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INDUSTRY
Investment Banking |
LAST QUARTERLY
UPDATE
9/5/2006 |
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| The investment banking industry in the US is comprised
of fewer than 2,000 companies, with combined annual
revenue of about $110 billion. Major companies include Morgan
Stanley, Goldman Sachs, Lehman Brothers, and Bear
Stearns. Investment banking is heavily
concentrated: the largest 50 firms hold 90 percent of the
market. |
| COMPETITIVE LANDSCAPE |
| Demand is driven by economic activity that results in
company mergers, acquisitions, or public financing. The
profitability of an investment bank depends on its ability to
accurately assess both the value of a
business transaction and the readiness of the market
to buy the attendant debt or equity. Big
firms have an advantage because large customer
transactions require firms with substantial
financial resources. Small investment banks can compete by
participating in syndications and operating in regional
markets or specialized industries. Although labor-intensive,
the industry produces very high value: average annual revenue
per employee at large firms is close to $1 million. |
| PRODUCTS, OPERATIONS & TECHNOLOGY |
| The primary revenue sources of the investment banking
industry are from the placement of new debt and equity
issues with public and private investors, and the fees
associated with mergers and acquisitions (M&A).
Investment banks also purchase new debt and equity issues for
their own accounts, acting as the market ‘maker,’ and actively
trade other financial instruments. Most investment banks are
active securities and currency traders and also provide
asset management services for wealthy clients and
retirement and investment funds. Thirty percent of industry
revenue comes from merger and acquisition fees and associated
stock transactions; 15 percent from helping corporations and
governments issue bonds; 20 percent from active trading in
financial instruments; and 10 percent from interest income.
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| The industry assembles and supplies the capital
required by businesses to expand, merge, and acquire other
businesses. Investment banks are intermediaries between
corporations issuing new debt and equity securities and
investors that buy the securities. An investment bank
underwrites new securities by buying them from the issuing
company at a negotiated price, then reselling them to its
investor base, other investment banks, and the investing
public. It may act as the ‘maker’ of the market for the new
securities, facilitating trades between buyers and sellers.
Investment banks perform a variety of other financial
services, such as merger and acquisition advice and
market analysis. |
| The major investment banks have a research staff that
performs the risk, economic, and financial analysis used to
support internal operations, from acquisitions and mergers to
formulating trading positions in world, US, and regional
markets. The profitability of an investment bank is directly
related to the quality of its research
analysis. Big investment banks employ a large number
of salespeople, analysts, and traders in a network of offices,
and may operate a trading "floor." Smaller banks operate out
of regular offices. Labor is the chief operating
expense. |
| Investment banks employ cutting-edge communications
and computing technology to support their operations.
Dedicated, fully redundant, high-speed networks interconnect
all major offices (domestic and foreign). Computing facilities
and critical data are distributed among operations and backup
sites. Backup facilities can be placed in service
automatically in real-time without loss of data. Within a few
days of the World Trade Center disaster, trading and support
operations resumed when the markets reopened using backup
facilities without loss of customer data. |
| SALES & MARKETING |
| Investment banking is largely a matter of developing
relationships with potential buyers of new
securities and with corporations or governments that
want to issue new securities or acquire other companies.
Investment bank sales staffs develop relationships with
corporate finance departments in target industries to promote
their services for facilitating M&A and capital
acquisition activities. Other salespeople develop
relationships with individual investors. Institutional
salespeople develop business relationships with large
institutional investors, such as money managers, pension fund
managers, or mutual fund companies. Private client service
representatives provide brokerage and money management
services for high-wealth individuals. Salespeople make money
through commissions on trades made through their firm. |
| Because investment banking fees are fairly standard
throughout the industry, banks rely heavily on their
reputation of effectiveness to attract customers, and
accordingly advertise their role in securities
issuances and acquisition or merger "deals." Fees are
often negotiated according to the size of a deal and the share
price that the investment banker can get from investors.
Fees of 0.5 to 1 percent of the transaction size are
common. |
| FINANCE & REGULATION |
| Investment bankers may have large cash balances
and cash flow. Receivables are typically low
because investment fees are usually paid immediately.
