Fictional demonstrationThe businesses, figures, sources and findings in this report are invented. No client information is used.
Executive review
Group · Year 3Continue diligence.
Keep the price conditional.
Trading is growing, but reported profit overstates the assumed repeatable earnings. Cash collection and recurring maintenance still need attention.
- Reported → adjusted EBITDA
- €3.30m → €2.80m
- Cash after investment
- €1.06m
- Base-case equity value
- €10.95m
Growth, with a smaller earnings base
Three-year group performance · €m
Revenue grew 22.2% over the period. The earnings review removes €0.50m from Year 3 EBITDA.
The acquisition in view
A fictional equipment maintenance group with two wholly owned operating units. The example uses a share purchase with debt, cash and working-capital adjustments at completion.
Inspect the two operating businessesGroup performance
Growth & contributionThe group total is only the starting point. Compare the operating businesses, then follow each one through the statements and cash cycle.
| Business | Revenue | Share | EBITDA | Adjusted EBITDA | Working capital | Sources |
|---|---|---|---|---|---|---|
| Vellum Serviceworks | 13.60 | 61.8% | 2.60 | 2.28 | 1.52 | SYN-VEL-Y3SYN-QOE-01SYN-QOE-02 |
| Bracken Careworks | 8.40 | 38.2% | 0.70 | 0.52 | 1.12 | SYN-BRA-Y3SYN-QOE-01SYN-QOE-02 |
| Group | 22.00 | 100.0% | 3.30 | 2.80 | 2.64 |
Linden Group Holdings
Two wholly owned fictional operating units; all group figures are derived from their ledgers.
| Measure | Year 1 | Year 2 | Year 3 |
|---|---|---|---|
| Revenue · €m | 18.00 | 20.00 | 22.00 |
| Revenue growth | — | 11.1% | 10.0% |
| Gross margin | 40.0% | 40.0% | 40.0% |
| EBITDA · €m | 2.34 | 2.80 | 3.30 |
| EBITDA margin | 13.0% | 14.0% | 15.0% |
| Net margin | 6.3% | 7.4% | 8.2% |
Vellum Serviceworks
Invented scheduled servicing unit. Its stronger margin supports most group earnings.
| Measure | Year 1 | Year 2 | Year 3 |
|---|---|---|---|
| Revenue · €m | 10.80 | 12.20 | 13.60 |
| Revenue growth | — | 13.0% | 11.5% |
| Gross margin | 42.0% | 42.0% | 42.0% |
| EBITDA · €m | 1.68 | 2.10 | 2.60 |
| EBITDA margin | 15.6% | 17.2% | 19.1% |
| Net margin | 8.2% | 9.9% | 11.3% |
Bracken Careworks
Invented reactive repair unit. Slower collections and a lower margin constrain cash generation.
| Measure | Year 1 | Year 2 | Year 3 |
|---|---|---|---|
| Revenue · €m | 7.20 | 7.80 | 8.40 |
| Revenue growth | — | 8.3% | 7.7% |
| Gross margin | 36.9% | 36.9% | 36.8% |
| EBITDA · €m | 0.66 | 0.70 | 0.70 |
| EBITDA margin | 9.2% | 9.0% | 8.3% |
| Net margin | 3.5% | 3.5% | 3.1% |
Financial statements
Three complete financial yearsRead earnings, the balance sheet and cash movement together. Parentheses show costs or cash outflows. Balance-sheet liabilities are positive amounts.
Linden Group Holdings
Fictional consolidated parent
| Line item | Year 1 | Year 2 | Year 3 |
|---|---|---|---|
| Revenue | 18.00 | 20.00 | 22.00 |
| Direct costs | (10.80) | (12.00) | (13.20) |
| Gross profit | 7.20 | 8.00 | 8.80 |
| Operating overheads | (4.86) | (5.20) | (5.80) |
| Exceptional income | 0.00 | 0.00 | 0.30 |
| Reported EBITDA | 2.34 | 2.80 | 3.30 |
| Depreciation | (0.60) | (0.65) | (0.70) |
| Operating profit | 1.74 | 2.15 | 2.60 |
| Interest | (0.22) | (0.21) | (0.20) |
| Profit before tax | 1.52 | 1.94 | 2.40 |
| Tax | (0.38) | (0.46) | (0.60) |
| Net profit | 1.14 | 1.48 | 1.80 |
| Synthetic source records | SYN-VEL-Y1SYN-BRA-Y1 | SYN-VEL-Y2SYN-BRA-Y2 | SYN-VEL-Y3SYN-BRA-Y3 |
| Line item | Year 1 | Year 2 | Year 3 |
|---|---|---|---|
| Cash | 1.10 | 1.05 | 0.90 |
| Trade receivables | 2.40 | 2.70 | 3.20 |
