Specifications of Buy-Out Plan®
and DealSense® Plus

Buy-Out Plan® and DealSense Plus® are comprehensive systems that integrate financial analysis... valuation ... pricing... detailed financial projections... free cash flow ROI modeling and report writing within a single system that is Microsoft Windows Vista/XP/2000/NT compatible.

Corporate finance professionals, accountants, M&A advisors, investment bankers and savvy business buyers use Buy-Out Plan and DealSense Plus to streamline valuation, acquisition analysis and planning so they can focus on value-building strategies. The key components of these two systems are interwoven and build upon each other for a more focused and in-depth review of an acquisition throughout the various stages of the acquisition process. The following is a summary overview of the major sections of each program:

• Financial Statement Normalization and Recasting
• Insightful Financial Analysis and Benchmarking
• A Powerful Engine for Preparing Projections
• Business Valuation Using ACCEPTED Methods
• Economically Sound Price, Terms & Deal Structure
• Post-Acquisition Financial Simulation & Business Acquisition Risk Analysis
• Return on Investment based Discounted Free Cash Flows

Executive-level Presentation and Report Generation

Both Buy-Out Plan and DealSense Plus include an on-board financial report builder that links the analysis model with a pre-formatted report/narrative that is logical and easy to understand.

The Financial Report Builder scans thousands of cells in order to organize and present a report that is relevant and documents the methods, procedures and key assumptions that you used.

The Financial Report Builder scans thousands of cells in order to organize and present a report that is relevant and documents the methods, procedures and key assumptions that you used.

The Financial Report Builder helps avoid the "paralysis of analysis" and allows you to harness the power of your analysis by turning into a credible narrative. Say "Good Bye" to writer's block and the hassles of cutting-and-pasting. The Financial Report Builder will save you hours and hours. The rest of this document provides a comprehensive review of the analytical horsepower for each program.

Although the programs are very similar, the features that are unique to DealSense Plus have been highlighted for easy comparison.

INSIGHTFUL FINANCIAL ANALYSIS

Buy-Out Plan and DealSense Plus include the metrics you need to assess the financial performance of a business using both historic and adjusted (recast/normalized) financial statements.

• Flexible chart of accounts allows you to mirror the target company's financials and accommodates up to 10 years of historic Income Statement and Balance Sheet data and supporting information.
• Interim financial statements can be entered, adjusted and annualized. You have the option to use Interim Balance Sheet data in the valuation methods. This gives you the flexibility to use either the Interim or Year-End data depending upon which one is most appropriate given the valuation assignment.
• Statements of Cash Flows, Retained Earnings and Sources & Uses of Funds are calculated automatically.
• Easily make "normalization" adjustments for any account and for any historic period. Eliminate the effects of excessive, discretionary, personal, non-operating, deferrals, and non-recurring items to reflect the true economic condition of the company. Normalized (recast) financial statements are presented along with an Earnings & Net Cash Flow Summary that highlights the bottom-line effects of all adjustments.
• Explanatory notes can be made to document and track adjustments.
• Common-size Income Statements and Balance Sheets as well as 33 common financial ratios that measure liquidity, coverage, leverage and profitability are automatically calculated.
• Performance can be compared to the specific industry based on standard Risk Management Association's (formerly Robert Morris Associates) Annual Statement Studies format.
• Performance can also be compared using Integra Information's 5-Year Industry data for common-size statements and 60 ratios.
• Z-Score Model measures the probability of the target becoming insolvent within the next 12 months. This widely used model helps assess economic viability.
• Sustainable Growth Model measures the maximum growth rate of sales that is sustainable without depleting financial resources. This helps determine whether revenue growth assumptions are in line with profit margins, dividend payout, asset turnover and financial leverage assumptions, both before and after the transaction.
• DuPont Analysis to help identify whether changes in ROE are being driven by Sales Margins, Asset Management or Financial Leverage
• The MoneySoft Five-Minute Diagnostic™ provides a snapshot of a company's footing and highlights the factors that are driving or dragging its performance based upon financial statement data.

