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A Work Project, presented as part of the requirements for the Award of a Masters Degree in Management from the NOVA – School of Business and Economics.
APPENDIXES
GROWTH STRATEGIES IN
TOURISM ENTERTAINMENT INDUSTRY
– A PRACTICAL APPLICATION –
FILIPA SILVA #791
MARIA ABECASIS #2066
RITA BONVALOT #1889
A Project carried out on the Management course, under the supervision of:
Prof. Miguel Muñoz Duarte and Dr. João Paiva Mendes (Boost Tourism Portugal)
January 8th 2016
2
APPENDIXES
I. BOOST TOURISM ........................................................................................................................ 3
APPENDIX 1.1: METHODOLOGY .................................................................................................... 3
APPENDIX 1.2: INTERNATIONAL TOURISM ................................................................................... 3
APPENDIX 1.3: TOURISM IN PORTUGAL ........................................................................................ 4
APPENDIX 1.4: TOURISM ENTERTAINMENT LISBON COMPANIES ................................................. 5
APPENDIX 1.5: BUSINESS MODEL CANVAS – BOOST TOURISM ................................................... 6
APPENDIX 1.6: VALUE PROPOSITION ............................................................................................ 7
APPENDIX 1.7: BOOST IN NUMBERS ............................................................................................. 8
II. M&A ............................................................................................................................................... 9
APPENDIX 2.1: METHODOLOGY STRATEGY I ............................................................................... 9
APPENDIX 2.2: STEP FOR M&A ................................................................................................... 9
APPENDIX 2.3: LITERATURE REVIEW STRATEGIC SECTION ........................................................ 10
APPENDIX 2.4: EXTERNAL DIMENSION OF STRATEGIC ANALYSIS .............................................. 11
APPENDIX 2.5: INTERNAL DIMENSION OF STRATEGIC ANALYSIS ............................................... 14
APPENDIX 2.6: EXPOSURE DIMENSION OF STRATEGIC ANALYSIS ............................................... 15
APPENDIX 2.7: PARTIAL DASHBOARD OF STRATEGIC ANALYSIS ................................................ 16
APPENDIX 2.8: LITERATURE REVIEW FINANCIAL SECTION ......................................................... 17
APPENDIX 2.9: VALUATION ........................................................................................................ 18
APPENDIX 2.10: DCF METHOD................................................................................................... 19
APPENDIX 2.11: COMPARABLES METHOD .................................................................................. 20
APPENDIX 2.12: BUSINESS VALUATION CALCULATOR ............................................................... 21
APPENDIX 2.13: COST APPROACH .............................................................................................. 21
APPENDIX 2.14: STEP FOR M&A INSTRUCTIONS TAB ............................................................... 23
III. NATIONAL EXPANSION .......................................................................................................... 24
APPENDIX 3.1: METHODOLOGY STRATEGY II ............................................................................ 24
APPENDIX 3.2: OPORTO’S BOOST COMPETITORS ....................................................................... 25
APPENDIX 3.3: BUSINESS MODEL CANVAS – BOOST OPORTO ................................................... 26
APPENDIX 3.4: CONGRESS RANKINGS ........................................................................................ 27
APPENDIX 3.5: DECISION MATRIX SCORE ATTRIBUTION............................................................ 30
APPENDIX 3.6: OPORTO – PRICES COMPARISON ........................................................................ 31
APPENDIX 3.7: BOOST’S OPORTO ORGANIZATIONAL STRUCTURE ............................................ 32
