Achieve Corporation — Confidential
Business
Valuation &
Strategic
Options
Report
Precision Engineering Ltd
Document Overview
Contents
This report is written for a UK business owner. It provides a defensible valuation range and translates the numbers into practical decisions: exit timing, offer benchmarking, bankability and negotiation anchoring. All valuation outputs are indicative and should be treated as decision support rather than a guarantee of price.
Valuation at a Glance
This section provides the headline valuation outcome first, then sets out what the numbers imply for an owner's strategic choices. The objective is clarity: a value range you can defend, and the levers that move value within that range.
- Enterprise value (EV) is the value of the operating business before financing. It allows like-for-like comparison regardless of debt levels.
- Equity value is what is attributable to shareholders after adjusting EV for cash, debt and debt-like items (such as leases). This is the number most owners anchor on.
- A valuation range is more defensible than a single point. It reflects that value moves with evidence strength: earnings quality, cash conversion and risk profile.
- The central anchor (ยฃ26.7m equity) is the working reference for strategic planning and negotiation positioning. The range defines where a credible discussion can sit.
FY2025 Snapshot — Operating and Financial Position
| Metric | FY2025 |
|---|---|
| Revenue | ยฃ27.0m |
| Gross margin | 36% |
| EBITDA (reported) | ยฃ3.699m (13.7%) |
| EBITDA (adjusted) | ยฃ4.049m (15.0%) |
| Net debt / EBITDA | 0.07x |
| ROCE | 32.2% |
| Cash conversion cycle | 57.2 days |
- Revenue and gross margin describe scale and unit economics. Stable gross margin supports valuation resilience because it signals pricing discipline and cost control.
- EBITDA is the most common mid-market valuation reference point. It indicates operating earning power, but it is not the same as cash.
- Adjusted EBITDA reflects normalised, maintainable earnings after removing non-recurring or owner-specific items. The more defensible the adjustments, the more credible the upper end of valuation.
- Net debt/EBITDA is a leverage indicator. At 0.07x, the business is conservatively financed, which increases strategic flexibility and reduces refinancing risk.
- ROCE shows how efficiently the business turns invested capital into profit. ROCE materially above cost of capital indicates value creation.
- Cash conversion cycle indicates how much cash is tied up in working capital. Predictability matters as much as the absolute number.
Owner Decisions This Valuation Supports
The valuation is intended to support practical owner decisions rather than provide a theoretical number.
- Is now the right time to sell?
- Is an unsolicited offer fair?
- Is the business bankable (for growth finance or recapitalisation)?
- What must improve before going to market?
- What valuation range should anchor negotiations?
- It keeps the valuation connected to action: timing, structure and negotiating posture.
- It clarifies which factors change value (and which do not), reducing the risk of being anchored by an opportunistic offer or an adviser's optimism.
- It provides a consistent narrative you can use with buyers, lenders or other shareholders without overstating certainty.
Scope, Basis and Valuation Approach
Scope: indicative valuation based on three years of historic performance (FY2023โFY2025) and a five-year forecast (FY2026โFY2030) as reflected in the model. Basis: market value; going concern; 100% equity.
Methods: discounted cash flow (DCF) and market multiples (EV/Revenue and EV/EBITDA). Enterprise value is estimated first and then bridged to equity value using cash, debt and debt-like items.
- DCF anchors value to free cash flow after working capital and reinvestment needs. It is disciplined and risk-aware.
- Market multiples anchor value to observable market behaviour. They are useful for benchmarking unsolicited offers.
- Using both methods provides a defensible range, rather than a single fragile number.
Company Overview and Value Proposition
Precision Engineering Ltd is presented as an illustrative mid-market UK precision engineering manufacturer, included to demonstrate the owner-facing report structure.
The company description in this section is illustrative for the sample; it is not verified business information.
The business is assumed to manufacture tight-tolerance components and sub-assemblies in small-to-medium batch runs, serving customers where quality and delivery reliability have direct economic value.
Competitive differentiation is assumed to be driven by quality discipline, engineering capability, repeatability of delivery, and embedded customer relationships.
- Repeat demand and high switching costs tend to support more resilient margins and valuation multiples.
- Engineering capability can support pricing power because it reduces customers' technical and supply-chain risk.
- Process discipline and management depth reduce key-person dependency, improving both saleability and bankability.
3.1 Profit and Loss Highlights
The performance review focuses on scale, margin quality, sustainability of earnings and evidence of operating leverage. These are the factors that counterparties typically underwrite.
* FY2023 and FY2024 figures are illustrative assumptions created to complete the sample.
| Metric | FY2023* | FY2024* | FY2025 |
|---|---|---|---|
| Revenue | ยฃ24.0m | ยฃ25.5m | ยฃ27.0m |
| Gross margin | 35.0% | 35.5% | 36.0% |
| EBITDA (reported) | ยฃ2.95m (12.3%) | ยฃ3.35m (13.1%) | ยฃ3.699m (13.7%) |
| EBITDA (adjusted) | ยฃ3.20m (13.3%) | ยฃ3.60m (14.1%) | ยฃ4.049m (15.0%) |
| Net margin | 6.5% | 7.0% | 8.0% |
The profile shows steady top-line progression and incremental margin improvement. Gross margin stability alongside improving EBITDA margin suggests profitability is being driven by operational leverage and cost discipline. For valuation and funding, the key point is repeatability: earnings that can be underwritten with confidence generally support a stronger outcome.