A POWERFUL ENGINE FOR PREPARING FINANCIAL PROJECTIONS

Buy-Out Plan and DealSense Plus allow you to prepare two sets of fully linked, line-item projections of the Income Statements, Balance Sheets, Statements of Cash Flows, Statements of Retained Earnings and Sources & Uses of Funds. The objective of the first set of projections is to develop a supportable forecast of the company's future earnings and financial position under existing management and ownership.

• Fully linked, line-item projections of the Income Statements, Balance Sheets, Statements of Cash Flows, Statements of Retained Earnings and Sources & Uses of Funds are created for 1 to 10 years.
• Detailed monthly financial projections for up to 24 months can be prepared using seller-provided data, the Top-Down or Bottom-Up approach or a hybrid of the three.
• Income Statement projection options include regression trend-line, historic average growth, manual constant growth, historic percent of sales, variable growth rates, manual percent of sales, or manual dollar value inputs.
• The base projection amount for each Income Statement account can be adjusted as needed.
• Projected income taxes are estimated based on corporate tax tables or effective tax rates. A Tax Reconciliation Worksheet allows for application of adjustments to taxable income and credits to Federal, State, Local and other taxes.
• Net Operating Loss carry-forward is automatically deducted as projected income permits.
• Common Dividends are calculated as a percent of net income and Preferred Dividends as a percent of the preferred stock balance, or enter dividends manually.
• Accounts Receivable, Inventory and Accounts Payable can be projected using historically calculated turnover ratios, manual turnover ratios or dollar amounts.
• The amount of Fixed Assets required to sustain revenue growth is estimated. Assets can be purchased and disposed of in any projected year. The effect of asset purchases and disposals is automatically calculated along with depreciation using straight-line or accelerated methods.
• Fixed asset purchases can be financed, in whole or in part, during any projected year with changes to the projected financial statements calculated automatically.
• Short-term and long-term notes are amortized with flexible payment options controlled by the user including normal amortization or direct reduction, interest and principal deferrals and balloon payments that are calculated automatically.
• A/R, inventory and cash maintenance revolvers can be set to maintain desired cash balances in the projected balance sheets.
• Goodwill and other intangibles are amortized over any term.
• Key income statement and balance sheet figures are summarized and presented for each projected year.
• Includes summary of depreciation and loan amortization items.

BUSINESS VALUATION USING ACCEPTED METHODS

Buy-Out Plan and DealSense Plus include the methods and approaches necessary to prepare a supportable valuation. Valuation is examined from several perspectives using professionally accepted valuation methods and forms an intelligent framework for purchase price considerations. Both Buy-Out Plan and DealSense Plus provide a thoughtful and logical guide through the valuation process. You can examine a company's value with Buy-Out Plan using 10 common valuation methods. DealSense Plus, the more powerful of the two systems, has 29 different methods in order to arrive at a supportable conclusion of value.

Asset Valuation Methods:

• Net Asset Value
• Liquidation Value

Income Valuation Methods:

• Capitalization of Earnings
• Discounted Future Earnings
• Discounted Cash Flow
• When determining discount and capitalization rates, you have the option to use either the Build-Up method or the Capital Asset Pricing Model (CAPM) method. If you are valuing the company on a debt-free basis, you can convert the discount and capitalization rates to their debt-free equivalents based on the company's weighted average cost of capital.
• In valuing the company's historic and/or future earnings, you can use any of the following: Normalized Net Income, EBT, EBIT, EBITDA, Net Cash Flow and Free Cash Flow.

Market and Comparable Company Valuation Methods:

• Price to Earnings (manual input of multiple).
• Price to Revenue (manual input of multiple).
• Price to Gross Cash Flow (manual input of multiple).
• Price to Dividends (manual input of multiple).
• Price to Net Asset Value (manual input of multiple).
• Price to Book Value (manual input of multiple).

DealSense Plus includes the following additional market and comparable valuation methods:

• Price to Earnings Multiple from Done Deals/Completed Transactions database (uses Net Income), Pratt's Stats (uses Net Income and EBT), and Mergerstat database (uses Net Income).
• Price to Revenue Multiple from Done Deals/Completed Transactions database, Pratt's Stats (using both Equity Price & Deal Price), and BIZCOMPS.
• Price to Cash Flow from Operations (using Done Deals/Completed Transactions).
• Price to Discretionary Earnings using Pratt's Stats and/or BIZCOMPS.
• Price to Total Assets (using Done Deals/Completed Transactions).
• Price to Equity using Done Deals/Completed Transactions, User defined on Book Value, User defined on Net Asset Value, Deal Price to EBIT (using Pratt's Stats) and/or Deal Price to EBITDA (using Pratt's Stats).