| Inventory | 0.80 | 0.90 | 1.05 |
| Property, plant & equipment | 4.60 | 4.70 | 4.80 |
| Total assets | 8.90 | 9.35 | 9.95 |
| Trade payables | 1.40 | 1.60 | 1.61 |
| Debt | 3.60 | 3.70 | 3.80 |
| Total liabilities | 5.00 | 5.30 | 5.41 |
| Equity | 3.90 | 4.05 | 4.54 |
| Liabilities & equity | 8.90 | 9.35 | 9.95 |
| Balance check | 0.00 | 0.00 | 0.00 |
| Synthetic source records | SYN-VEL-Y1SYN-BRA-Y1 | SYN-VEL-Y2SYN-BRA-Y2 | SYN-VEL-Y3SYN-BRA-Y3 |
| Line item | Year 1 | Year 2 | Year 3 |
|---|---|---|---|
| Opening cash | 1.20 | 1.10 | 1.05 |
| Reported EBITDA | 2.34 | 2.80 | 3.30 |
| Cash interest | (0.22) | (0.21) | (0.20) |
| Cash tax | (0.38) | (0.46) | (0.60) |
| Increase in working capital | (0.20) | (0.20) | (0.64) |
| Operating cash flow | 1.54 | 1.93 | 1.86 |
| Capital expenditure | (0.70) | (0.75) | (0.80) |
| Cash after investment | 0.84 | 1.18 | 1.06 |
| Net borrowing / repayments | 0.10 | 0.10 | 0.10 |
| Distributions | (1.04) | (1.33) | (1.31) |
| Net cash movement | (0.10) | (0.05) | (0.15) |
| Closing cash | 1.10 | 1.05 | 0.90 |
| Cash reconciliation | 0.00 | 0.00 | 0.00 |
| Synthetic source records | SYN-VEL-Y1SYN-BRA-Y1 | SYN-VEL-Y2SYN-BRA-Y2 | SYN-VEL-Y3SYN-BRA-Y3 |
Vellum Serviceworks
100% owned by fictional Linden Group Holdings
| Line item | Year 1 | Year 2 | Year 3 |
|---|---|---|---|
| Revenue | 10.80 | 12.20 | 13.60 |
| Direct costs | (6.26) | (7.08) | (7.89) |
| Gross profit | 4.54 | 5.12 | 5.71 |
| Operating overheads | (2.86) | (3.02) | (3.31) |
| Exceptional income | 0.00 | 0.00 | 0.20 |
| Reported EBITDA | 1.68 | 2.10 | 2.60 |
| Depreciation | (0.36) | (0.39) | (0.43) |
| Operating profit | 1.32 | 1.71 | 2.17 |
| Interest | (0.13) | (0.13) | (0.12) |
| Profit before tax | 1.19 | 1.58 | 2.05 |
| Tax | (0.30) | (0.37) | (0.51) |
| Net profit | 0.89 | 1.21 | 1.54 |
| Synthetic source records | SYN-VEL-Y1 | SYN-VEL-Y2 | SYN-VEL-Y3 |
| Line item | Year 1 | Year 2 | Year 3 |
|---|---|---|---|
| Cash | 0.60 | 0.57 | 0.66 |
| Trade receivables | 1.44 | 1.61 | 1.84 |
| Inventory | 0.48 | 0.54 | 0.63 |
| Property, plant & equipment | 2.76 | 2.83 | 2.89 |
| Total assets | 5.28 | 5.55 | 6.02 |
| Trade payables | 0.84 | 0.94 | 0.95 |
| Debt | 2.16 | 2.22 | 2.28 |
| Total liabilities | 3.00 | 3.16 | 3.23 |
| Equity | 2.28 | 2.39 | 2.79 |
| Liabilities & equity | 5.28 | 5.55 | 6.02 |
| Balance check | 0.00 | 0.00 | 0.00 |
| Synthetic source records | SYN-VEL-Y1 | SYN-VEL-Y2 | SYN-VEL-Y3 |
| Line item | Year 1 | Year 2 | Year 3 |
|---|---|---|---|
| Opening cash | 0.75 | 0.60 | 0.57 |
| Reported EBITDA | 1.68 | 2.10 | 2.60 |
| Cash interest | (0.13) | (0.13) | (0.12) |
| Cash tax | (0.30) | (0.37) | (0.51) |
| Increase in working capital | (0.18) | (0.13) | (0.31) |
| Operating cash flow | 1.07 | 1.47 | 1.66 |
| Capital expenditure | (0.42) | (0.46) | (0.49) |
| Cash after investment | 0.65 | 1.01 | 1.17 |
| Net borrowing / repayments | 0.06 | 0.06 | 0.06 |
| Distributions | (0.86) | (1.10) | (1.14) |
| Net cash movement | (0.15) | (0.03) | 0.09 |
| Closing cash | 0.60 | 0.57 | 0.66 |
| Cash reconciliation | 0.00 | 0.00 | 0.00 |
| Synthetic source records | SYN-VEL-Y1 | SYN-VEL-Y2 | SYN-VEL-Y3 |
Bracken Careworks
100% owned by fictional Linden Group Holdings
| Line item | Year 1 | Year 2 | Year 3 |
|---|---|---|---|
| Revenue | 7.20 | 7.80 | 8.40 |
| Direct costs | (4.54) | (4.92) | (5.31) |
| Gross profit | 2.66 | 2.88 | 3.09 |
| Operating overheads | (2.00) | (2.18) | (2.49) |
| Exceptional income | 0.00 | 0.00 | 0.10 |
| Reported EBITDA | 0.66 | 0.70 | 0.70 |
| Depreciation | (0.24) | (0.26) | (0.27) |
| Operating profit | 0.42 | 0.44 | 0.43 |
