In 2001, John and Mary Drake founded the Baltimore Resins Corporation (BRC). Their business was finding waste products and plastics manufacturing that had been simply discarded, and finding ways to harvest this material and actually sell it for profit to possible manufacturing groups that could use this material. At the time, a big company (Waste Management) was actually charging customers to pick up and discard what was once considered waste. BRC was an innovator; it began to get these “waste” items for re-cycling and new uses by paying creators of this “waste” a penny a pound. Staff was hired, and the business grew. In March of 2013, John and Mary were divorced. The court specified a division of assets. Subsequently, several years later, Mary Drake brought suit against the attorney that had represented her in the divorce proceedings. Her claim was that that attorney had not commissioned a business valuation, and therefore the proper value of the company wasn’t established, and hence the cash consideration associated with the judge’s decree was inappropriate or lacking in full factual basis. In this legal malpractice suit, Mary Drake the plaintiff, commissioned a financial economist to place a value on the company around the time of the divorce decree. However, several facts make this choice of date less than straightforward. First, the husband John Drake, had apparently for several years been planning to found a new company (called Towson Resins Corporation) to which he migrated several of the clients of Baltimore Resins Corporation. In other words there was some pilferage of Baltimore Resin’s business. Second, in addition despite vigorous efforts at what lawyers call discovery, the last set of financial documents for Baltimore Resins Corporation that is available to the financial economist are as of the close of calendar year 2011. In addition, the only balance sheet available was 2010 (note I may be able to add 2011). In a separate document you are provided with several years of financial data, compiled from subchapter S corporation returns (Form 1120S) for Baltimore Resins Corporation. You are also provided with data for several SIC codes obtained from Business Valuation Resources Dealstats database. You are also provided with several background articles on the industry. Here are the questions (think of this as a way to include topics and organize your full report): 1) Describe, as best you can, each of the Exhibits A through F (mostly Business Valuation Resources Dealstats data sheets) provided. State what you think each exhibit might be, and how each one might be be used by an analyst….it’s part of the digging process as one prepares to do a valuation. I hope you will post your thoughts and questions about this daunting task, in the DISCUSSION FORUM. 2) Giving considerable detail, propose which multiples and metrics from the Dealstats downloaded data sheets you feel would be valuable or appropriate in placing a value on Baltimore Resins Corporation as of the end of 2011. To be more specific: View the exhibit titled MAIN DATA-BALTIMORE RESINS CASE-EXHIBITS A-F. Look at B,C,D,E AND F. Each one is a download of BVR’s DEEALSTATS reported transactions. But on each one, I specified slightly different search criteria, such as SIC code or sales level, etc (read the heading very carefully to see what I did). Your task is to glean from this mass of data what you feel are appropriate valuation multiples/metrics to actually apply. For example, for one of the group of metrics that you apply, you might choose the average of MVIC/NET SALES from Exhibit B and Exhibit C. You must justify your choices. When you look at Exhibit F, you might choose specific transactions that have the word resins or plastics within. Your pdf “app” may have scanning ability-for example Adobe Acrobat can scan for words within a pdf document. 3) Using the background articles provided (last six files), write between two and five pages about the…
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