Whatts uour eompany lrorth?

By H. Lee Rust

Would you like a quick estimate of the market or enterprise value of your company? With some exceptions, it's not hard to calculate. Begin with your last three year's income statements. If sales and profits have been relatively stable, compute the average over that period for your net profits before tax, your depreciation and amortization charges, and the annual interest paid on loans. If sales and profits have grown substantially over that period, just use the most recent year without an average.

Now, add the three numbers (before tax income + depreciation & amortization + interest expenses) to compute EBITDA. That's an acronym for Earnings Before Interest, Taxes, Depreciation, and Amortization, or what I call the "nominal cash flow of the business." That is the cash flow that is generated with the non-cash depreciation and amortization charges added back and independent of the amount and extent of the company's financing and tax status.

Multiply EBITDA by a factor that is usually between 3.5 and 6.5. Deciding on that factor is the hard part. If your company is in a highly competitive industry with plenty of participants and low levels of proprietary content, the multiplier would be on the low side. If your company has less competition and holds patents or has other proprietary elements that tend to reduce competition, the multiplier would be on the high side.

After deciding on a multiplier and applying it to EBITDA, then subtract all interest-bearing debts of the company. After all, in buying companies, the assumed debts are as much a part of the purchase price or enterprise value as the debt raised independently to pay the cash portion of the purchase price.

The market or enterprise value of your company should be close to the result of that calculation. Of course, to compute the true value, find a buyer and multiply the purchase price by a factor of "one."

assess your company's financial strength and your appetite for risk. Add to these a thorough evaluation of the historical financial results of the target company. Then use this information to develop pro forma statements showing the past results with adjustments made as if the target firm had been owned by you as a corporate parent during that period.

Based on these historical and pro forma financials, you can then develop projections factoring in the acquisition financing and its terms. The best acquisition will largely pay for itself from the target company's own earnings. Properly structured, this can often be done and still meet the price requirements of the seller.

In any acquisition, either a known target or one from a search in a new market area, look for these three elements. If they're all in place, your external expansion plans through acquisitions are likely to be successful.

David Hughes used acquisitions to build Hughes Supply into a wholesale distributor of construction materials with over $4.4 billion of annual sales and 500 branches in 40 states. One of my clients in Lakeland, Fl., acquired two related operations, merged with two others, and started five new ventures while building his business from $8 million in annual revenues to over $40 million in only four years.

You can generate similar rates of growth with an acquisition strategy added to your normal plans for the internal growth of your monthly sales from new customers and increased market share.

- A corporate finance consultant for over 25 years helping clients buy and sell companies, Lee Rust is author o/Let's Buy a Company: How to Accelerate Growth through Acquisitions' Ile can be reached at hleerust@earthlink.net.

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Matt Elred, ex-Universal Forest Products, is a new account mgr. for Capital Lumber Co., Phoenix, Az. David Checketts, formerly with Standard Structures. is a new account mgr. in Salt Lake City, Ur.

Vicki Coffman was promoted to engineered wood products technician in Spokane Valley, Wa.

Ed Maher, formerly with Snavely Forest Products, has joined the import dept. of Buckeye Pacific, Portland. Or.

Josh Powers has joined 84 Lumber Co., Dublin, Ca., as mgr. trainee.

Doug Hudson, ex-Delta Cedar, is now working in Vancouver, Wa., for Canyon Lumber, Kelowna, B.C.

Blake Moore, ex-Weyerhaeuser, has joined Taiga Building Products, Rocklin. Ca.. in outside sales for California's Central Vallev and central coast.

Ellis Goebel, senior v.p.-business development and investor relations, has retired from Building Materials Holding Corp.. San Francisco, Ca., parent of BMC West. the chain he co-founded in 1987. Mark Kailer, v.p. and rreasurer. now oversees inventor relations, while Mike Mahre and Stan Wilson norv head business development. John Fa has been named v.p.-real estate.