| Interest | (0.09) | (0.08) | (0.08) |
| Profit before tax | 0.33 | 0.36 | 0.35 |
| Tax | (0.08) | (0.09) | (0.09) |
| Net profit | 0.25 | 0.27 | 0.26 |
| Synthetic source records | SYN-BRA-Y1 | SYN-BRA-Y2 | SYN-BRA-Y3 |
| Line item | Year 1 | Year 2 | Year 3 |
|---|---|---|---|
| Cash | 0.50 | 0.48 | 0.24 |
| Trade receivables | 0.96 | 1.09 | 1.36 |
| Inventory | 0.32 | 0.36 | 0.42 |
| Property, plant & equipment | 1.84 | 1.87 | 1.91 |
| Total assets | 3.62 | 3.80 | 3.93 |
| Trade payables | 0.56 | 0.66 | 0.66 |
| Debt | 1.44 | 1.48 | 1.52 |
| Total liabilities | 2.00 | 2.14 | 2.18 |
| Equity | 1.62 | 1.66 | 1.75 |
| Liabilities & equity | 3.62 | 3.80 | 3.93 |
| Balance check | 0.00 | 0.00 | 0.00 |
| Synthetic source records | SYN-BRA-Y1 | SYN-BRA-Y2 | SYN-BRA-Y3 |
| Line item | Year 1 | Year 2 | Year 3 |
|---|---|---|---|
| Opening cash | 0.45 | 0.50 | 0.48 |
| Reported EBITDA | 0.66 | 0.70 | 0.70 |
| Cash interest | (0.09) | (0.08) | (0.08) |
| Cash tax | (0.08) | (0.09) | (0.09) |
| Increase in working capital | (0.02) | (0.07) | (0.33) |
| Operating cash flow | 0.47 | 0.46 | 0.20 |
| Capital expenditure | (0.28) | (0.29) | (0.31) |
| Cash after investment | 0.19 | 0.17 | (0.11) |
| Net borrowing / repayments | 0.04 | 0.04 | 0.04 |
| Distributions | (0.18) | (0.23) | (0.17) |
| Net cash movement | 0.05 | (0.02) | (0.24) |
| Closing cash | 0.50 | 0.48 | 0.24 |
| Cash reconciliation | 0.00 | 0.00 | 0.00 |
| Synthetic source records | SYN-BRA-Y1 | SYN-BRA-Y2 | SYN-BRA-Y3 |
Statement basis and reconciliation
Three illustrative full years; each comprises 365 days. No calendar dates, interim periods or forecasts are represented.
Group equals the two units. The fictional holding parent has no separate operating balances. There is no intercompany trading or debt, no goodwill and no acquisition accounting in the fixture.
The balance check is assets less liabilities and equity. The cash reconciliation compares closing cash in both statements. A zero difference shows that these invented schedules agree; it does not validate a real business.
Quality of earnings
Group · Year 3The valuation starts with recurring earnings. Two explicit assumptions reduce reported EBITDA; each has a source reference and a reason.
Reported to adjusted EBITDA
Year 3 running balance · €m
| Item | Amount | Sources |
|---|---|---|
| Reported Year 3 EBITDA | 3.30 | SYN-VEL-Y3SYN-BRA-Y3 |
| 1.Remove a one-off supplier rebate | (0.30) | SYN-QOE-01 |
| 2.Allow for recurring maintenance | (0.20) | SYN-QOE-02 |
| Adjusted Year 3 EBITDA | 2.80 | SYN-VEL-Y3SYN-BRA-Y3SYN-QOE-01SYN-QOE-02 |
Adjustment 1: Remove a one-off supplier rebate
Cash was received, but the rebate is not expected to repeat.
Adjustment 2: Allow for recurring maintenance
The invented base case includes a recurring cost missing from the reported run rate.
Opening to closing cash
Year 3 running balance · €m
| Item | Amount | Sources |
|---|---|---|
| Opening Year 3 cash | 1.05 | SYN-VEL-Y2SYN-BRA-Y2 |
| 1.Reported EBITDA | 3.30 | SYN-VEL-Y3SYN-BRA-Y3 |
| 2.Interest paid | (0.20) | SYN-VEL-Y3SYN-BRA-Y3 |
| 3.Tax paid | (0.60) | SYN-VEL-Y3SYN-BRA-Y3 |
| 4.Increase in working capital | (0.64) | SYN-VEL-Y3SYN-BRA-Y3 |
| 5.Capital expenditure | (0.80) | SYN-VEL-Y3SYN-BRA-Y3 |
| 6.Net new borrowing | 0.10 | SYN-VEL-Y3SYN-BRA-Y3 |
| 7.Distributions to owners | (1.31) | SYN-VEL-Y3SYN-BRA-Y3 |
| Closing Year 3 cash | 0.90 | SYN-VEL-Y2SYN-BRA-Y2SYN-VEL-Y3SYN-BRA-Y3 |
The full cash roll-forward includes operating cash, investment, borrowing and distributions. Cash after investment is €1.06m before financing and distributions.