APPENDIX 3.8: BOOST’S OPORTO P&L ...................................................................................... 33
APPENDIX 3.9: BUDGET REQUIREMENTS .................................................................................... 33
IV. INTERNATIONAL EXPANSION .............................................................................................. 34
APPENDIX 4.1: METHODOLOGY STRATEGY III ........................................................................... 34
APPENDIX 4.2: BOOST MADRID IN NUMBERS ............................................................................. 34
APPENDIX 4.3: TOURISM IN MADRID .......................................................................................... 36
APPENDIX 4.4: PORTER’S FIVE FORCES ANALYSIS FOR MADRID .............................................. 36
APPENDIX 4.5: COMPETITION IN MADRID .................................................................................. 37
APPENDIX 4.6: ALTERNATIVE STRATEGIES PROS AND CONS ..................................................... 38
APPENDIX 4.7: DECISION MATRIX SCORE ATTRIBUTION............................................................ 39
APPENDIX 4.8: BUSINESS MODEL CANVAS FOR BOOST IN MADRID .......................................... 40
3
I. BOOST TOURISM
APPENDIX 1.1: Methodology
Figure 1: Project’s methodology (Source: Desk Research)
APPENDIX 1.2: International Tourism
Figure 2: International Tourists Arrival – By region forecast 2030 (Source: UNWTO)
4
APPENDIX 1.3: Tourism in Portugal
Figure 3: Weight of Tourism Revenues in the Portuguese GDP
Figure 4: Tourism direct contribution to GDP (%)
Figure 5: Total Guests in Portugal (2014)
Figure 6: Total Number of Hotel Establishments
3,8%4,0%4,2%4,4%4,6%4,8%5,0%5,2%5,4%5,6%5,8%6,0%6,2%6,4%
5000550060006500700075008000850090009500
100001050011000
Tourism Revenues
(millions €)
Weight of Tourism in
the GDP (%)
0%
1%
2%
3%
4%
5%
6%
7%
8%
Europe
World
Portugal
Forecast
3.000.000
5.000.000
7.000.000
9.000.000
11.000.000
13.000.000
15.000.000
17.000.000
Total Foreign
Total Portugal
Total Global
1.940
1.960
1.980
2.000
2.020
2.040
Total
Global
5
APPENDIX 1.4: Tourism entertainment Lisbon Companies
Table 1: Teambuilding and Corporate Events Competitors
COMPETITION Description
BOOST
PORTUGAL
Boost organizes team building or other events, providing diverse exclusive and
original activities, taking care of the entire process and guaranteeing the satisfaction
of its customers. Main attractions: Tuktuks, GoCar, Segway, Beetle, e- Buggies and
Scooters.
Tours For You
An Incoming Tour operator and DMC specialized in providing creative and personalized
travel planning and developing luxury and experiential travel services and special events.
The company also have provide adventurous tours for team-buildings and events as
canoeing, thematic events, ballooning, air tourism, BTT, slide, rappel, paintball and other
activities.
Equinócio
Three main operational areas: Corporate (organize outdoor events and team buildings),
Adventure (specialized in activities like Rafting, Canoeing, body board, trekking, slide,
rappel and other activities) and Kids (focused in young customers, planning anniversary
parties and summer camps.
BgBuilding Offer a large range of effective team building solutions, conference facilitators, corporate
entertainment and internal training and development of the company.
Kiss the Cook Specialists in team building and events around the table. Promote teamwork, collaboration,
creativity or competition through a hands-on attitude.
Lisbon secrets A company with a team of dynamic guides, committed to offering a personal and authentic
experience to its visitors. It organizes diverse tours and events combining many activities
from walking to wine tasting and boat tour.
Inside Lisbon Operates in two main areas: smaller private tours and corporations team-buildings. It can
be considered a Boost client since it outsources some of the company’s products.
Seaventy Focused in ocean activities, organizes team buildings, meetings & networking events and
business lunches. It provides this events aboard elegant and exclusive boats, creating a
unique and premium environment.
