Achieve Corporation — Financial Modelling
Valuation
Memorandum
Newco Ltd
Acquisition screening and feasibility assessment. Enterprise value estimated by discounted cash flow and market multiples, bridged to equity value. Valuation date: 28 February 2026.
This is a worked example of the acquisition feasibility note a client will receive. Certain historic and forecast figures are illustrative assumptions created to complete the example and should not be treated as verified financial information.
Valuation Output
Section 1
Investment Committee
Summary
The following summarises the valuation output, headline financials, and the key screening decision. This is the first page a buyer's investment committee would read.
Value Today (from the model)
| Metric | Result |
|---|---|
| Enterprise value range | £24.2m to £30.3m |
| Equity value range | £23.0m to £29.1m |
| Screening anchor (equity) | £26.7m |
| Screening anchor (enterprise value) | £27.8m |
FY2025 Snapshot
| Item | FY2025 |
|---|---|
| Revenue | £27.0m |
| Gross margin | 36% |
| EBITDA (reported) | £3.699m (13.7%) |
| EBITDA (adjusted, model) | £4.049m (15.0%) |
| Net debt / EBITDA | 0.07× |
| ROCE | 32.2% |
| Cash conversion cycle | 57.2 days |
Why it looks attractive — buyer view
- ✓Stable gross margin and improving EBITDA margin suggest repeatable unit economics.
- ✓ROCE materially exceeds the model hurdle rate (WACC 10%), indicating capital is being deployed efficiently.
- ✓Very low leverage improves deal flexibility and reduces downside risk.
What could break the deal case
- !Adjusted EBITDA includes £0.350m of add-backs. Rejection compresses value quickly.
- !Cash conversion: validate receivables ageing, disputes, and inventory quality.
- !Capital intensity: confirm maintenance capex is consistent with 3% of revenue.
- !Risk profile: if concentration or cyclicality is higher than expected, WACC should be higher and DCF value falls.
Decision Gate: Progress, Hold, or Decline
Section 2
Scope &
Basis of Valuation
Indicative valuation based on three years of historic accounts and a five-year forecast, as provided in the model. This note is designed to be read as an M&A investment memo.
It focuses on sustainability of earnings, cash conversion, balance sheet risk, and sensitivity to the key assumptions that drive value.
- —Market value; going concern; 100% equity basis.
- —Enterprise value estimated first; bridged to equity via cash, debt, and debt-like items.
- —No audit or verification procedures have been performed.
- —This note is not investment advice and should not be used as a fairness or solvency opinion.
Document Control
| Item | Detail |
|---|---|
| Client / Intended user | Prospective acquirer or investor (screening use only) |
| Subject company | Newco Ltd (illustrative) |
| Purpose | Acquisition screening and feasibility assessment |
| Basis of value | Market value; going concern; 100% equity |
| Methods | Discounted cash flow (DCF) plus market multiples (EV/Revenue and EV/EBITDA) |
| Confidentiality | Confidential; not for wider distribution without consent |
This document is a worked example of the acquisition feasibility note a client will receive. It is designed to be repeatable: inputs are modelled in Excel, and the written analysis is generated to a consistent structure and standard.
Section 3
Company Overview
Newco Ltd is an illustrative mid-market engineering business used to demonstrate the screening format. In a live engagement, this section summarises products, end-markets, competitive position, customer concentration, and operational footprint.
Business Model
Manufactures tight-tolerance, mission-critical components and sub-assemblies in small-to-medium batch runs. Value proposition: reliable quality, repeatable delivery, and problem-solving capability for complex parts.
End-Market Mix
Regulated sectors support stickier margins; cyclical sectors can amplify downside risk.
Competitive Levers
- 01Documented quality management discipline.
- 02Engineering capability reducing customer rework and scrap risk.
- 03Short lead times driven by planning and capacity flexibility.
- 04Embedded relationships with procurement and engineering stakeholders.
Customer Concentration Risk
Treated as a first-order risk. In a live mandate, tested by revenue, margin by customer, length of relationship, and whether demand is contract-backed or purchase-order driven.
Screening Triggers
Any single customer exceeding 20% of revenue or the top five exceeding 50%.
Operational Footprint
One main UK manufacturing site with CNC capacity, inspection/metrology capability, and a supporting engineering and commercial team.
Diligence would validate machine utilisation, maintenance standards, scrap and rework levels, and depth of management below the owner/MD.
Section 4
Historical Financial
Performance
FY2023–FY2025. A business with meaningful scale and improving unit economics. The key screening question is whether the margin profile is repeatable — and on what evidence.