Working capital
Collection, stock & paymentGrowth absorbs cash when customer balances and stock rise faster than supplier credit. The ageing analysis identifies the balances that need the closest review.
Linden Group Holdings
Year 3 closing balances, grouped by days past contractual due date. Invented trade balances exclude VAT, credit balances and impairment allowances.
| Measure | Year 1 | Year 2 | Year 3 |
|---|---|---|---|
| Receivables · €m | 2.40 | 2.70 | 3.20 |
| Inventory · €m | 0.80 | 0.90 | 1.05 |
| Payables · €m | (1.40) | (1.60) | (1.61) |
| Operating working capital · €m | 1.80 | 2.00 | 2.64 |
| Receivable days · DSO | 48.7d | 49.3d | 53.1d |
| Inventory days · DIO | 27.0d | 27.4d | 29.0d |
| Payable days · DPO | 47.3d | 48.7d | 44.5d |
| Cash conversion cycle | 28.4d | 28.0d | 37.6d |
Receivables ageing · Year 3
| Age | €m | Share |
|---|---|---|
| Not yet due | 1.53 | 47.8% |
| 1 to 30 days overdue | 0.68 | 21.3% |
| 31 to 60 days overdue | 0.46 | 14.4% |
| 61 to 90 days overdue | 0.30 | 9.4% |
| Over 90 days overdue | 0.23 | 7.2% |
| Total | 3.20 | 100.0% |
Over 60 days: €0.53m. SYN-VEL-AR-Y3 SYN-BRA-AR-Y3 SYN-VEL-AP-Y3 SYN-BRA-AP-Y3
Payables ageing · Year 3
| Age | €m | Share |
|---|---|---|
| Not yet due | 0.80 | 49.7% |
| 1 to 30 days overdue | 0.37 | 23.0% |
| 31 to 60 days overdue | 0.23 | 14.3% |
| 61 to 90 days overdue | 0.13 | 8.1% |
| Over 90 days overdue | 0.08 | 5.0% |
| Total | 1.61 | 100.0% |
Over 60 days: €0.21m. SYN-VEL-AR-Y3 SYN-BRA-AR-Y3 SYN-VEL-AP-Y3 SYN-BRA-AP-Y3
Vellum Serviceworks
Year 3 closing balances, grouped by days past contractual due date. Invented trade balances exclude VAT, credit balances and impairment allowances.
| Measure | Year 1 | Year 2 | Year 3 |
|---|---|---|---|
| Receivables · €m | 1.44 | 1.61 | 1.84 |
| Inventory · €m | 0.48 | 0.54 | 0.63 |
| Payables · €m | (0.84) | (0.94) | (0.95) |
| Operating working capital · €m | 1.08 | 1.21 | 1.52 |
| Receivable days · DSO | 48.7d | 48.2d | 49.4d |
| Inventory days · DIO | 28.0d | 27.8d | 29.1d |
| Payable days · DPO | 49.0d | 48.5d | 43.9d |
| Cash conversion cycle | 27.7d | 27.5d | 34.6d |
Receivables ageing · Year 3
| Age | €m | Share |
|---|---|---|
| Not yet due | 1.05 | 57.1% |
| 1 to 30 days overdue | 0.38 | 20.7% |
| 31 to 60 days overdue | 0.22 | 12.0% |
| 61 to 90 days overdue | 0.12 | 6.5% |
| Over 90 days overdue | 0.07 | 3.8% |
| Total | 1.84 | 100.0% |
Over 60 days: €0.19m. SYN-VEL-AR-Y3 SYN-VEL-AP-Y3
Payables ageing · Year 3
| Age | €m | Share |
|---|---|---|
| Not yet due | 0.55 | 57.9% |
| 1 to 30 days overdue | 0.20 | 21.1% |
| 31 to 60 days overdue | 0.11 | 11.6% |
| 61 to 90 days overdue | 0.06 | 6.3% |
| Over 90 days overdue | 0.03 | 3.2% |
| Total | 0.95 | 100.0% |
Over 60 days: €0.09m. SYN-VEL-AR-Y3 SYN-VEL-AP-Y3
Bracken Careworks
Year 3 closing balances, grouped by days past contractual due date. Invented trade balances exclude VAT, credit balances and impairment allowances.
