|
| Knowledge Centre |
|
|
| Case Study 1 |
[<<Back Next>>] |
| |
- OBJECTIVE:
Due diligence with business and revenue model valuation of an information technology start-up.
- BRIEF:
A leading private equity player is considering acquiring a stake in an on-line search engine. If the investment is seen through, the client will get 25 per cent of the equity on a fully diluted basis. This investment round would be the last funding round i.e. no further dilution. The client will consider an exit in the next 12 to 18 months.
- ACTION:
Global Strategy & Investment Consulting of Planman Consulting India Pvt. Ltd. was responsible to acquaint the client with the necessary requisites.
- APPROACH:
The project was primarily based on secondary research analysis. GSIC had to acquire minute and detailed data from various proprietary and public information domains and use financial modeling to come to a rational conclusion for the client.
- REQUISITES:
The client required the following:
- Viability of the business model.
- Assessment of the downside risk of the investment.
- Competitive technological advantage of the company over other players in the domain.
- Recommendations on the potential valuation of the company.
- METHODOLOGY:
The study was simple in its outlook but as difficult in its execution. The methods adopted for information gathering were thought upon in proximity with the requisites before execution. The project was initiated by way of a detailed discussion with the client to gather a sound overview on the investment followed by an exhaustive data search. The analysis was done taking into account numerous factors pertaining to the specific industry which might have affected the investment.
- OUTCOME: The overall outcome of the project entailed the following:
- Deliverables -A comprehensive report which entailed:
- An executive summary describing the business model.
- Market opportunity.
- Revenue model.
- Competitive analysis.
- Valuation and revenue forecasting.
- Downside risk.
- Results - The analysis was explicated on a recommendation and contextual based search. It explored the way people undertook any on-line search and the immense potential held by technology in the industry. It explored the competitive advantage that technology could pose in the area of on-line search engines. The relative valuation showed that the company was fairly valued. Research suggested that there were downward risks with respect to legal and entrepreneurial issues but the upside risks offset them by a greater extent.
- POST-MORTEM REVIEW:
The private equity player was able to successfully draw a decision based on the findings of the report. He was able to rationally conclude that the investment was feasible and he can go ahead with the project.
|
| |
|
|
