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February 2005
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April 2005

'Not the day job

In addition to my day job this week I am performing the role of Fairfax with Shelford Opera Group in the Yeoman of the Guard.   We open on Thursday night after a final two nights of rehearsal and run until Saturday.  It's not too late to get tickets on the door!  This year we are directed by Jan White - who has also directed at Campaign Amateur Theatre in Ely, with Mark Aldous as musical director.   I am looking forward to it for quite apart from getting two solo aria's in this Opera, I also get three changes of costume, a false beard and a sword!

Have the mighty really fallen ?

I was amused to see two Cambridge companies featuring in  the 17 March edition of Private Eye.   In the "Stock Horror" section a little graph showed how much an investment of £100 five years ago would be worth today.  ARM and Autonomy featured with values today of £11 and £5.

This just shows that stock market investment is about timing; investing at the peak of any market will lead to tears.  I shouldn't think anyone would suggest that these companies were worth a tenth or a twentieth of their 2000 values. It struck me that this was just an extreme example of the point I made in my last post about the divergence of "value" and price.   Only in this case it is price that is transparent being a quoted market, while value is not necessarily moving in the same direction.

If the price is right - why valuation isn't always meaningful

Shareholders in businesses are interested to know what their shares are worth.  Some even have professional valuations prepared.  Some of these are useful; valuations for tax purposes, to settle divorces, or to organise the buyback of shares from exiting shareholders.  But for most owner managers its the realistic value that they might get from actually selling the company that matters.

This will vary depending on who might want to buy - sorry if that seems really obvious, but for some otherwise quite good business there may be a narrow market, as they may have limited appeal.  Also competition amongst buyers will help uplift the price - I have seen deals where the ultimate price was uplifted beyond the realms of sanity by competitive pressure.   The best way to get an idea of what a business is worth - short of selling it - is to get an adviser with access to the data to do a search for sales of similar businesses to benchmark what people are really paying.   

The buyer may have its own way of looking at price and valuation that influences the outcome.    I have recently been involved in selling a business to a quoted plc which was very focused on the headline price, as it would be intensely scrutinised on this by the stock-market.  However there were lots of other areas where we were able to negotiate  benefit for the Vendors of the business where the plc was much less sensitive. 

So value is not just about the headline price, and desk based valuations are often nothing to do with ultimate price.   

Valuation can also become a really heated topic when raising venture capital - some thoughts on that in a subsequent post.

Telecomms Technology MBO

At PEM Corporate Finance we advised on the recently completed Management Buyout of Cambridge based telecoms technology company C3 Limited

C3 develops communications platforms and applications to automate call-handling.  Its products  are designed to meet the mass calling requirements of large corporates, service providers, network operators and the public sector. They are PC based, run under Windows NT, use MSSQL and are SNMP compatible.  Customers include Vodafone and O2. 

C3 equipment is used to support TV phone ins, monitoring lone workers, and helping loved ones keep in touch with troops abroad. 

An interesting company in an buoyant sector; we were pleased to help Wayne Starsmore and John Wood to acquire the company.

Have a look at the full press release at Cambridge Network or on our site.