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Exhibit 12 – Sample Search Fund Financial Models
STRUCTURE A - Operating Case: Optimistic Case
Year 0
Revenues
Revenue Growth
EBITDA Margin
EBITDA
Less: Depreciation & Amortization
Less: Interest Expense
Earnings Before Taxes
Taxes @ 40%
Net Income
Closing
$15,000
Year 1
$17,250
15.0%
Year 2
$19,838
15.0%
Year 3
$22,813
15.0%
Year 4
$26,235
15.0%
Year 5
$30,170
15.0%
20.0%
$3,000
20.5%
$3,536
21.0%
$4,166
21.5%
$4,905
22.0%
$5,772
22.5%
$6,788
($500)
($575)
($192)
$2,770
($661)
($82)
$3,423
($760)
($10)
$4,134
($875)
$ -$4,897
($1,006)
$ -$5,783
($1,108)
$1,662
($1,369)
$2,054
($1,654)
$2,481
($1,959)
$2,938
($2,313)
$3,470
$3,536
($192)
($1,108)
($450)
($575)
($300)
$912
$912
$4,166
($82)
($1,369)
($518)
($661)
($300)
$1,236
$2,148
$4,905
($10)
($1,654)
($595)
($760)
($252)
$1,634
$3,782
$5,772
$ -($1,959)
($684)
($875)
$ -$2,254
$6,036
$6,788
$ -($2,313)
($787)
($1,006)
$ -$2,683
$8,718
40.0%
Free Cash Flow
EBITDA
Less: Cash Interst Expense
Less: Cash Taxes
Less: Changes in NWC @ 20% of Rev Growth
Less: CapEx
Less: Mandatory Debt Paydown
Free Cash Flow for Voluntary Debt Paydown
Cumulative FCF
Capital Structure
Cash
$ --
$ --
$ --
$ --
$ --
$ --
Senior Debt
Seller Financing
Total Debt
3,000
4,500
$7,500
1,788
4,950
$6,738
252
5,445
$5,697
4,356
$4,356
2,538
$2,538
109
$109
6,450
$13,950
7,095
$13,833
$1,095
7,805
$13,501
$1,205
8,585
$12,941
$1,325
9,443
$11,981
$1,294
10,388
$10,497
$1,198
Investor Capital - Redeemable Preferred Stock
Investor Capital - Non-Redeemable Preferred Stock
Total Capitalization (excl. Common Stock)
Seller Financing + Investor Capital Accretion
Exit Valuation
EBITDA
Valuation Multiple
TEV
$6,788
5.0x
$33,942
Less: Net Total Debt
Total Equity Value
$109
$33,833
Less: Value to Redeemable Pfd Stock
Less: Value to Non-Redeemable Pfd Stock
Value to Common Equity
$ -$10,388
$23,445
1
STRUCTURE A - Operating Case: Base Case
2
STRUCTURE A - Operating Case: Pessimistic Case
Year 0
Revenues
Revenue Growth
EBITDA Margin
EBITDA
Less: Depreciation & Amortization
Less: Interest Expense
Earnings Before Taxes
Taxes @ 40%
Net Income
Closing
$15,000
Year 1
$15,000
--
Year 2
$15,000
--
Year 3
$15,000
--
Year 4
$15,000
--
Year 5
$15,000
--
20.0%
$3,000
20.0%
$3,000
20.0%
$3,000
20.0%
$3,000
20.0%
$3,000
20.0%
$3,000
($500)
($500)
($184)
$2,316
($500)
($71)
$2,429
($500)
($6)
$2,494
($500)
$ -$2,500
($500)
$ -$2,500
($926)
$1,389
($972)
$1,458
($998)
$1,496
($1,000)
$1,500
($1,000)
$1,500
$3,000
($184)
($926)
$ -($500)
($300)
$1,089
$1,089
$3,000
($71)
($972)
$ -($500)
($300)
$1,158
$2,247
$3,000
($6)
($998)
$ -($500)
($153)
$1,343
$3,590
$3,000
$ -($1,000)
$ -($500)
$ -$1,500
$5,090
$3,000
$ -($1,000)
$ -($500)
$ -$1,500
$6,590
40.0%
Free Cash Flow
EBITDA
Less: Cash Interst Expense
Less: Cash Taxes
Less: Changes in NWC @ 20% of Rev Growth
Less: CapEx
Less: Mandatory Debt Paydown
Free Cash Flow for Voluntary Debt Paydown
Cumulative FCF
Capital Structure
Cash
$ --
$ --
$ --
$ --
$ --
$ --
Senior Debt
Seller Financing