6
APPENDIX 1.5: Business Model Canvas – Boost Tourism
7
APPENDIX 1.6: Value Proposition
Table 2: Boost Prices in Lisbon
Individual Services – Prices
GoCar
Tour 1st hour: 29€/h
After 1st hour:
5€/h 4 hours: 60€ 8 hours: 89€
Segway 75min: 35€ 150 min: 55€ 120min: 50€ Buggy Combo:
50€
Bikes
and
company
Follow the
river: 29€
Up the hills
32€
Follow the
Sun:75€
Lisbon
by
beetle
135€ half day 180€ all day
Sintra
225€ all day
surf trip tour
290€ all day
when'n wine
Tuk tuk 50€/h 140€ half day
Buggy
Tour
25€/h
+5€/15min
(2pax)
40€/h
+8€/15min
(4pax)
Scooter
Solutions
40€
/day
75€
/2 days
110€
/3 days
140€
/4 days
170€
/5days
200€
/6days
215€
/7days
Escape
Hunt 35€ 2pax 50€ 3pax 60€ 4pax 50€ 5pax
Figure 7: Boost brands in Lisbon (Source: Desk research)
8
APPENDIX 1.7: Boost in Numbers
Figure 8: Sales Evolution
Figure 9: Groups 2014
Figure 10: Cost of services distribution
Figure 11: Capital Structure
Figure 12: Sales Distribution
Figure 13: Individuals 2014
Figure 14: EBITDA Evolution
Figure 15: Cost Structure
9
II. M&A
APPENDIX 2.1: Methodology Strategy I
Figure 16: Methodology followed in M&A chapter (Source: Desk research)
APPENDIX 2.2: STEP for M&A
Figure 17: STEP for M&A model cover
10
APPENDIX 2.3: Literature Review strategic section
Figure 18: Berkus Method (Source: Desk research)
Figure 19: Scorecard Valuation Methodology (Source: Desk research)
Figure 20: Seven Domains Framework (Source: Desk research)
Figure 21: Sources used to select strategic variables (Source: Desk research)
G ro s s m a n , Ma rk , How to valu e you r s tart u p for ven tu re cap ital
P o rte r, Mic h a e l , 1979. How com p etitive forces s h ap e s trateg y, 57(2), 137-145, Harvard Bu s in es s Review
Ag u illa r, F .J . , 1967. S can n in g th e b u s in es s en viron m en t, Macm illan
Mu llin s , W , J o h n , 2003. Th e n ew b u s in es s road tes t, P ren tic Hall Fin an cial T im es
P a y n e , B ill , 2011. S corecard valu ation m eth od olog y: Es tab lis h in g th e valu ation of p re-reven u e, s tart-u p com p an ies
Ka rls s o n , M, J e n n y , 2009. Valu ation u s in g th e an alytic h ierarch y p roces s : Tran s form in g q u alita tive ju d g em en ts in to q u an tita tive m eas u res , Un ivers ity of P itts b u rg h
Mu llin s , W , J o h n , 2003. Th e n ew b u s in es s road tes t, P ren tic Hall Fin an cial T im es
B o rd e n , H, Ne il , 1964. Th e con cep t of th e m arketin g m ix, J ou rn al of ad vertis in g res earch
P rivate eq u ity valu ation , Kap lan 2014
Hu d s o n , Ma ria n n e , 2014. S u cces s fu l exit s trateg ies s ecrets : Kn ow h ow to g et ou t b efore you g et in , Forb es
Ro b b in s , S te v e r , Exit s trateg ies for you r b u s in es s , En trep ren eu r on lin e
Ex
tern
al
Inte
rna
lE
xp
osu
re
Matching variables selected with the corresponding references
11
APPENDIX 2.4: External dimension of strategic analysis
Figure 22: STEP for M&A – Eco Tuk Tours macro environment analysis
Figure 23: STEP for M&A – Eco Tuk Tours market and industry analysis
Value Driver Classification Score Choose a weight Factor
Political
Political stability: What's the degree of stability? medium 2 5% 0.1
Government policies: What's the level of benefit for the country? medium 2 10% 0.2
Economic
National economy: What's the climate of national economy? growing 3 10% 0.3
Global economy: What's the climate of international economy? growing 3 10% 0.3
Social
Life style: What's the level of social life style? low 1 10% 0.1
Literacy: What's the educational level? medium 2 0% 0
Cultural issues: What's the influence of increasing relevance given to culture and history? high 3 10% 0.3
Demographics: What's the influence of demographics on the business? low 3 0% 0
Technological 0
Technological advances: What's the rate of technological change? low 3 0% 0
Legal
Bureaucracy: What's the degree of bureauscracy in processes? low 3 5% 0.15
Product regulations: What's the level of regulation constrains? low 1 15% 0.15
Environmental
Weather: What's the influence of weather conditions? high 3 5% 0.15
Waste disposal laws: What's the waste laws? high 3 5% 0.15
Environmental concerns: What's the level of environmental consciousness? high 3 15% 0.45
Specific driver: add other high 3 0% 0
Overall 2.35
Macroenvironment - PESTLE
Evaluate columns in light red according to your goals and perspective of each factor.