| Measure | Year 1 | Year 2 | Year 3 |
|---|---|---|---|
| Receivables · €m | 0.96 | 1.09 | 1.36 |
| Inventory · €m | 0.32 | 0.36 | 0.42 |
| Payables · €m | (0.56) | (0.66) | (0.66) |
| Operating working capital · €m | 0.72 | 0.79 | 1.12 |
| Receivable days · DSO | 48.7d | 51.0d | 59.1d |
| Inventory days · DIO | 25.7d | 26.7d | 28.9d |
| Payable days · DPO | 45.0d | 49.0d | 45.4d |
| Cash conversion cycle | 29.4d | 28.8d | 42.6d |
Receivables ageing · Year 3
| Age | €m | Share |
|---|---|---|
| Not yet due | 0.48 | 35.3% |
| 1 to 30 days overdue | 0.30 | 22.1% |
| 31 to 60 days overdue | 0.24 | 17.6% |
| 61 to 90 days overdue | 0.18 | 13.2% |
| Over 90 days overdue | 0.16 | 11.8% |
| Total | 1.36 | 100.0% |
Over 60 days: €0.34m. SYN-BRA-AR-Y3 SYN-BRA-AP-Y3
Payables ageing · Year 3
| Age | €m | Share |
|---|---|---|
| Not yet due | 0.25 | 37.9% |
| 1 to 30 days overdue | 0.17 | 25.8% |
| 31 to 60 days overdue | 0.12 | 18.2% |
| 61 to 90 days overdue | 0.07 | 10.6% |
| Over 90 days overdue | 0.05 | 7.6% |
| Total | 0.66 | 100.0% |
Over 60 days: €0.12m. SYN-BRA-AR-Y3 SYN-BRA-AP-Y3
Year 3 closing balances, grouped by days past contractual due date. Invented trade balances exclude VAT, credit balances and impairment allowances. The cash conversion cycle is receivable days plus inventory days less payable days.
Returns & ratios
DuPont analysisSeparate operating profitability, use of assets and financial leverage. A higher return on equity can come from any of the three.
Linden Group Holdings
Year 3 return on equity
| Measure | Year 1 | Year 2 | Year 3 |
|---|---|---|---|
| Net profit margin | 6.3% | 7.4% | 8.2% |
| Average assets · €m | 8.73 | 9.13 | 9.65 |
| Average equity · €m | 3.85 | 3.97 | 4.30 |
| Asset turnover | 2.06× | 2.19× | 2.28× |
| Equity multiplier | 2.27× | 2.30× | 2.25× |
| Return on assets | 13.1% | 16.2% | 18.7% |
| Return on equity | 29.6% | 37.2% | 41.9% |
| Operating cash conversion | 65.8% | 68.9% | 56.4% |
| Net debt / EBITDA | 1.07× | 0.95× | 0.88× |
| Current ratio | 3.07× | 2.91× | 3.20× |
Vellum Serviceworks
Year 3 return on equity
| Measure | Year 1 | Year 2 | Year 3 |
|---|---|---|---|
| Net profit margin | 8.2% | 9.9% | 11.3% |
| Average assets · €m | 5.19 | 5.42 | 5.79 |
| Average equity · €m | 2.26 | 2.34 | 2.59 |
| Asset turnover | 2.08× | 2.25× | 2.35× |
| Equity multiplier | 2.29× | 2.32× | 2.23× |
| Return on assets | 17.1% | 22.3% | 26.6% |
| Return on equity | 39.3% | 51.8% | 59.5% |
| Operating cash conversion | 63.7% | 70.0% | 63.8% |
| Net debt / EBITDA | 0.93× | 0.79× | 0.62× |
| Current ratio | 3.00× | 2.89× | 3.29× |
Bracken Careworks
Year 3 return on equity
| Measure | Year 1 | Year 2 | Year 3 |
|---|---|---|---|
| Net profit margin | 3.5% | 3.5% | 3.1% |
| Average assets · €m | 3.54 | 3.71 | 3.87 |
| Average equity · €m | 1.59 | 1.64 | 1.71 |
| Asset turnover | 2.04× | 2.10× | 2.17× |
| Equity multiplier | 2.23× | 2.26× | 2.27× |
| Return on assets | 7.1% | 7.3% | 6.7% |
| Return on equity | 15.8% | 16.5% | 15.2% |
| Operating cash conversion | 71.2% | 65.7% | 28.6% |
| Net debt / EBITDA | 1.42× | 1.43× | 1.83× |
| Current ratio | 3.18× | 2.92× | 3.06× |
Working-capital days use closing trade balances and 365 days; direct costs proxy cost of sales for payable/inventory days. Returns use arithmetic averages of opening and closing total assets/equity. Current liabilities comprise trade payables; all debt is assumed non-current. Cash conversion is cash after interest, tax and working-capital movement divided by reported EBITDA.
Valuation laboratory
Group · Year 3 earningsMove from business value to the amount payable for the shares. Change an assumption to see its effect; the three cases provide reference points.
Base case
Illustrative equity value €10.95m
- Adjusted EBITDA × multiple
- 2.80 × 5.0×
- Enterprise value
- 14.00
- Less debt
- (3.80)
- Add cash
- 0.90
- Working-capital adjustment
- (0.15)
- Equity value · €m
- 10.95
| Assumption / result | Base | Downside | Upside |
|---|---|---|---|
| Adjusted EBITDA | 2.80 | 2.40 | 3.20 |
| Assumed multiple | 5.0× | 4.5× | 5.5× |
| Enterprise value | 14.00 | 10.80 | 17.60 |
| Closing working capital | 2.64 | 2.49 | 2.79 |
| Working-capital adjustment | (0.15) | (0.30) | 0.00 |
| Equity value | 10.95 | 7.60 | 14.70 |
Base
Repeat trading without the one-off rebate, with recurring maintenance fully provided.
