilizing the Exit Multiple Method) and $34 million to $48 million for the Commercial Business. XX also calculated the unlevered free cash flows related to recurring cost reductions and non-recurring incremental costs that the Mergers were forecasted to generate (the “Synergies”) during the period from October 25, 2023 to December 31, 2023 through the end of calendar year 2027 based upon the Synergy Information. EY applied a termina...
Discounted Cash Flow Method. A discounted cash flow (DCF) method is a valuation method used to determine the present value of any investment. DCF analysis uses future cash flow projections and discounts them to arrive at a present value estimate. 𝐶𝐹𝑖 where, 𝑃𝑉 = ∑ (1 + 𝑟)𝑡𝑖 𝑖=1 𝐶𝐹𝑖 is the cash flow paid at the end of interval 𝑖 or at time ��𝑖 . 𝑟 is the yield to maturity. 𝑡𝑖 is the time interval from valuation date to cashflow date. 𝑇 is the maturity date.
Discounted Cash Flow Method. Under the Discounted Cash Flow Method, the projected future cash flows of the Company were discounted to the present value by applying the appropriate discount rate. Projected future cash flow data was based on the business plan prepared by the Company and provided to KPMG by Parent. KPMG did not verify the Company's business plan. The growth rate of 0% to 1% into perpetuity was taken into account in determining future cash flows beyond the fiscal year 2003. Subsequently, projected cash flows were adjusted by depreciation expense, capital expenditures, amortization of goodwill, changes in working capital and interest expense. KPMG applied a discount rate of 12.6% based on KPMG's view of the Company's weighted average of cost of capital. KPMG also considered that the Company's net operating losses could be used to offset against future taxable income. Based on Discounted Cash Flow Analysis, the KPMG determined that the fair market value of the Shares was in the range of $4.10 to $4.60 per Share. Tender Offer Bid Premium Analysis KPMG also analyzed publicly announced data for recent tender offers for companies that subsequently went private in order to assist Parent in determining an appropriate premium for the Offer. KPMG determined that the average tender offer premium for recent U.S. transactions with a comparable transaction size was approximately 38.3% in excess of the trading price on the day before announcement, 36.9% in excess of the trading price 5 days prior to announcement and 44.7% in excess of the trading price 30 days prior to announcement. Based on this analysis, KPMG determined that an appropriate tender offer bid premium for the Shares would be 40%. PURPOSE AND STRUCTURE OF THE OFFER AND THE MERGER; REASONS OF PARENT FOR THE OFFER AND THE MERGER The purpose of the Offer and the Merger is for Parent to increase its ownership of the outstanding common stock of the Company from approximately 57.1% to 100%. Upon the consummation of the Merger, the Company will become a wholly-owned direct subsidiary of Parent, thereby simplifying Parent's holding company structure and furthering Parent's ability to combine the Company's operations with those of Parent. Parent believes that its ability to realize and take advantage of potential synergies between the operations of Parent and its subsidiaries and the Company have been hampered by the Company's current structure. Parent believes it would be better able to achieve the desired level of potential syner...
