Methods Used to Value an Operating Business and Its Common Stock

Before applying certain standard valuation methods, we perform an in-depth study of the subject entity. We may make significant adjustments to the company’s historical financial statements. These are used with other data during the valuation process.

Acadia uses the following standard valuation methods applied by merger and acquisition specialists, and by corporate valuation experts:

Market Approach	Comparison to market-based financial ratios of selected public firms. Comparison to acquisition-based financial ratios of selected transactions.
Income Approach	Discounted cash flow (DCF) analysis. Leverage buyout (LBO) analysis (applicable only under limited circumstances).
Balance Sheet Approach	Appraisal of assets and liabilities (applicable only under limited circumstances).

In the application of these methods, we consider premiums or discounts to reflect the type of ownership interest being valued (entire business, controlling block or minority interest). Adjustments are also made to reflect the unique characteristics of the subject’s business (such as rapid growth, significant capital expenditure requirements, or conversely, a turnaround situation).

In a transaction, Acadia often places significant emphasis on the range of values developed from the income approach, and uses the range of values developed from the market approach as supporting evidence.