Downside
A lost service contract reduces earnings. A lower multiple and weaker working capital reduce the price further.
Upside
New contracted work lifts earnings. The higher multiple assumes stronger revenue visibility.
Equity value sensitivity
Illustrative equity value at varying adjusted EBITDA and enterprise-value multiples. Debt, cash and closing working capital are held at the base case; scenario cards separately vary closing working capital. Select a cell to apply its earnings and multiple, with base-case closing working capital.
| EBITDA / multiple | 4.0× | 4.5× | 5.0× | 5.5× | 6.0× |
|---|---|---|---|---|---|
| €2.40m | 6.55 | 7.75 | 8.95 | 10.15 | 11.35 |
| €2.60m | 7.35 | 8.65 | 9.95 | 11.25 | 12.55 |
| €2.80m | 8.15 | 9.55 | 10.95 | 12.35 | 13.75 |
| €3.00m | 8.95 | 10.45 | 11.95 | 13.45 | 14.95 |
| €3.20m | 9.75 | 11.35 | 12.95 | 14.55 | 16.15 |
An assumed multiple is not market evidence. Fees, tax effects, deferred consideration and additional debt-like items are outside this example. SYN-VEL-Y3 SYN-BRA-Y3 SYN-QOE-01 SYN-QOE-02 SYN-VAL-01 SYN-WC-01
Findings & decision
6 traceable findingsProceed to further diligence, subject to the evidence below. Modelled adjustments explain the example; open items remain conditions to resolve before agreeing a final price.
Reported growth includes a non-recurring rebate
Modelled adjustmentReported EBITDA reaches EUR 3.30m, including EUR 0.30m of one-off supplier income.
- Decision implication
- Removing the rebate and recurring maintenance estimate reduces EBITDA to EUR 2.80m. This is an illustrative earnings case, not an accounting restatement.
- Next evidence required
- In real diligence, inspect the agreement, posting and receipt; establish whether comparable rebates recur.
Working capital absorbs part of earnings growth
Open diligence itemWorking capital increases by EUR 0.64m. Reported EBITDA converts to EUR 1.06m after interest, tax and investment.
- Decision implication
- Earnings are not the same as distributable cash. Closing trade-balance ratios do not reveal seasonal peaks or receipt timing.
- Next evidence required
- Inspect monthly working capital, cash forecasts, subsequent receipts and supplier payment terms.
Older receivables need a separate recovery assessment
Open diligence itemEUR 0.53m, or 16.6%, of receivables is more than 60 days overdue.
- Decision implication
- Age alone does not establish a loss. No impairment or price deduction is assumed for this open item; displayed valuation may not capture a recovery shortfall.
- Next evidence required
- Obtain invoice-level ageing, disputes, credit notes and subsequent cash evidence before quantifying a loss or negotiating an adjustment.
Bracken contributes revenue with limited cash generation
Open diligence itemBracken provides 38.2% of group revenue at an EBITDA margin of 8.3%. Its cash after investment is EUR -0.11m.
- Decision implication
- The stronger unit masks a weaker cash result in the other unit. A group-level margin alone would miss that concentration.
- Next evidence required
- Review repair pricing, job profitability, staffing capacity and collections before assuming group-wide margin improvement.
Working-capital target changes consideration directly
Illustrative assumptionBase closing working capital of EUR 2.64m is below the assumed EUR 2.79m target by EUR 0.15m.
- Decision implication
- The shortfall reduces base equity value by the same amount. The benchmark is assumed rather than validated against seasonality.
- Next evidence required
- Agree definitions, the monthly reference period, exclusions and completion-account process before setting a real target.
Distributions explain the falling cash balance
Open diligence itemEUR 1.31m of distributions exceed cash after investment plus EUR 0.10m of borrowing; cash falls from EUR 1.05m to EUR 0.90m.
- Decision implication
- Positive EBITDA alone does not support the distribution rate. This model does not test legal reserves, covenants or minimum operating liquidity.
- Next evidence required
- Inspect distribution approvals, borrowing terms and the cash forecast before assessing sustainable distributions.
Carry the conditions into the price.
Confirm sustainable earnings, establish the cash and working-capital requirement, and settle debt-like items before a final offer. The illustrative base case remains €10.95m of equity value, subject to its stated assumptions.
Source ledger
16 synthetic recordsSYN identifiers refer only to invented fixture inputs in this module. They are navigation and arithmetic traceability aids, not real documents, external evidence or audit certification. Links elsewhere in the report land on the relevant record below.
SYN-VEL-OPENVellum Serviceworks: opening trial balanceSynthetic opening ledger
Explicit invented opening balances seed cash, fixed assets, debt, equity and working capital. Assets equal liabilities plus equity before the first year rolls forward.