Total Debt
3,000
4,500
$7,500
1,611
4,950
$6,561
153
5,445
$5,598
4,646
$4,646
3,611
$3,611
2,472
$2,472
6,450
$13,950
7,095
$13,656
$1,095
7,805
$13,402
$1,205
8,585
$13,231
$1,325
9,443
$13,054
$1,323
10,388
$12,860
$1,305
Investor Capital - Redeemable Preferred Stock
Investor Capital - Non-Redeemable Preferred Stock
Total Capitalization (excl. Common Stock)
Seller Financing + Investor Capital Accretion
Exit Valuation
EBITDA
Valuation Multiple
TEV
$3,000
4.0x
$12,000
Less: Net Total Debt
Total Equity Value
$2,472
$9,528
Less: Value to Redeemable Pfd Stock
Less: Value to Non-Redeemable Pfd Stock
Value to Common Equity
$ -$9,528
$ --
3
STRUCTURE B - Operating Case: Optimistic Case
Year 0
Revenues
Revenue Growth
EBITDA Margin
EBITDA
Less: Depreciation & Amortization
Less: Interest Expense
Earnings Before Taxes
Taxes @ 40%
Net Income
Closing
$15,000
Year 1
$17,250
15.0%
Year 2
$19,838
15.0%
Year 3
$22,813
15.0%
Year 4
$26,235
15.0%
Year 5
$30,170
15.0%
20.0%
$3,000
20.5%
$3,536
21.0%
$4,166
21.5%
$4,905
22.0%
$5,772
22.5%
$6,788
($500)
($575)
($192)
$2,770
($661)
($82)
$3,423
($760)
($10)
$4,134
($875)
$ -$4,897
($1,006)
$ -$5,783
($1,108)
$1,662
($1,369)
$2,054
($1,654)
$2,481
($1,959)
$2,938
($2,313)
$3,470
$3,536
($192)
($1,108)
($450)
($575)
($300)
$912
$912
$4,166
($82)
($1,369)
($518)
($661)
($300)
$1,236
$2,148
$4,905
($10)
($1,654)
($595)
($760)
($252)
$1,634
$3,782
$5,772
$ -($1,959)
($684)
($875)
$ -$2,254
$6,036
$6,788
$ -($2,313)
($787)
($1,006)
$ -$2,683
$8,718
40.0%
Free Cash Flow
EBITDA
Less: Cash Interst Expense
Less: Cash Taxes
Less: Changes in NWC @ 20% of Rev Growth
Less: CapEx
Less: Mandatory Debt Paydown
Free Cash Flow for Voluntary Debt Paydown
Cumulative FCF
Capital Structure
Cash
$ --
$ --
$ --
$ --
$ --
$ --
Senior Debt
Seller Financing
Total Debt
3,000
4,500
$7,500
1,788
4,950
$6,738
3,773
3,225
$13,736
$998
252
5,445
$5,697
4,415
3,225
$13,337
$1,136
5,990
$5,990
6,588
$6,588
6,762
$6,762
3,532
3,225
$12,746
$1,295
1,878
3,225
$11,691
$1,199
3,225
$9,987
$978
Investor Capital - Subordinated Debt
Investor Capital - Non-Redeemable Preferred Stock
Total Capitalization (excl. Common Stock)
Seller Financing + Investor Capital Accretion
3,225
3,225
$13,950
Exit Valuation
EBITDA
Valuation Multiple
TEV
$6,788
5.0x
$33,942
Less: Net Total Debt
Total Equity Value
$6,762
$27,180
Less: Value to Subordinated Debt
Less: Value to Non-Redeemable Pfd Stock
Value to Common Equity
$ -$3,225
$23,955
4
STRUCTURE B - Operating Case: Base Case
Year 0
Revenues
Revenue Growth
EBITDA Margin
EBITDA
Less: Depreciation & Amortization
Less: Interest Expense
Earnings Before Taxes
Taxes @ 40%
Net Income
Closing
$15,000
Year 1
$15,750
5.0%
Year 2
$16,538
5.0%
Year 3
$17,364
5.0%
Year 4
$18,233
5.0%
Year 5
$19,144
5.0%
20.0%
$3,000
20.3%
$3,189
20.5%
$3,390
20.8%
$3,603
21.0%
$3,829
21.3%
$4,068
($500)
($525)
($187)
$2,478
($551)
($73)
$2,766
($579)
($6)
$3,018
($608)
$ -$3,221
($638)
$ -$3,430
($991)
$1,487
($1,106)
$1,660
($1,207)
$1,811
($1,288)
$1,933
($1,372)
$2,058
$3,189
($187)
($991)