Marc Mullins has been named mgr. of quality assurance for engineered rvood products at APA-The Engineered Wood Association. Tacoma, Wa. He succeeds Jack Minneci, who retired at the end of 2005 after spending a combined 38 years with APA and the American Institute of Timber Construction.

Carol Lyn Groce is the nerv advertising & marketing coordinator at Railing Dynamics Inc.

Dan Stephenson is store mgr. of the nerv Lorve's Home Improvement Center in Keizer. Or. Chris Horan is mgr. of the new Apple Valley. Ca.. location.

Steve Skinner. ex-Peppen & Rogen Group. is new to Bluelinx Inc., as senior v.p.-strategy & business development. Duane Goodwin. previously a consultant. has joined Bluel-inx as senior v.p.-supply chain.

Larry Stoddard has been appoinred senior v.p.-business development for Wolseley Group's North American division.

Dick Fitzgerald has been promoted to president of Baltimore-Md. based Fletcher Wood Solutions. a Tenon company.

Kenneth D. Kuehn has been promoted to v.p.-marketing & product management for Huttig Building Products. Inc.

Dave Paterson has been promoted to executive v.p.-building products for Georgia-Pacific Corp., Atlanta, Ga. Joining G-P from new parent Koch are Jim Hannan, executive v.p.chief administrative officer: Bill Caffey. executive v.p.-operations & compliance; Julie Brehm, senior v.p.-human resources; Tye Darland, senior v.p.-general counsel; David Park, senior v.p.-strategy & business development; Philip Ellender, senior v.p.-government & public affairs, and Mark Luetters, senior v.p.-supply & trading, fiber & energy.

Christine Stollas is the new mgr. of communications for the National Lumber & Building Material Dealers Association, Washington, D.C.

Joe Renzetti has been named president and general mgr. at Specialty Construction Brands.

Maurico Lavandero was appointed v.p.-marketing for Briggs Industries Inc.

Deborah Nellson has been appointed marketing mgr. for Hanson Roof Tile.

Robert M. Owens, president, Owens Forest Products, Duluth, Mn., has been elected chairman of the board of governance for the Temperate Forest Foundation, Beaverton, Or. He succeeds Dr. Robert G. Lee, who will continue as an advisor.

Everit A. Sliter, Sliters', Kalispell, Mt., has been appointed chairman of the board of Glacier Bancorp, Inc.

Kevin Casey, Caseywood, Grass Valley, Ca., was named businessperson of the year by the local Chamber of Commerce.

Tiffany Thurgood Smith, formerly of Pick's Building Materials, West Covina, Ca., and daughter of Steve Thurgood, co-owner of Pick's, is the proud parent of a second son, Dylan. born Dec. 18.

Sandy Bunz, Mungus-Fungus Forest Products, Climax, Nv., has returned to the office following a trip to Hawaii, according to co-owners Hugh Mungus and Freddy Fungus.

Beacon Buys Pacific Supply

C&S Roofing Materials, Orange, Ca., has been acquired by Beacon Roofing Supply, Peabody, Ma. Under the name Pacific Supply Co., C&S distributes residential and commercial roofing and other building products from four Southern California facilities.

In 2005, Pacific Supply had 123 employees and sales of $53 million.

Beacon operates 142 branches in 30 states throughout the U.S. and in Eastern Canada.

Trex Plant Douses Minor Fire

A pile of composite byproduct caught fire Jan. l0 at Trex's decking and railing manufacturing plant in Fernley, Nv.

Firefighters quickly extinguished the blaze, which was contained to a concrete-walled area where byproducts from the manufacturing process are placed to cool. County fire chief Jim Lemke noted that the blaze was the fourth such fire at the plant. He said no hazardous fumes were emitted from the fire.

Plant general manager Bryan Moorehead said that, due to the holidays, more waste material than usual had built up in the containment area and heat from inside the material ignited.

"At no time was the plant, emPloYees or the public in danger," Moorehead stressed.

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