Value Driver Classification Score Choose a weight Factor
Market
Size of the market: What's the Current Market dimension (served available market)? medium 2 10% 0.20
Size of the opportunity: What's the potential universe (total available market)? high 3 10% 0.30
Market Evolution: What's the market evolution trend? growing 3 10% 0.30
Porter's Five Forces 0.00
Rivalry among existing competitors: What's the level of competition in the market? high 1 10% 0.10
Threat of new entrants: What's thelevel of efficiency of the barriers to entry? medium 2 5% 0.10
Threat of substitutes: What's the number of products/services with similar functions? medium 2 5% 0.10
Suppliers power: What's the level of pressure/power from suppliers? medium 2 15% 0.30
Buyers power: What's the level of pressure/power from Buyers? high 1 5% 0.05
Industry characteristics 0.00
Cyclicality: What's the level of cyclicality? high 1 5% 0.05
Seasonality: What's the level of seasonality? high 1 5% 0.05
Trendy: How trendy is this market? high 1 5% 0.05
Public attitude towards the product: What's the level of acceptance/interest? high 3 15% 0.45
Specific driver: add other high 3 0% 0.00
Overall 2.05
Market and industry
12
Figure 24: Tuk tuk – Eco Tuk Tours
Figure 25: Survey questions
13
Figure 26: Population survey results (Source: Desk research)
Figure 27: TAM, SAM & SOM detailed calculations (Source: Desk research)
14
APPENDIX 2.5: Internal dimension of strategic analysis
Figure 28: Existing brand
Figure 29: STEP for M&A – Eco Tuk Tours company analysis
Figure 30: STEP for M&A –Eco Tuk Tours marketing mix analysis
Evaluate columns in light red according to your goals and perspective of each factor.
Value Driver Classification Score Choose a weight Factor
Team
Founders: What's the level of relevant experience? medium 2 0% 0.00
Management team: What's the level of expertise and know how? medium 2 0% 0.00
Sales team: How strong is the commercial team? strong 3 10% 0.30
Staff: What's the level of quality of the staff and team? high 3 5% 0.15
Intangible assets
Brand name: What's the level of awareness? medium 2 20% 0.4
Reputation: What's the level of credibility/reputation? strong 3 15% 0.45
Customer Portfolio: What's the level of quality of the portfolio? high 3 10% 0.3
Partnerships: How relevant are the partnerships? relevant 3 5% 0.15
Licenses/Patents: How relevant are the Licenses/Patents? irrelevant 2 0% 0
Tangible assets
Assets conditions: What's the level of necessary investment? low 3 10% 0.3
Synergies
Market share: What's the level of Market Share? medium 2 5% 0.1
Assembling process: How costly and time consuming to integrate? medium 2 20% 0.4
Specific driver: add other high 1 0% 0
Overall 2.55
Company
Value Driver Classification Score Choose a weight Factor
Product
Product innovation: What's the level of innovation? low 1 5% 0.05
Scalability: What's the level of scalability? medium 2 5% 0.10
Product complementarity: What's the level of complementary with current offer? high 3 30% 0.90
Placement
Distribution channels: What's the level of Sales channels integration and synergies? medium 2 10% 0.20
Promotion
Communication tools: What's the level of synergies in communication and Promotion high 1 20% 0.20
Price
Value for money: How does Price compares to Value for Money? average 2 10% 0.20
Competitive price: How does Price compares to Competition? above average 3 10% 0.30
Cost: How does Price compares to Cost? average 2 10% 0.20
Specific driver: add other high 1 0% 0
Overall 2.15
Marketing Mix - 4 P's
15
APPENDIX 2.6: Exposure dimension of strategic analysis
Figure 31: STEP for M&A – Eco Tuk Tours downside risks analysis
Figure 32: STEP for M&A – Eco Tuk Tours upside potential
Evaluate columns in light red according to your goals and perspective of each factor.