- Revenue: scale and market position. Stable revenue supports confidence in forward cash flows.
- Gross margin: unit economics โ pricing power and production control; stability supports valuation resilience.
- EBITDA margin: operating leverage and cost discipline. Improving margin often supports multiple resilience.
3.2 Reported vs Adjusted EBITDA
| FY2025 EBITDA Bridge | Amount |
|---|---|
| Reported EBITDA | ยฃ3.699m |
| Total add-backs / normalisation | ยฃ0.350m |
| Adjusted EBITDA (model) | ยฃ4.049m |
- Adjusted EBITDA is intended to represent maintainable earnings. It matters because many negotiations and funding discussions anchor on sustainable EBITDA.
- Where adjustments are clearly evidenced and non-recurring, they support a valuation towards the upper end of the range.
- Where adjustments are weakly evidenced or recurring, value typically migrates towards the lower end of the range.
The objective is an evidence-led presentation of maintainable performance, not an optimistic redefinition of earnings.
4.1 Enterprise Value to Equity Value โ Bridge
Enterprise value measures the operating business. Equity value adjusts EV for cash, debt and debt-like items. Owners typically focus on equity value because it represents shareholder proceeds.
| Bridge Item (FY2025) | Amount |
|---|---|
| Cash | ยฃ2.2m |
| Debt (excluding leases) | ยฃ2.45m |
| Lease liabilities (debt-like) | ยฃ0.9m |
| Net debt (excluding leases) | ~ยฃ0.25m |
| Net debt (including leases) | ~ยฃ1.15m |
- Cash: typically increases equity value; it can also strengthen negotiating position by reducing dependency on lender consent.
- Debt: reduces equity value and can introduce completion complexity; conservative debt levels improve optionality.
- Lease liabilities: treated as debt-like because they are contractual obligations; understanding them avoids surprises in proceeds.
- Net debt: summarises overall leverage; low net debt supports bankability and can reduce perceived risk in negotiations.
4.2 Working Capital and Cash Conversion
| Metric | FY2025 |
|---|---|
| Receivable days (DSO) | 55 |
| Inventory days (DIO) | 42.2 |
| Payable days (DPO) | 40 |
| Cash conversion cycle (CCC) | 57.2 days |
A CCC of 57.2 days indicates meaningful cash tied up in the operating cycle. In manufacturing this is normal; predictability and control are what drive confidence.
- DSO: how quickly customers pay. Improving DSO releases cash and strengthens funding credibility.
- DIO: how much inventory/WIP is held. Disciplined DIO reduces write-down risk and releases cash.
- DPO: how supplier terms fund the business. Balanced DPO supports cash without damaging supplier resilience.
- CCC: the overall cash tie-up in the trade cycle. Predictable CCC supports valuation confidence and lender comfort.
Returns, Efficiency and Funding Capacity (FY2025)
This section summarises profitability, return, liquidity and leverage measures that influence valuation resilience and funding headroom.
| Ratio | FY2025 |
|---|---|
| ROCE | 32.2% |
| Current ratio | 2.49x |
| Quick ratio | 1.92x |
| Cash ratio | 0.63x |
| Debt-to-equity | 0.35x |
| Net debt / EBITDA | 0.07x |
| Interest cover (EBITDA/interest) | 24.7x |
- ROCE: capital efficiency. High ROCE typically supports stronger valuations because it indicates economic value creation.
- Liquidity ratios: resilience and short-term safety. Strong liquidity reduces execution risk and supports bank conversations.
- Leverage ratios: financing risk. Conservative leverage increases optionality and reduces deal friction.
- Interest cover: ability to service debt from operations. Strong cover supports funding headroom and improves lender confidence.
Forecast and Cash Flow Outlook (FY2026โFY2030)
Forecasts are assumptions to be tested. Their purpose here is to translate growth and margin expectations into free cash flow, which drives intrinsic value.
Revenue and EBITDA figures are illustrative; free cash flow is consistent with the DCF output.
| Metric | FY2026 | FY2027 | FY2028 | FY2029 | FY2030 |
|---|---|---|---|---|---|
| Revenue | ยฃ28.35m | ยฃ29.77m | ยฃ31.26m | ยฃ32.82m | ยฃ34.46m |
| EBITDA (reported) | ยฃ3.97m | ยฃ4.23m | ยฃ4.50m | ยฃ4.82m | ยฃ5.17m |
| EBITDA margin | 14.0% | 14.2% | 14.4% | 14.7% | 15.0% |
| Free cash flow | ยฃ1.675m | ยฃ1.759m | ยฃ1.847m | ยฃ1.939m | ยฃ2.036m |
- Revenue growth assumptions set the scale of future cash flows. Credible, measurable growth supports defensible valuation.