Inventories consist of various types of securities and
may be high. To finance their activities, investment bankers
may borrow from commercial banks or other sources. |
| The Securities and Exchange Commission (SEC) is the
primary regulator of US securities markets. The Maloney Act of
1938 allows self-regulating organizations (SRO) such as the
National Association of Securities Dealers (NASD),
and national and regional exchanges provide direct
oversight of securities firms under supervision of the SEC.
|
| Congressional acts and the resulting rules issued by
banking and securities regulators have had a major role in
structuring the marketplace. After the stock market crash of
1929, Congress passed the Glass-Steagal Act of 1933
that separated commercial and investment banks and
defined the permissible activities of each. In 1999, Congress
passed the Financial Services Modernization Act
(FSMA) (also known as the Gramm-Leach-Bliley Act),
that eliminated the Glass-Steagal separation. Among other
things, FSMA permits the creation of financial holding
companies that simultaneously have banks, securities firms,
and insurance companies as subsidiaries, which may sell each
other's products. Due to FSMA, the industry is rapidly
consolidating. |
| REGIONAL & INTERNATIONAL ISSUES |
| The major investment banks have offices in ten to 12
metropolitan markets nationwide that are connected to their
head offices by dedicated high-speed communication networks.
Services and pricing are generally uniform throughout the
country. These banks also have offices in major business
centers worldwide, usually including London, Paris, Frankfurt,
Tokyo, Hong Kong, and Singapore as a minimum. |
| The largest investment banks operate globally and a number
of foreign investment banks are major participants in the US
market (Credit Suisse, Deutsche Bank, ABN Amro, Barclays
Capital, Rothschild). International investment banks play a
significant role in the US market and most large foreign-based
investment banks have established presences in the US, often
by buying established US investment banks. |
| HUMAN RESOURCES |
|
Investment banks compete vigorously for the top graduates
of business, finance, economics, and legal schools. Average
starting compensation for MBAs from top 10 business schools
average about $145,000 per year. Average employee income in
investment banks is about $220,000 per year. While
compensation in the industry is high, the pressure to perform
is intense, resulting in high turnover.
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| GOING PUBLIC:Petrie Parkman Is Latest
Investment-Bank IPO |
| Dow Jones News
Service, 14 September,
2006, 838 words
|
| Aiming to duplicate the IPO
performance of Thomas Weisel Partners Group Inc. (TWPG)
and Evercore Partners Inc. (EVR), investment-banking
boutique Petrie Parkman & Co. said this week it
plans to sell a piece of itself through a public
... |
| |
| Morgan Stanley To Sign Inter-Brokerage
Pact on Hiring |
| Dow Jones News
Service, 14 September,
2006, 543 words
|
| NEW YORK (Dow Jones)--Morgan
Stanley (MS) has decided to join a pact among brokerage
firms that makes it easier for brokers to jump ship
without fear of being sued. The company has already
notified other members of its intention to join
... |
| |
| UPDATE: J.P. Morgan's Dimon Calls
Investment-banking Environment 'OK' |
| Dow Jones Business
News, 13 September,
2006, 328 words
|
| By Nick Godt NEW YORK (Dow Jones)
-- J.P. Morgan Chase & Co. Chief Executive Jamie
Dimon said Wednesday that, as far as he knows, the
investment-banking environment remains "OK" and that the
firm's pipeline of deals is "rather strong." |
| | |
| QUARTERLY INDUSTRY UPDATE |
| M&A Activity has Strong Six
Months - Merger and acquisition (M&A) volume
continued to surge globally and in the US in second quarter
2006, contributing to a strong first half of the year. M&A
volume in the US increased 23 percent during the first six
months compared to year-ago, while global deals increased 44
percent, according to Thomson Financial. Leading US sectors
were telecommunications, energy and power, and financial.