Value Driver Classification Score Choose a weight Factor
Unquoted investment and liquidity risk high 1 10% 0.1
Capital risk low 3 5% 0.15
Regulatory risk high 1 40% 0.4
Tax risk high 1 25% 0.25
Valuation risk high 1 10% 0.1
Agency risk medium 2 5% 0.1
Competitive environment risk low 3 5% 0.15
Diversification risk low 3 0% 0
Market risk (interest rates, exchange rates) medium 2 0% 0
Specific driver: add other high 1 0% 0
Overall 1.25
Downside Risks
Value Driver Classification Score Choose a weight FactorHorizontal integration
Domestic horizontal integration: What's the level of probability of a potential national competitor acquisition?low 1 0% 0
Vertical integration
Domestiv vertical integration:What's the level of probability of a supply-chain acquisition?medium 2 25% 0.5
Financial investors
Venture capital: What's the level of probability of venture capital interest and investment?medium 2 0% 0
Private equity: What's the level of probability of private equity interest and investment?medium 2 0% 0
IPO
IPO: What's the level of probability of IPO? low 1 0% 0
Liquidation
Tangible investment: What's the level of probability of selling assets?high 3 35% 1.05
Strategic alliance
Strategic alliance: What's the level of probability of corporate partnerhips or joint ventures?medium 2 35% 0.7
Follow-on investment
Investment attractive: high 3 5% 0.15
Specific driver: add other high 3 0% 0
Overall 1.55
Upside potential
Exit
str
ate
gie
s
16
APPENDIX 2.7: Partial dashboard of strategic analysis
Figure 33: Graphs for each subgroup of the internal, external and exposure dimensions
17
APPENDIX 2.8: Literature review financial section
Table 3: Pros and cons of each valuation methodology (Source: Desk research)
Figure 34: Matrix relating the different methods applied (Source: A. Damodaran)
Table 4: Applicability of different valuation methods
18
APPENDIX 2.9: Valuation
Figure 35: Inputs and assumptions sheet
This sheet should contain the assumptions and inputs needed (values without VAT), fill in the light red cells and then click to see the results for each method
Deal structure assets purchase
Latest FY 2015
days in a year 360
select target's country (if not in the list select other) Portugal
if target's country is not in the list, enter the corporate tax rate:
inflation rate (click to input) inflation rate
1.5%
1-stage
Does the target have significant historical information? no
Is the target publicly traded?
Enter the market value of Equity
Enter the market value of Debt
Enter current cash amount 24293.7
Sales
Do you want to use the current sales as the base? no
if yes, what is the current amount of sales?
Bottom up Sales estimate
Forecast method (choose and then click) inflation Growth rate estimation
Are there any perspectives of price changes? no
If yes, click on the button to enter the expected changes Changes in price
Investment
Forecast method for capex (click on the button) Capex
What is the % of sales revenues that cost of sales represents? 5%
Fixed expenses with salaries, bonus, fringe Benefits 82 546
Variable expenses with salaries, bonus and fringe benefits (enter % of sales) 0
90 599
0
Operating government grants amount 40 000
Will it continue? If yes click on the button to enter an amount per year of the estimation period no Government subsidies
Other fixed operating income 0
Other variable operating income (enter % of sales) 0
Other fixed operating costs 1 614
Other variable operating costs (enter % of sales) 0%
Depreciation&amortization (click on the button) Calculations Map
Working capital
Days of accounts receivable 30
Days of accounts payable (suppliers, overhead costs…) 30
Inventories days 0
VAT days payable 45
VAT rate (%sales) 23%
Social security days payable 20
Social security rate (%payroll) 23.75%
Tax paid during the year (%) 85.00%
Discount rate estimation
Stable Growth Inputs
liquidation Terminal value estimation
Sensitivity analysis Sensitivity analysis DCF
Current Financial Information
Balance sheet
tangible fixed assets 103 542
accounts receivable 37 009
inventory 0
Other current assets 30592.12
Intangible assets 10047.17
Other relevant operating investments 0
0
Truth in Balance sheet information
Are fixed tangible assets fully depreciated? yes
if yes, what is the market value of the fixed tangible assets? 50 000
if no, what percentage of the book value represents the market value of those assets? 0%
if the company liquidated the inventory what % of its book vaue would it receive? 0%
if the company was liquidated what % of accounts receivable would be received? 100%
if the company was liquidated what % of other current assets would be received as cash? 100%
if the company was liquidated what % of intangible assets would be received as cash? 0%