Other Valuation Methods:

• Capitalization of Excess Earnings.
• Multiple of Discretionary Earnings.
• Preferred Stock valuation based upon the market yield of preferred stock from comparable companies.
• Buy-Out Plan and DealSense Plus give you the option to apply Control Premiums, Minority Discounts, and Marketability Discounts as well as the ability to value partial interests.
• Control Premiums, Minority Discounts, and Marketability Discounts can be applied to each individual valuation method or in the valuation conclusions.
• A valuation summary lists each method used and the respective value, which can be weighted and averaged to arrive at a total equity value.

Deal Sense Plus Includes an Additional Test to Make Sure a Value is Supportable and Reasonable:

• An "economic reality test" of your conclusion of value is included. You set hypothetical purchase terms including the amount of equity and the required return, and the amount and payment terms of up to four levels of acquisition debt. A "real-time monitor" gives you instant feedback.
• Key measures of operating performance and Return on Investment performance for the hypothetical transaction terms are provided as part of the economic reality test.
• Also included are flexible Rules of Thumb that allow you to use any combination of multiples of earnings, assets, and user-defined multiples to determine the reasonableness of the values indicated by the other methods.

BUSINESS VALUATION USING ACCEPTED METHODS

Embedded in both Buy-Out Plan and DealSense Plus is a pricing approach that is designed to inoculate a buyer from paying too much for an acquisition-the "winner's curse." There are numerous metrics and data points that will guide a buyer toward a viable acquisition price and structure.

• Transaction can be structured as either a stock or asset purchase.
• Investment banking fees on a "user-defined" sliding scale (i.e., Lehman formula) are automatically calculated. Legal, accounting and other transaction-related fees may be estimated and included in the cost of the acquisition.
• Purchase price worksheet includes a comparison of 10 multiples based upon asking price, proposed price, fair market value (FMV), market value of invested capital (MVIC) and enterprise value (EV).
• Premiums over FMV, MVIC and EV for both the proposed purchase price and asking price are also calculated and presented. The results for each valuation method are also available from the pricing worksheet.
• Purchase price can be distributed between assets or stock, non-compete agreements, employment agreements, management contracts, and goodwill, if any.
• Allows you to specify payment terms for any Non-Compete Agreements, Management Contracts and Contingency Payments.
• Intangible assets can be allocated in accordance with FAS 141.
• Assets can be purchased in whole or in part, based upon book or allocated at market. Liabilities can be assumed in whole or in part.
• Summarizes seller's proceeds between cash, seller financing and assumed liabilities and estimates the total purchase cost to the buyer after considering transaction costs and estimated contingency payments.
• Summarizes the remaining amount of funds required to complete the sale after considering seller financing, liability assumptions and other deferred payments to seller.
• Develop a Hurdle Rate for use in evaluating returns on Total Invested Capital and Invested Equity.
• Analysis of Returns on Investment using Free Cash Flow from Pre-Acquisition projections. Measurements include Net Present Value, IRR, Hurdle Rate/IRR Spread, Profitability Index and Payback Period.

POST-ACQUISITION FINANCIAL SIMULATION & RISK ANALYSIS

Buy-Out Plan and DealSense Plus include a second set of detailed financial projections that allow you to evaluate the impact of a multitude of assumptions. Purchase price, structure, and an array of funding options are integrated into the projections along with the impact of operating assumptions. The projections automatically update as assumptions are changed to provide instant feedback on their implications to support the negotiating and decision-making process.