|
| CEOs Positive on M&A, Negative on
Global Economy - Goldman Sachs has rated the global
business outlook as “worsening,” following pessimistic results
from a survey of worldwide CEOs. CEOs cite volatile financial
markets and uncertainty about US economic growth as reasons
for caution, although they were optimistic on capital spending
on M&As. The CEOs’ evaluation of the US business climate
was the lowest since 2002 in the wake of the recession. |
| Acquisition Demand Helps Drive Up
Equity, Debt Markets - US markets for equity,
equity-related securities, and debt had healthy growth the
first half of 2006, despite rising interest rates and concerns
about inflation and tighter money. Equity markets grew 63
percent during the first six months of 2006 compared to
year-ago; the market for initial public offerings (IPOs) grew
31 percent; and 36 percent for debt issuances, according to
Thomson Financial. Demand for acquisition capital helped
offset economic concerns. |
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| CRITICAL ISSUES |
| Revenue Depends on Volume of Economic
Activity - Investment banking activity is cyclical
along with the US economy, and more volatile. For example,
during the 2001 recession, revenues of the four largest
investment banks fell 25 percent and profits almost 40
percent. As the economy shows strong growth, investment bank
revenues and profits generally outpace the economy. |
- US real gross domestic product, the output of goods and
services, grew at an estimated annual rate of 2.5 percent
second quarter 2006, compared to 5.6 percent first quarter.
|
| Regulatory Oversight, Litigation
Intensify - Emanating from the high-profile corporate
scandals of the late 1990s to early 2000s, regulatory
oversight of investment banking has intensified. Investment
bankers are likely targets for accusations of corporate crimes
due to stricter federal sentencing guidelines, larger
financial penalties, and greater public awareness. Three areas
in particular have attracted attention: manipulation of “hot”
initial public offering (IPO) prices; biased research; and
insufficient risk assessment or disclosure. |
- The SEC will conduct a major study to determine if
regulators need to update protection for investors in
today’s marketplace.
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| OTHER BUSINESS CHALLENGES
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| Dependence on Market Volatility - Market
fluctuations and volatility may adversely affect the value of
banks' interest rate and credit products, currency, commodity,
and equity positions, and the institutions' merchant banking
investments. Conversely, certain trading businesses depend on
market volatility to provide trading and arbitrage
opportunities, and decreases in volatility may reduce these
and adversely affect the results of these businesses. |
| Legal Proceedings - The increased
regulatory enforcement has been attended by an increase of
litigation both civil (including class action suits) and
criminal. Many of these suits are the aftermath of high
profile corporate scandals. Settlements have ranged into the
billions of dollars. |
| Exposure to Global Economic Conditions -
Crises in almost any country can have a global economic impact
and affect equity and bond markets. Collapse of the bubble
economy in Thailand in 1997 had a ripple effect throughout
Asia and caused a global economic crisis. |
| Regional Economic Conditions - The
private clients of smaller investment banks tend to be
concentrated in the geographic region primarily served by the
bank. For example, Piper Jaffray's private clients are
concentrated in the Midwest and mountain states. An economic
downturn in that region can heavily impact the performance of
the bank even if national and global markets are
favorable. |
| BUSINESS TRENDS |
| Consolidation - To broaden
access to capital, investment banks have been merging with
other types of financial institutions (for example, commercial
banks, brokerages, insurance companies, finance companies) and
with international banks. Mergers and acquisitions (M&A)
were propelled in part by the deregulation of the financial
services industry. In recent years, foreign investment banks
have established a firm presence in the US by acquiring US
firms. |
| New Lines of Business - To
generate steady cash flows, investment banks constantly seek
new product lines compatible with their core banking business.
Goldman Sachs indirectly owns 29 electrical power plants and
actively trades power sales contracts, Bear Stearns operates a
mortgage company, and Morgan Stanley owns the credit card
company Discover Financial Services and an aircraft leasing
subsidiary. These lines of business leverage the expertise
normally used to support M&A. |
| Regulatory Oversight Varies with
Business Performance - Common investment bank
business practices that are unquestioned one day can receive
intense scrutiny the next. For example, the allocation process
for equities and fixed income security offerings was
questioned when it became public that executives and directors
of public companies that were clients of the bank were offered
shares in initial public offerings (IPOs) and debt issues by
the bank. Banks have voluntarily given up these
practices. |
| INDUSTRY OPPORTUNITIES |
| Expansion into New Foreign
Markets - While competition for business in the US
and Europe is intense, major investment banks are looking to
expand into underserved foreign markets. Many investment banks
are eyeing African countries, like Nigeria, that have a large
number of high-wealth individuals; however, political
instability and corruption are major impediments. |
| Corporate Bankruptcy
Advisors - A new bankruptcy law, expected to remove
many restrictions prohibiting investment banks from acting as
advisors during bankruptcies, will allow banks to leverage
their industry research staff to help companies reorganize
under bankruptcy rules. |
| International Partnerships -
Midsized investment banks serving clients involved in
international markets can become more competitive by forming
partnerships with compatible foreign investment banks. These
arrangements allow the bank to expand its client base without
the substantial investment required to establish overseas'
operations. |
Executive: CEO
[Chief Executive Officer] |
Key
Focus:
Enforcing Ethical
Standards |
The industry has been rocked by a series
of high-profile ethical conduct scandals ranging from
analyst reports touting bank-held equities to illegal
after hours trading. Executive oversight is difficult
because the fast pace of the industry requires
distributed decision-making, but investor confidence
ebbs with each new scandal. Merrill Lynch has developed
a set of ethical guidelines and practices and has
charged its auditors, who report to a committee of
independent directors, with compliance monitoring.
