You should prepare the following:
1) (40 points, 5 points for following directions plus points as below) A memo (1 page) outlining the options available to Jim Covert and Signature Security in the standard one-page memo form; memo can be single-spaced or double-spaced, your choice; use 11 or 12 point type and 1 inch margins all around
a) Situation (10 points) half page discussion of the significant facts in the situation
b) Options (10 points) list of options, including continue to grow by acquisition, stop acquisitions and carry on, exit by selling to another company and return to USA, exit by an IPO and return to USA, or other options which you may develop
c) Recommendation (5 points)- which of the options should they pursue?
d) Justification (10 points) short summary of reasons why the recommended option is the best one (summary of more detailed discussion below)
2) (30 points) A brief (1 page or less) discussion of how you would determine the value of Signature Security, including a statement of the actual amount that you believe would be the most appropriate purchase and sale price for the company. This can be a Microsoft Word (of other word processor) document or an Excel (or other spreadsheet) file or a PDF document. You should take the following approach:
a) The case talks about an industry valuation standard based on RMR (recurring monthly revenue). Valuation is based upon a multiple of RMR. The standard level is 60-70times RMR for the USA, 25 times RMR for Australia (when Signature was first purchased), ranging up to 40-50 times RMR for a recent acquisition in Australia. Make a case for which multiple you would use (25, 40-50, or 60-70).
b) Calculate the value based upon the multiple you have decided to use in part a).
c) Now look at EBITDA, and using the value = EBITDA times a multiple, calculate the multiple of EBITDA that your valuation number represents.
d) Then make the case for using that multiple of EBITDA. Why is that multiple appropriate in this case?
3) (30 points) A more detailed (5-10 pages) analysis supporting your recommended decision. This should include some market information, some financial analysis, and whatever other information you relied upon to reach your decision. This may be in the from of a Microsoft Word (or other word processor) file, an Excel (or other spreadsheet) file, or a combination of both.