- EBITDA and margin assumptions determine operating earning power. Small changes in margin can materially change value.
- Free cash flow is the key driver of DCF. It captures what is left after working capital and reinvestment.
7.1 Discounted Cash Flow (DCF)
This section explains how the valuation range is derived and what drives sensitivity within the range.
| Model Inputs (Base Case) | Value |
|---|---|
| WACC (discount rate) | 10% |
| Terminal growth | 2.5% |
| Maintenance capex (assumption) | 3% of revenue |
DCF Sensitivity โ Terminal Growth Held at 2.5%
| Base-Case DCF Output (Model) | Result |
|---|---|
| Enterprise value (EV) | ยฃ24.2m |
| Equity value | ยฃ23.0m |
- WACC reflects risk. If counterparties perceive higher risk, WACC increases and DCF value falls.
- Terminal growth should be conservative. Overstating terminal growth can make valuation fragile in negotiation.
- DCF is beneficial because it values the business on cash generation after reinvestment needs, not on accounting profits alone.
7.2 Market Multiples (Cross-Check)
| Method | Applied Multiple | EV | Equity |
|---|---|---|---|
| EV/Revenue | 1.10x | ยฃ29.8m | ยฃ28.7m |
| EV/EBITDA | 8.18x | ยฃ30.3m | ยฃ29.1m |
- EV/EBITDA is the standard mid-market pricing yardstick. It focuses on maintainable operating earnings and is capital-structure neutral.
- EV/Revenue is a secondary cross-check. It must be interpreted alongside margin strength.
- Multiples are beneficial because they benchmark value to market evidence and help assess whether an unsolicited offer is in line with typical pricing.
8.1 Is Now the Right Time to Sell?
The FY2025 profile shows improving profitability, strong returns on capital and minimal leverage. These conditions typically support valuation resilience and buyer confidence.
- Improving EBITDA margin strengthens the trajectory narrative.
- ROCE above cost of capital supports the case that the business creates economic value.
- Low leverage reduces complexity and preserves optionality (sell, recapitalise or fund growth).
8.2 Is an Unsolicited Offer Fair?
The defensible equity range is ยฃ23.0m to ยฃ29.1m, with a central anchor of ยฃ26.7m. Offers should be assessed against where they sit within this range and what assumptions they imply.
- Treat ยฃ23.0m as the intrinsic floor in the modelled case.
- Use ยฃ26.7m as the central reference for credible discussion.
- Treat ยฃ29.1m as achievable where evidence around maintainable earnings and forward visibility is strong.
8.3 Is the Business Bankable?
With net debt/EBITDA at 0.07x and interest cover at 24.7x, the business presents as conservatively financed with substantial headroom. Liquidity ratios reinforce resilience.
- They indicate the business can service debt comfortably from operations.
- They highlight whether cash is trapped unpredictably in working capital.
- They demonstrate financial discipline and reduce perceived execution risk.
8.4 What Must Improve Before Going to Market?
The objective is to reduce uncertainty, because uncertainty drives counterparties to push price to the bottom end of the range.
Prepare a clear, evidence-backed bridge from reported to maintainable earnings.
Demonstrate working capital control (receivables ageing and inventory discipline).
Maintain a credible reinvestment narrative (maintenance capex discipline).
Strengthen forward visibility where available (repeat demand, pricing discipline).
8.5 What Valuation Should Anchor Negotiations?
Anchor on ยฃ26.7m equity value, using ยฃ23.0m to ยฃ29.1m as the defensible range. This balances intrinsic value discipline with market benchmarks.
- Reduces the risk of accepting opportunistic discounts framed as market reality.
- Improves confidence when rejecting weak offers or requesting improved terms.
- Supports consistent communication with advisers, funders and other shareholders.
Reference
Glossary
It keeps terminology consistent and reduces the risk of misunderstanding when discussing value with buyers, funders or advisers.
| Term | Meaning |
|---|---|
| Enterprise Value (EV) | Value of the operating business before financing items. |
| Equity Value | Value attributable to shareholders after adjusting EV for cash, debt and debt-like items. |
| EBITDA | A proxy for operating earning power; not the same as cash. |
| Adjusted EBITDA | EBITDA after normalising non-recurring or owner-specific items to estimate maintainable earnings. |
| Free Cash Flow | Cash generated after tax, working capital movement and reinvestment (capex). |
| DCF | Discounted cash flow valuation method based on forecast free cash flow discounted back to today. |
| WACC | Risk-adjusted required return. Higher WACC reduces DCF value. |
| Terminal Growth | Long-run growth rate assumed after the explicit forecast period. |
Important Notice
Limiting Conditions
This report is prepared for strategic review and valuation screening purposes 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.
- They keep the report credible and defensible: valuation is sensitive to evidence and assumptions.
- They set appropriate expectations: decision support, not a guaranteed outcome.
- They clarify reliance and scope for all parties.
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Every mandate is led personally by Mark Ross Roberts FMVA, CBCA. No junior handoffs.
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