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Key
Focus:
Maintaining Corporate
Culture |
Industry consolidations over the past 20
years have required meshing disparate cultures. If the
blending doesn’t proceed smoothly, top producers may
leave, and internal politics can capture much of a
firm’s time and resources as well as draw negative media
attention. The Morgan Stanley drama of 2005, about the
1997 merger with Dean Witter, resulted in extensive
internal power struggles and captivated the financial
press for months. |
|
Executive: CFO
[Chief Financial Officer] |
Key
Focus:
Conducting Financial Oversight
of Operations |
Investment banks trade debt and equity
instruments as commodities. The fast-paced nature of the
business requires that the authority to make financial
commitments be distributed fairly far down in the
organization. The broad-based ability to make financial
commitments exposes the corporation to the
eccentricities of large numbers of individuals.
Financial oversight requires a delicate balance so it
does not impede operations. |
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Key
Focus:
Establishing Cost
Controls |
Investment banking is very much a feast
or famine business. Financial oversight groups closely
monitor the economy and business conditions. When
business is plentiful, the distributive decision-making
tends to encourage generous spending. When business is
tight, spending constraints are quickly imposed. |
|
Executive: CIO
[Chief Information Officer]
|
Key
Focus:
Building Fault Tolerant
Systems |
Uninterrupted continuity of operations
during and after failures or disasters of any type is
crucial to the business. Multiple levels of
communications, servers, and user operations facilities
must be in place, have current files, and be ready to
use. |
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Key
Focus:
Designing Systems with Adequate
Peak Capacity |
All systems must have sufficient
capacity to serve all corporate needs under extremely
stressful conditions and support volume orders that are
greater than normal. After natural and man-made
disasters are reported, large increases in trading
volumes can rapidly occur on a national basis. Trading
positions must be accessible and continue to function
and execute as long as the markets remain open or the
bank will suffer a loss of investors. |
|
Executive: HR
[Human Resources] |
Key
Focus:
Maintaining Competitive
Compensation Programs |
Compensation packages, including bonus
systems, need to be structured to reward and retain the
top producers in key positions. Turnover peaks after
annual bonuses are awarded. |
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Key
Focus:
Recruiting Top Quality
Staff |
Investment banks compete intensively for
the top business school graduates. Turnover of skilled
positions is high and having quality replacement staff
is crucial to ongoing success. |
|
Executive: Sales
[VP Sales/Marketing] |
Key
Focus:
Developing Executive Contacts
in Target Companies |
Buyers of merger and acquisition
(M&A) services are senior executives of both the
acquiring or target firms. The selling team must be able
to penetrate at the senior level and build client
confidence. |
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Key
Focus:
Positioning the Investment Bank
in Target Markets |
Investment banking services are marketed
based on the accomplishments and established reputation
of key staff. Marketing enhances that reputation by
strategically placing print stories and video interviews
in target market publications and business journals.
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| CONVERSATION STARTERS |
How cyclical is the firm's business?
Investment banking activity is cyclical along with the US
economy, and more volatile. |
How does the firm ensure regulatory
compliance?
Emanating from the high-profile
corporate scandals of the late 1990s to early 2000s,
regulatory oversight of investment banking has
intensified. |
How does market volatility affect the
firm?
Market fluctuations and volatility may
adversely affect the value of banks' interest rate and credit
products, currency, commodity, and equity positions, and the
institutions' merchant banking investments. |
How much of an overseas' presence does the firm
have?
While competition for business in the US
and Europe is intense, major investment banks are looking to
expand into underserved foreign markets. |
What types of bankruptcy advice does the firm
provide?