4.1 — P&L Highlights (FY2023–FY2025)
| Metric | FY2023 | FY2024 | FY2025 (model) |
|---|---|---|---|
| Revenue | £24.0m | £25.5m | £27.0m |
| Gross margin | 35.0% | 35.5% | 36.0% |
| Gross profit | £8.4m | £9.1m | £9.7m |
| EBITDA (reported) | £2.95m (12.3%) | £3.35m (13.1%) | £3.699m (13.7%) |
| EBITDA (adjusted) | £3.20m (13.3%) | £3.60m (14.1%) | £4.049m (15.0%) |
| Net margin | 6.5% | 7.0% | 8.0% |
| Net income | £1.56m | £1.79m | £2.16m |
FY2023 and FY2024 figures are illustrative assumptions for sample purposes. FY2025 figures are taken from the model snapshot.
4.2 — EBITDA Quality: Reported vs Adjusted
| FY2025 EBITDA Bridge | Amount |
|---|---|
| Reported EBITDA | £3.699m |
| Total add-backs / normalisation | £0.350m |
| Adjusted EBITDA (model) | £4.049m |
4.3 — Balance Sheet & Leverage Bridge (FY2025)
| Bridge Item | Amount |
|---|---|
| Cash | £2.2m |
| Debt (excluding leases) | £2.45m |
| Lease liabilities (debt-like) | £0.9m |
| Net debt (excluding leases) | ~£0.25m |
| Net debt (including leases) | ~£1.15m |
Leverage is very low (net debt/EBITDA 0.07×). Lease liabilities are debt-like and included in the EV-to-equity bridge.
4.4 — Working Capital & Cash Conversion (FY2025)
| Metric | FY2025 | Why it matters (acquisition view) | What to test in diligence |
|---|---|---|---|
| Receivable days | 55 | Cash tied up in debtors; growth can absorb cash. | Ageing, disputes, concentration, payment discipline. |
| Payable days | 40 | Supplier funding supports cash; too high can indicate stress. | Validate terms vs actual and supplier dependency. |
| Inventory days | 42.2 | Inventory quality impacts cash and potential write-downs. | Obsolescence, WIP valuation, slow-moving stock. |
| Cash conversion cycle | 57.2 days | Indicates ~2 months of cash tied up in operations. | Seasonality and working capital volatility under growth. |
Section 5
Key Ratios (FY2025)
— Acquisition Interpretation
ROCE of 32.2% materially exceeds the WACC hurdle of 10%, signalling capital is being deployed efficiently. Net leverage is very low. The principal operational risk is cash conversion — roughly two months of cash tied up in working capital.
| Ratio | FY2025 | Benefit (why a buyer cares) | Downside / What to test |
|---|---|---|---|
| Net margin | 8.0% | Strong conversion to bottom-line profitability. | Can still hide cash drag from working capital growth. |
| Current ratio | 2.49× | Comfortable short-term liquidity. | Very high liquidity can signal inefficient working capital management. |
| Quick ratio | 1.92× | Liquidity remains strong excluding inventory. | Receivables quality matters — test ageing and disputes. |
| Cash ratio | 0.63× | Solid immediate liquidity vs current liabilities. | Sensitive to debtor slippage or seasonal working capital swings. |
| Debt-to-equity | 0.35× | Conservative leverage; deal flexibility retained. | May be under-optimised capital structure (not a risk per se). |
| Interest cover (EBITDA/interest) | 24.7× | Debt service not a constraint. | Will compress if rates rise materially — starting point is strong. |
| Altman Z-score | 3.84 | Low distress risk on model fundamentals. | Not a substitute for diligence; operational shocks can still hit cash. |
| Asset turnover | 2.00× | Efficient revenue generation from assets. | Could signal underinvestment — check maintenance capex against replacement cycle. |
Section 6
Forecast & Cash Flow
FY2026–FY2030
Forecasts are treated as assumptions to be tested in diligence. The few variables that drive value: revenue growth, margins, working capital intensity, and reinvestment.
6.1 — Forecast Summary (FY2026–FY2030)
| Metric | FY2026 | FY2027 | FY2028 | FY2029 | FY2030 |
|---|---|---|---|---|---|
| Revenue | £28.35m | £29.77m | £31.26m | £32.82m | £34.46m |
| EBITDA (reported) | £3.97m | £4.23m | £4.50m | £4.82m | £5.17m |
| EBITDA margin | 14.0% | 14.2% | 14.4% | 14.7% | 15.0% |
| Free cash flow (FCF) | £1.675m | £1.759m | £1.847m | £1.939m | £2.036m |
Revenue and EBITDA figures are illustrative to complete the sample. Free cash flow is set to be consistent with the DCF output.