- Period
- Opening Year 1
- Status
- Invented fixture input
- Coverage
- cash; receivables; inventory; payables; propertyPlantEquipment; debt; equity
Original invented input; no predecessor record.
Linked findings: Statement and analytical support; no separate finding.
SYN-VEL-Y1Vellum Serviceworks: Year 1 ledgerSynthetic statement ledger
Invented annual revenue, costs, closing trade balances and cash movements. Cash, fixed assets, borrowing and equity roll forward from the preceding closing balance. Tax expense equals cash paid.
- Period
- Year 1
- Status
- Invented fixture input
- Coverage
- revenue; directCosts; overheads; exceptionalIncome; receivables; inventory; payables; depreciation; interest; tax; capitalExpenditure; debtMovement; distributions
Input records: SYN-VEL-OPEN
Linked findings: Statement and analytical support; no separate finding.
SYN-VEL-Y2Vellum Serviceworks: Year 2 ledgerSynthetic statement ledger
Invented annual revenue, costs, closing trade balances and cash movements. Cash, fixed assets, borrowing and equity roll forward from the preceding closing balance. Tax expense equals cash paid.
- Period
- Year 2
- Status
- Invented fixture input
- Coverage
- revenue; directCosts; overheads; exceptionalIncome; receivables; inventory; payables; depreciation; interest; tax; capitalExpenditure; debtMovement; distributions
Input records: SYN-VEL-Y1
Linked findings: F-02: Working capital absorbs part of earnings growthF-06: Distributions explain the falling cash balance
SYN-VEL-Y3Vellum Serviceworks: Year 3 ledgerSynthetic statement ledger
Invented annual revenue, costs, closing trade balances and cash movements. Cash, fixed assets, borrowing and equity roll forward from the preceding closing balance. Tax expense equals cash paid.
- Period
- Year 3
- Status
- Invented fixture input
- Coverage
- revenue; directCosts; overheads; exceptionalIncome; receivables; inventory; payables; depreciation; interest; tax; capitalExpenditure; debtMovement; distributions
Input records: SYN-VEL-Y2
Linked findings: F-01: Reported growth includes a non-recurring rebateF-02: Working capital absorbs part of earnings growthF-04: Bracken contributes revenue with limited cash generationF-05: Working-capital target changes consideration directlyF-06: Distributions explain the falling cash balance
SYN-VEL-AR-Y3Vellum Serviceworks: Year 3 receivables ageingSynthetic ageing schedule
Five invented overdue buckets reconcile to the closing statement control total. Buckets use contractual due dates. No invoice-level or subsequent-settlement evidence is claimed.
- Period
- Year 3 closing
- Status
- Invented fixture input
- Coverage
- Not yet due; 1 to 30 days overdue; 31 to 60 days overdue; 61 to 90 days overdue; Over 90 days overdue
Input records: SYN-VEL-Y3
Linked findings: F-03: Older receivables need a separate recovery assessment
SYN-VEL-AP-Y3Vellum Serviceworks: Year 3 payables ageingSynthetic ageing schedule
Five invented overdue buckets reconcile to the closing statement control total. Buckets use contractual due dates. No invoice-level or subsequent-settlement evidence is claimed.
- Period
- Year 3 closing
- Status
- Invented fixture input
- Coverage
- Not yet due; 1 to 30 days overdue; 31 to 60 days overdue; 61 to 90 days overdue; Over 90 days overdue
Input records: SYN-VEL-Y3
Linked findings: Statement and analytical support; no separate finding.
SYN-BRA-OPENBracken Careworks: opening trial balanceSynthetic opening ledger
Explicit invented opening balances seed cash, fixed assets, debt, equity and working capital. Assets equal liabilities plus equity before the first year rolls forward.
- Period
- Opening Year 1
- Status
- Invented fixture input
- Coverage
- cash; receivables; inventory; payables; propertyPlantEquipment; debt; equity
Original invented input; no predecessor record.
Linked findings: Statement and analytical support; no separate finding.
SYN-BRA-Y1Bracken Careworks: Year 1 ledgerSynthetic statement ledger
Invented annual revenue, costs, closing trade balances and cash movements. Cash, fixed assets, borrowing and equity roll forward from the preceding closing balance. Tax expense equals cash paid.
- Period
- Year 1
- Status
- Invented fixture input
- Coverage
- revenue; directCosts; overheads; exceptionalIncome; receivables; inventory; payables; depreciation; interest; tax; capitalExpenditure; debtMovement; distributions
Input records: SYN-BRA-OPEN
Linked findings: Statement and analytical support; no separate finding.
SYN-BRA-Y2Bracken Careworks: Year 2 ledgerSynthetic statement ledger
Invented annual revenue, costs, closing trade balances and cash movements. Cash, fixed assets, borrowing and equity roll forward from the preceding closing balance. Tax expense equals cash paid.