A new bankruptcy law, expected to remove
many restrictions prohibiting investment banks from acting as
advisors during bankruptcies, will allow banks to leverage
their industry research staff to help companies reorganize
under bankruptcy rules. |
How important are the firm's partnerships with
foreign investment bankers?
Midsized investment
banks serving clients involved in international markets can
become more competitive by forming partnerships with
compatible foreign investment banks. |
| QUARTERLY INDUSTRY UPDATE QUESTIONS |
How does the firm’s merger and acquisition
(M&A) activity compare to last year's?
Overall M&A volume in the US increased 23
percent during the first half of 2006 compared to year-ago,
according to Thomson Financial. |
What is the firm’s outlook on capital spending and
M&A activity in the near-term?
Worldwide CEOs
are optimistic about capital spending, and M&A, but
pessimistic about the US and global economies, according to a
recent survey by Goldman Sachs. |
| OPERATIONS, PRODUCTS AND FACILITIES
QUESTIONS |
How many domestic offices does the bank operate?
What are their functions and locations?
The
number and placement of offices often suggests how
aggressively the bank is mining local markets. |
Which exchanges (domestic and international) is
the bank a member of?
Membership of major stock,
options, and futures exchanges, particularly those located in
New York, Chicago, London, Paris, Frankfurt, Tokyo, and Hong
Kong indicate how significant a player the bank is. |
Does the bank’s holding company operate insurance
and commercial banking subsidiaries in addition to the
investment bank?
The Financial Services
Modernization Act of 1999 (FSMA) allows a holding company to
own a variety of financial service entities. |
How many equities is the bank considered a market
maker for?
Investment banks buy new debt and
equity issues for their own accounts, acting as the market
"maker," and actively trade other financial instruments. The
number of equities the bank is considered a market maker for
gauges the investment bank's significance. |
Does the bank offer its own investment
products?
Investment banks offer mutual funds,
hedge funds, derivatives, bond funds options, and futures
instruments of various types. |
| CUSTOMERS, MARKETING, PRICING, COMPETITION
QUESTIONS |
Who are the bank’s major competitors?
Competitors are generally other investment banks operating
in the same geographic markets or catering to the same
industries. |
Does the bank specialize in particular industries?
If so, which?
Most large investment banks
specialize in particular industries. |
How active are the industries in which the bank
specializes?
Industries like telecommunications
are consolidating at all levels. |
Is globalization a factor in the industries served
by the bank?
Customers frequently establish
themselves in foreign markets by acquiring companies already
serving those markets. |
What have been the major factors in the firm being
selected by clients?
Factors could include
aggressive pricing, industry expertise, access to capital, and
previous success with similar clients. |
Does the bank sponsor key events to market its
services?
Many banks are corporate sponsors of
sporting (golf, tennis, etc.); arts; and charity events and
use the sponsorship to get key clients in a social environment
in hopes of building better relationships. |
| REGULATION, R&D, IMPORT, AND EXPORT
QUESTIONS |
What impact has the Financial Services
Modernization Act (FMSA) had on the bank?
FMSA
removed restrictions on the lines of business investment banks
may participate in. |
Has the bank’s research been called into question
due to any of the high-profile bankruptcies of the past
several years?
Citigroup, JP Morgan, and Bank of
America are among 14 investment banks that have paid over $6
billion to settle claims of deceptive promotion practices,
which resulted from underwriting a debt issue by WorldCom
shortly before its bankruptcy. |
Has the bank been expanding its research
capabilities in selected foreign markets?
Banks
are searching for underserved (comparatively) markets such as
South America, Africa, and the former Soviet Union countries
(Russia, Ukraine, etc.). |
Has the intense regulatory oversight of the past
few years impacted bank operating policy?
Penalties have been imposed for lack of objectivity in
research analysis, full disclosure of known problems in
underwritten equity and debt issues, and other ethical
conduct. |
How has increased concern over personal data and
identity theft impacted the company?
|
| ORGANIZATION AND MANAGEMENT QUESTIONS |
How much turnover among bankers has the bank had
over the past few years? What percentage has occurred in the
annual "post-bonus" period?
Wall Street
investment banks recruit heavily from other investment banks,
especially right after annual bonuses have been paid. |
Has the bank's staff increased or decreased over
the past five years due to market fluctuations?