• All or some of the operating assumptions from the Pre-Acquisition Projections can be imported and modified. You have complete control of every line item. (See section on Pre-Acquisition Projections for details.)
• Monthly projections can include detail for up to 36 months.
• Secured Credit Analysis determines the amount of credit available based on the appraised value of unencumbered assets.
• Funding options include revolving lines of credit, bank notes, term debt, subordinated debt, inventory and accounts receivable revolvers, convertible debt, warrants/options, common stock, preferred stock and convertible preferred.
• Funding options can be used to finance the acquisition and to plan for future working capital needs.
• Acquisition Funding Summary provides a detailed listing of all sources and uses of acquisition funds.
• Prepares a second set of detailed, fully linked financial statement projections for up to 10 years based on transaction structure and terms, funding and revised assumptions under new management and ownership.
• A Tax Reconciliation Worksheet allows for application of adjustments to taxable income and to Federal, State, Local and other taxes.
• Pro Forma projection summary provides key income statement and balance sheet figures for each projected year.
• Includes summary of depreciation and loan amortization items. Post-acquisition financial projections are subjected to a number of analytical tests that point to potential problems and trends that might impact the future viability and health of the company.
• A comparative review of critical ratios, performance and planning criteria is provided for the historic base year, the pro forma base year and for each projected year after the acquisition.
• Provides the ability to configure loan covenant compliance limits set by the lender and automatically determines any period for which a loan is in default.
• Calculates Ratios and Common-Size Statements for each projected year after the acquisition.
• Z-Score Model measures the probability of the target becoming insolvent within the next 12 months. This widely used model helps assess economic viability.
• Sustainable Growth Model measures the maximum growth rate of sales that is sustainable without depleting financial resources. This helps determine whether revenue growth assumptions are in line with profit margins, dividend payout, asset turnover and financial leverage assumptions after the transaction.

POST-ACQUISITION FINANCIAL SIMULATION & RISK ANALYSIS

Buy-Out Plan and DealSense Plus include various metrics based on Free Cash Flow to analyze the returns on Total Invested Capital and Invested Equity. Returns are calculated for both the business entity and individual investor groups. The numbers from the Post-Acquisition Projections are used in the ROI model and whenever the assumptions are changed, the ROI results are automatically updated.

• Develop a Hurdle Rate for use in evaluating returns on Total Invested Capital and Invested Equity.
• Analysis of Returns on Investment uses Free Cash Flow from the Post-Acquisition projections. Measurements include Net Present Value, IRR, Hurdle Rate/IRR Spread, Profitability Index and Payback Period.
• Estimates company value in each projected year for use in the return on investment calculations. The projected value is based on a multiple of projected net-of-debt or debt-free earnings with an option to include or exclude excess cash.
• Internal Rate of Return is calculated for up to 10 separate investment groups and for convertible debt and exercised options/warrants based on the initial investment, all cash flows over the term of the investment and the value of the investment in the exit period.
• For each projected year, the Per Share Analysis summarizes the number of shares outstanding, projected total value, per share value, book value per share, dividends per share and simple earnings per share.
• All cash flows to each investment group, convertible debt and exercised options/warrants are summarized for each projected year.

EXECUTE-LEVEL PRESENTATION AND REPORTING

• Buy-Out Plan and DealSense Plus include the MoneySoft Financial Report Builder that links the numeric analysis with a pre-formatted report and narrative that automatically documents the analysis for you using Microsoft Word. Buy-Out Plan automatically generates an editable Acquisition Report and Proposal. DealSense includes the Acquisition Report and Proposal and also generates a Business Valuation Report/Appraisal.
• The Financial Report Builder is "smart" enough to know what analysis you actually performed and describes the results of the analysis. Both the templates and generated reports are fully customizable using Microsoft Word. This eliminates the need for re-keying information or cutting and pasting.
• Buy-Out Plan contains over 95 supporting schedules that can be printed individually or in user-defined batches.
• DealSense Plus contains over 150 supporting schedules that can be printed individually or in user-defined batches.
• Print controls include page orientation, headers and footers, scaling (print-to-fit), and much more.
• The Graphing function generates pre-formatted graphs and updates them as your data changes.

All of the power of Buy-Out Plan and DealSense Plus can be yours today. Call 800-966-7797 to talk with a knowledgeable representative.

For more information or to arrange an online demo, call MoneySoft at 800-966-7797 or 602-266-7710.

• Specifications |PDF|
• Sample BOP Report |PDF|
• Sample DSP+ Report |PDF|