- Period
- Year 2
- Status
- Invented fixture input
- Coverage
- revenue; directCosts; overheads; exceptionalIncome; receivables; inventory; payables; depreciation; interest; tax; capitalExpenditure; debtMovement; distributions
Input records: SYN-BRA-Y1
Linked findings: F-02: Working capital absorbs part of earnings growthF-06: Distributions explain the falling cash balance
SYN-BRA-Y3Bracken Careworks: Year 3 ledgerSynthetic statement ledger
Invented annual revenue, costs, closing trade balances and cash movements. Cash, fixed assets, borrowing and equity roll forward from the preceding closing balance. Tax expense equals cash paid.
- Period
- Year 3
- Status
- Invented fixture input
- Coverage
- revenue; directCosts; overheads; exceptionalIncome; receivables; inventory; payables; depreciation; interest; tax; capitalExpenditure; debtMovement; distributions
Input records: SYN-BRA-Y2
Linked findings: F-01: Reported growth includes a non-recurring rebateF-02: Working capital absorbs part of earnings growthF-04: Bracken contributes revenue with limited cash generationF-05: Working-capital target changes consideration directlyF-06: Distributions explain the falling cash balance
SYN-BRA-AR-Y3Bracken Careworks: Year 3 receivables ageingSynthetic ageing schedule
Five invented overdue buckets reconcile to the closing statement control total. Buckets use contractual due dates. No invoice-level or subsequent-settlement evidence is claimed.
- Period
- Year 3 closing
- Status
- Invented fixture input
- Coverage
- Not yet due; 1 to 30 days overdue; 31 to 60 days overdue; 61 to 90 days overdue; Over 90 days overdue
Input records: SYN-BRA-Y3
Linked findings: F-03: Older receivables need a separate recovery assessmentF-04: Bracken contributes revenue with limited cash generation
SYN-BRA-AP-Y3Bracken Careworks: Year 3 payables ageingSynthetic ageing schedule
Five invented overdue buckets reconcile to the closing statement control total. Buckets use contractual due dates. No invoice-level or subsequent-settlement evidence is claimed.
- Period
- Year 3 closing
- Status
- Invented fixture input
- Coverage
- Not yet due; 1 to 30 days overdue; 31 to 60 days overdue; 61 to 90 days overdue; Over 90 days overdue
Input records: SYN-BRA-Y3
Linked findings: Statement and analytical support; no separate finding.
SYN-QOE-01One-off rebate assumptionSynthetic earnings-adjustment note
The invented supplier rebate is recorded as exceptional income and received in cash. Remove the entire reported rebate from repeatable earnings, allocated to the unit that recorded it. Historical cash remains unchanged.
- Period
- Year 3
- Status
- Invented fixture input
- Coverage
- ADJ-01; exceptional income; reported-to-adjusted EBITDA
Input records: SYN-VEL-Y3SYN-BRA-Y3
Linked findings: F-01: Reported growth includes a non-recurring rebate
SYN-QOE-02Recurring maintenance assumptionSynthetic earnings-adjustment note
Assume additional recurring maintenance of EUR 0.12m for Vellum and EUR 0.08m for Bracken. This estimates the recurring cost of future operations; it does not represent a historical unpaid invoice.
- Period
- Year 3 run rate
- Status
- Invented fixture input
- Coverage
- ADJ-02; maintenance allocation; reported-to-adjusted EBITDA
Original invented input; no predecessor record.
Linked findings: F-01: Reported growth includes a non-recurring rebate
SYN-WC-01Illustrative working-capital mechanismSynthetic transaction assumption
The EUR 2.79m target is an invented negotiated benchmark. No monthly history is modelled to substantiate it. Working capital is trade receivables plus inventory less trade payables. Cash and borrowing are excluded to avoid duplication in the equity bridge.
- Period
- Illustrative completion
- Status
- Invented fixture input
- Coverage
- targetWorkingCapital; scenario closing working capital; equity adjustment
Input records: SYN-VEL-Y3SYN-BRA-Y3
Linked findings: F-05: Working-capital target changes consideration directly
SYN-VAL-01Illustrative pricing assumptionsSynthetic valuation assumption
Scenario earnings changes and enterprise-value multiples are invented and not benchmarked to market transactions. Debt and cash use Year 3 statement balances. No fee, lease or other debt-like item is modelled.
- Period
- Year 3 earnings basis
- Status
- Invented fixture input
- Coverage
- scenario earnings changes; scenario multiples; sensitivity multiples; enterprise-to-equity bridge
Input records: SYN-VEL-Y3SYN-BRA-Y3SYN-QOE-01SYN-QOE-02SYN-WC-01
Linked findings: F-05: Working-capital target changes consideration directly
Basis, boundaries and limitations
Fictional demonstration. The business, figures, assumptions and findings are invented. They do not describe a client, transaction or investment recommendation.
- Tax expense equals cash tax; there are no deferred taxes or tax accruals. Depreciation is the only non-cash profit charge.
- Debt is fully drawn borrowing at face value; there are no leases, debt-like items, transaction fees or trapped cash. No solvency or distributable-reserves opinion is implied by the modelled distributions.
- Valuation multiples, recurring-cost estimates and the working-capital target are invented assumptions, without market benchmarking or external diligence.
- Earnings adjustments do not rewrite historical statements or cash. A separate receivables diligence item is unquantified and is not included in the price bridge.