Mergers and acquisitions (M&A) can contract markedly
when the stock market enters a bearish phase. Staff cuts are
common during business slowdowns. |
Has the bank, through merger, acquisition, or
expansion, entered new lines of business in the last five
years?
The Financial Services Modernization Act
of 1999 (FSMA) allowed investment banks to enter activities
previously precluded under the post-depression Glass-Steagal
Act. |
What backup methods does the bank use to protect
records and core trading and support activities?
The 9/11 attacks were a wake up for financial institutions
to determine how prepared they are to resume activities after
a cataclysmic event. |
How does management control risk in major
transactions?
Risk can be controlled in a number
of ways, starting with impeccable research regarding timing
and salability of a new debt/equity issue. |
Is the bank publicly traded or privately
held?
Investment banks have been going public,
merging, and being acquired with increasing frequency since
the late 1980s. Names such as Salomon Brothers, Kidder
Peabody, EF Hutton, Smith Barney, and JP Morgan have all
either disappeared or been subsumed into other firm names.
|
| FINANCIAL ANALYSIS QUESTIONS |
How does the bank mitigate risk in large initial
public offerings (IPOs) it underwrites?
Banks use
a variety of methods to mitigate the risk in IPOs, such as
having most of the issues sold prior to the effective date,
having other banks join as underwriters, and controlling
market timing. |
Of the bank’s income, how much is derived from
traditional investment bank services, such as merger and
acquisition (M&A) fees? How much from trading in
securities and how much from other sources?
Investment banks are increasingly diversifying to
include other areas such as insurance, commercial banking,
credit cards, foreign exchange, and real estate. |
Has the investment banking backlog been growing or
declining in the past few years?
Investment
banking business was sharply affected by the 2001 recession.
|
How has the bank's credit rating changed over the
past several years?
Credit ratings are crucial to
a bank’s liquidity. Reduced credit ratings can adversely
affect liquidity, competitive position, borrowing costs,
access to capital markets, and trigger obligations under
bilateral provisions in trading and collateralized financing
contracts. |
How much of the firm's business is affected by
changes in interest rates?
Low interest rates
compact credit spreads and can affect fixed-income products.
|
| BUSINESS AND TECHNOLOGY STRATEGY
QUESTIONS |
Does the bank believe that the level of mergers
and acquisitions (M&A) in the industries it serves will be
sufficient or will the bank expand into additional
industries?
Accumulating sufficient research
expertise to expand into additional industries is expensive
and time-consuming. |
Does the bank offer investment services to small-
and moderate-wealth investors?
Investment banks
have traditionally offered services to high-wealth investors.
Since the industry is consolidating with commercial banks and
securities dealers, services are increasingly being offered to
moderate-wealth individuals. |
Does the bank intend to diversify into other
services or activities?
Banks are now engaged in
credit card services, equipment leasing, real estate
investment trusts, hedge fund operations, and commercial
banking. |
Does the bank operate its own data communication
network that connects headquarters, trading centers, computing
facilities, and major branch operations?
A
dedicated network gives the bank maximum flexibility. |
What contingency plans does the company have for
business interruptions? Have these plans been
rehearsed?
Periodic market crashes, major natural
disasters, and terrorist attacks have highlighted the
necessity for investing in facilities and plans to resume
operations in an orderly manner. |
Does the bank operate multiple data centers with
sufficient capacity to have alternate centers take over all
operations, computing, and recordkeeping in the event of the
loss of a center?
Investment banks, depending on
size, deal with millions to billions per day. Halting
operations because of computer center problems can cost
millions per episode. |
Has the bank invested significantly in technology
in the last three years?