($150)
($525)
($300)
$1,037
$1,037
$3,390
($73)
($1,106)
($158)
($551)
($300)
$1,202
$2,239
$3,603
($6)
($1,207)
($165)
($579)
($161)
$1,484
$3,723
$3,829
$ -($1,288)
($174)
($608)
$ -$1,759
$5,482
$4,068
$ -($1,372)
($182)
($638)
$ -$1,876
$7,358
40.0%
Free Cash Flow
EBITDA
Less: Cash Interst Expense
Less: Cash Taxes
Less: Changes in NWC @ 20% of Rev Growth
Less: CapEx
Less: Mandatory Debt Paydown
Free Cash Flow for Voluntary Debt Paydown
Cumulative FCF
Capital Structure
Cash
$ --
$ --
$ --
$ --
$ --
$ --
Senior Debt
Seller Financing
Total Debt
3,000
4,500
$7,500
1,663
4,950
$6,613
3,773
3,225
$13,612
$998
161
5,445
$5,606
4,415
3,225
$13,246
$1,136
5,990
$5,990
6,588
$6,588
7,247
$7,247
3,681
3,225
$12,896
$1,295
2,548
3,225
$12,361
$1,225
1,105
3,225
$11,578
$1,092
Investor Capital - Subordinated Debt
Investor Capital - Non-Redeemable Preferred Stock
Total Capitalization (excl. Common Stock)
Seller Financing + Investor Capital Accretion
3,225
3,225
$13,950
Exit Valuation
EBITDA
Valuation Multiple
TEV
$4,068
4.5x
$18,307
Less: Net Total Debt
Total Equity Value
$7,247
$11,059
Less: Value to Subordinated Debt
Less: Value to Non-Redeemable Pfd Stock
Value to Common Equity
$1,105
$3,225
$6,729
5
STRUCTURE B - Operating Case: Pessimistic Case
Year 0
Revenues
Revenue Growth
EBITDA Margin
EBITDA
Less: Depreciation & Amortization
Less: Interest Expense
Earnings Before Taxes
Taxes @ 40%
Net Income
Closing
$15,000
Year 1
$15,000
--
Year 2
$15,000
--
Year 3
$15,000
--
Year 4
$15,000
--
Year 5
$15,000
--
20.0%
$3,000
20.0%
$3,000
20.0%
$3,000
20.0%
$3,000
20.0%
$3,000
20.0%
$3,000
($500)
($500)
($184)
$2,316
($500)
($71)
$2,429
($500)
($6)
$2,494
($500)
$ -$2,500
($500)
$ -$2,500
($926)
$1,389
($972)
$1,458
($998)
$1,496
($1,000)
$1,500
($1,000)
$1,500
$3,000
($184)
($926)
$ -($500)
($300)
$1,089
$1,089
$3,000
($71)
($972)
$ -($500)
($300)
$1,158
$2,247
$3,000
($6)
($998)
$ -($500)
($153)
$1,343
$3,590
$3,000
$ -($1,000)
$ -($500)
$ -$1,500
$5,090
$3,000
$ -($1,000)
$ -($500)
$ -$1,500
$6,590
40.0%
Free Cash Flow
EBITDA
Less: Cash Interst Expense
Less: Cash Taxes
Less: Changes in NWC @ 20% of Rev Growth
Less: CapEx
Less: Mandatory Debt Paydown
Free Cash Flow for Voluntary Debt Paydown
Cumulative FCF
Capital Structure
Cash
$ --
$ --
$ --
$ --
$ --
$ --
Senior Debt
Seller Financing
Total Debt
3,000
4,500
$7,500
1,611
4,950
$6,561
3,773
3,225
$13,559
$998
153
5,445
$5,598
4,415
3,225
$13,238
$1,136
5,990
$5,990
6,588
$6,588
7,247
$7,247
3,822
3,225
$13,036
$1,295
2,972
3,225
$12,785
$1,249
1,977
3,225
$12,449
$1,164
Investor Capital - Subordinated Debt
Investor Capital - Non-Redeemable Preferred Stock
Total Capitalization (excl. Common Stock)
Seller Financing + Investor Capital Accretion
3,225
3,225
$13,950
Exit Valuation
EBITDA
Valuation Multiple
TEV
$3,000
4.0x
$12,000
Less: Net Total Debt
Total Equity Value
$7,247
$4,753
Less: Value to Subordinated Debt
Less: Value to Non-Redeemable Pfd Stock
Value to Common Equity
$1,977
$2,776
$ --
6
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