6.2 — DCF — Model Inputs (Base Case)
| Input | Value |
|---|---|
| WACC (discount rate) | 10% |
| Terminal growth | 2.5% |
| Maintenance capex (assumption) | 3% of revenue |
Base-Case DCF Output
DCF anchors value to cash conversion and risk pricing, not market sentiment. Sensitive to WACC and terminal growth — stress-test in diligence.
DCF Sensitivity — WACC vs Enterprise Value
Terminal growth held at 2.5% across all scenarios.
| WACC | Implied Enterprise Value (EV) |
|---|---|
| 9% | £28.0m |
| 10% (base) | £24.2m |
| 11% | £21.3m |
Section 7
Market Multiple Valuation
— Cross-Check
Multiples validate the valuation range against comparable listed engineering businesses, adjusted down for SME size and liquidity. EV/EBITDA is the primary yardstick; EV/Revenue is the secondary cross-check.
7.1 — Multiples Applied
| Method | Applied Multiple | EV | Equity |
|---|---|---|---|
| EV / Revenue | 1.10× | £29.8m | £28.7m |
| EV / EBITDA (adj.) | 8.18× | £30.3m | £29.1m |
Why Two Lenses?
DCF anchors value to free cash flow after working capital and reinvestment needs — the most disciplined test. However, it is sensitive to WACC and terminal growth assumptions.
EV/EBITDA is the most common acquisition pricing mechanism in the mid-market. Capital-structure neutral and gives a quick read on debt capacity. Primary yardstick.
EV/Revenue is less sensitive to accounting classifications, but can overstate value in low-margin businesses — hence secondary only.
"The practical conclusion is a valuation range rather than a single number: £24.2m to £30.3m EV. Anchor at £26.7m equity for screening, with the explicit intent that diligence outcomes move price toward the top or bottom of the range."
Section 8
Buyer Conclusion
& Offer Strategy
On the modelled information, the business screens as an attractive acquisition candidate. The following frames the offer anchor, conditions for the top end, and deal protections to manage downside.
8.2 — Screening Anchor
Working price for screening. Final price migrates toward the top or bottom of the range based on diligence outcomes.
8.3 — Top-End Conditions
- ✓Adjusted EBITDA is evidenced and accepted.
- ✓Working capital predictable; receivables ageing clean; inventory quality confirmed.
- ✓Forecast growth supported by order book, retention, pricing history.
- ✓Maintenance capex consistent with model assumptions.
8.4 — Deal Protections
Use a working capital peg and completion accounts. The offer is based on a normal trading level of working capital.
Completion accounts adjust price versus the peg: if working capital is above the peg, price increases; if below, price decreases. Ensures the business transfers with the appropriate level of debtors, stock, and creditors to trade normally.
8.5 — Progression Plan: From Screening to Offer
Section 9
Diligence Tests &
Information Request
The purpose of diligence is to convert a screening range into a defensible final price by testing the assumptions that drive value.
- Validate EBITDA add-backs: supporting invoices, contracts, and recurrence assessment.
- Working capital: receivables ageing, dispute log, credit notes, and customer concentration.
- Inventory: ageing, obsolescence policy, WIP valuation method, and write-down history.
- Capex: maintenance vs growth split; asset condition; replacement cycle; capex backlog.
- Debt-like items: leases, deferred revenue, provisions, warranty liabilities, and customer rebates.
- Customer concentration and contract durability (renewal history, pricing clauses).
- Margin by customer and product to identify cross-subsidy or pricing pressure.
- End-market cyclicality and exposure to single sectors.
- Supplier dependency and pricing volatility on key inputs.
Section 10
Limiting Conditions
This report is prepared for acquisition screening only. It is based on information and assumptions provided in the model and has not been audited or independently verified. Actual results may differ materially from forecasts. No responsibility is accepted for decisions made by third parties based on this document.
Glossary
Key Terms
Achieve Corporation — Financial Modelling
Commission Your
Own Valuation Model
This is the standard output a client receives: a deal-grade valuation model in Excel, paired with a structured acquisition feasibility note. Built to the same standard whether you are screening an acquisition or preparing to buy.
What you receive
DCF model + market multiples cross-check + acquisition feasibility memo, structured to investment committee standard.
Delivered by
Mark Ross Roberts FMVA, CBCA — directly. No junior analysts. No delegated modelling.