Computing, networking,
and display technologies have been changing rapidly for the
last several years. |
| COMPANY BENCHMARK INFORMATION
|
|
INVESTMENT BANKING AND
SECURITIES DEALING
(NAICS: 523110)
| 12 Month Rolling Data Period
|
Last Update June
2006 |
| Small Company Data |
Sales <
$2,036,650 |
| Table Data Format |
Median Values |
| |
| |
US Private Company
Data |
| |
Aggregate |
Small
Company |
| Company Count in
Analysis |
147 |
37 |
| |
| Income Statement
|
| Net Sales |
100% |
100% |
| Gross Profit |
88.9% |
88.9% |
| Operating Income |
3.8% |
0.3% |
| Net Profit After Tax |
4.2% |
0.5% |
| |
|
|
| Balance Sheet |
| Cash |
11.6% |
13.7% |
| Accounts Receivable |
0.3% |
0.0% |
| Inventory |
0.0% |
0.0% |
| Total Current Assets |
56.1% |
67.7% |
| Total Fixed Assets |
3.8% |
3.8% |
| Other Non-Current Assets |
40.2% |
28.5% |
| Total Assets |
100% |
100% |
| Accounts Payable |
0.7% |
0.3% |
| Total Current Liabilities |
19.6% |
12.6% |
| Total Long-Term Liabilities |
0.0% |
0.0% |
| Net Worth |
80.4% |
87.4% |
| |
|
|
Financial
Ratios
(Click on any ratio for comprehensive
definitions) |
| Quick Ratio |
0.96 |
1.21 |
| Current Ratio |
2.04 |
2.12 |
| Current Liabilities to Net Worth
|
31.5% |
9.0% |
| Current Liabilities to Inventory
|
1,165.0% |
101.0% |
| Total Liabilities to Net Worth
|
38.0% |
16.0% |
| Fixed Assets to Net Worth |
8.1% |
8.1% |
| Collection Period |
0.1 |
0.0 |
| Inventory Turnover |
39.4 |
- |
| Assets to Sales |
101.0% |
319.0% |
| Sales to Working Capital Ratio
|
0.8 |
0.6 |
| Accounts Payable to Sales |
0.0% |
0.0% |
| Return on Sales |
4.0% |
1.0% |
| Return on Assets |
3.6% |
1.6% |
| Return on Investment |
6.5% |
1.0% |
| Sales per Employee |
$262,570 |
$44,177 |
| Net
Profit per Employee |
$4,733 |
($130) |
| Interest Coverage |
9.0 |
6.0 |
| |
| Financial
industry data provided by Fintel -- offering
leading benchmarking with a database of over 900
industries. Utilize financial analysis
through profitability, liquidity, sustainable
growth rate, business valuation, custom research,
and other tools. Visit us on the web at www.fintel.us/firstresearch to
find out how we can help you. |
|
|
| VALUATION MULTIPLES |
| Investment Banking
|
| Acquisition multiples below are calculated
using at least 3 private, middle-market (valued at
less than $1 billion) industry transactions
completed between 5/1998 and 12/2005. Last update:
September 2006. |
| Valuation
Multiple |
Equity/Net
Sales |
Equity/Net
Income |
MVIC/Net Sales |
MVIC/EBIT |
| Median Value |
0.3 |
8 |
0.3 |
4.7 | |
Equity (Equity price) = Reported selling
price
MVIC (Market Value of Invested Capital) =
Equity price + Long-term liabilities
assumed
EBIT (Earnings Before Interest &
Taxes) = Net Income + Interest expense +
Taxes |
| SOURCE: Pratt's Stats™ (Portland,
OR: Business Valuation Resources, LLC) To purchase
more detailed information, please either visit www.BVMarketData.com
sm or call Business Valuation Resources
at 888-287-8258. |
|
|
|
The output of US security and commodity brokers, dealers,
exchanges, and services is forecast to grow at an annual
compounded rate of 8.1 percent between 2006 and
2009. |
|
Security, Commodity Services
Growth Uneven but Strong
|
|
|
IPO - Initial Public Offering |
|
M&A - Mergers and
Acquisitions |
|
NASD - National Association of Securities
Dealers |
|
SEC - Securities and Exchange
Commission |
|
SRO - Self Regulating
Organization |
 |
|
|
|
| “The purpose
of the Profiles is for sales call preparation and general
business and industry analysis. Profiles provide general
background information only and are not intended to furnish
detailed information about the creditworthiness of any
individual borrower or purchaser or to be used for making any
loans, leases or extension of credit to any individual
borrower or purchaser. First Research, Inc. is not an
investment advisor, nor is it in the business of advising
others as to the value of securities or the advisability of
investing in securities, and the Profiles are not intended to
be relied upon or used for investment purposes.”
|
 |
© Copyright 2006, First Research, Inc. All
Rights Reserved.
This information cannot be copied, sold or
distributed in any manner without the written permission of
First Research, Inc. www.firstresearch.com | |
| |