Relative Valuation
If you want to do a relative valuation of your firm, enter these inputs and then click on the button Comparables
Costs
Company's growth
if 2-stages, enter growth rate for second stage
GDP real growth
If not, choose a method for estimating sales and then click on the respective button (see comments)
Fixed SG&A expenses
terminal value forecast method
Cost of capital (click on the button)
Variable SG&A expenses (enter % of sales)
Debt and other liabilities
DCF Method Cost Approach Relative Valuation
19
APPENDIX 2.10: DCF Method
Table 5: List of assumptions needed for performing the valuation of Eco Tuk Tours
Figure 36: DCF analysis – Eco Tuk Tours
360 days in a year
Future of the product and the market is predictable
Survey answers assumed to be reliable enough to estimate the current sales
Sales growing at inflation rate
The price is not expected to change in the upcoming years
Variable expenses grow as a fixed percentage of sales
Fixed expenses grow at inflation
No more government subsidies are expected
Boost won't buy more tuk tuks
The only expected capital expenditures concern the batteries and power chargers
Every 4 years the batteries and power chargers have to be substituted
Tuk tuks depreciate at a rate of 25% (vehicles - pwc tax guide 2015)
Batteries and power chargers depreciate at a rate of 20% (small machines - pwc tax guide 2015)
Constant risk (discount rate)
Liquidation value, though the most conservative, was used as the terminal value
Assumptions list
Base 1 2 3 4 5 5
2015 2016 2017 2018 2019 2020 2021
243 902 245 366 247 820 250 793 254 555 258 374
12 195 12 268 12 391 12 540 12 728 12 919
231 707 233 098 235 429 238 254 241 827 245 455
Gross sales margin % 95% 95% 95% 95% 95% 95%
Operating government grants 40 000 0 0 0 0 0
82 546 83 041 83 872 84 878 86 151 87 443
0 0 0 0 0 0
90 599 91 142 92 054 93 158 94 556 95 974
0 0 0 0 0 0
1 614 1 623 1 639 1 659 1 684 1 709
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
96 949 57 291 57 864 58 558 59 437 60 328
EBITDA margin% 40% 23% 23% 23% 23% 23%
43 071 43 071 25 150 15 250 5 000 5 000
53 878 14 220 32 714 43 308 54 437 55 328
Taxes 21% 11 314 2 986 6 870 9 095 11 432 11 619
42 564 11 234 25 844 34 213 43 005 43 709
43 071 43 071 25 150 15 250 5 000 5 000
10 000 5 000 10 000 0 0
6 666 10 586 12 856 15 249 15 494
6 666 3 921 2 269 2 393 244
37 639 42 073 37 194 45 612 48 465
65 494
- 31 366 29 218 21 524 21 996 19 477
26 320
149 901
Net Debt 0
Equity
Gross sales margin
Cost of sales
Sales and services rendered
Payroll expenses fixed
SG&A expenses fixed
Other operating expenses fixed
SG&A expenses variable
Payroll expenses variable
Present Value of FCFF
Present Value of Terminal Value
Terminal Value
Other operating expenses variable
Other operating income variable
EBIT(1-t)
EBIT
Depreciation&amortization
EBITDA
Other operating income fixed
Value of the firm
Depreciation&amortization
Capital Expenditures
WC requirements (if needed)
Change in NWC
Free Cash Flow
20
APPENDIX 2.11: Comparables Method
Figure 37: Issues that must be considered in the selection of peers (Source: Desk research)
Figure 38: Common trading multiples (Source: Desk research)
Figure 39: Data used for the multiples calculation
Figure 40: Trading multiples Eco Tuk Tours
Auxiliar calculations for this case
Peer Group selected EB/EBITDA EV/Sales market cap (b) size premium 20%
Avis 5.28 1.84 3.456 liquidity/marketability discount 40%
Ryder system 4.99 1.17 3.412
Amerco inc 4.36 1.35 3.848
Weighted average (market cap) 4.86 1.45
Target's 2.33 0.70
Source: Ycharts 5y average
Discounts
Multiple used
Lower bound Upper bound Lower bound Upper bound
EV/EBITDA peers 57 291 60 328 133 574 140 655
EV/Sales peers 245 366 258 374 170 859 179 917
EV/EBITDA theoretical 57 291 60 328 114 582 156 853
EV/Sales theoretical 245 366 258 374 122 683 206 699
Financial Metric Implied value
21
APPENDIX 2.12: Business valuation calculator
Figure 41: Value simulator – Hadley capital
APPENDIX 2.13: Cost Approach
Figure 42: Cost approach – Eco Tuk Tours
24294 Book value of fixed tangible assets 103 542
37009 Book value of intangible assets 10 047
Inventories 0 Other relevant operating investments 0
Other current assets 30592 113 589
Fixed tangible assets 50000
Intangible assets 0
141895
Liabilities 0
-
Adjusted book value (marked to market) Reproduction cost
Accounts receivable (net of questionable receivables)
Cash
Equity value
Enterprise value
Enterprise value
22
Figure 43: Value of the assets vs business value
23
APPENDIX 2.14: STEP for M&A instructions tab
Figure 44: STEP for M&A – introduction tab
About
Instructions
Valuation models considered
Caveats
The DCF method relies on the forecast of the expected annual post-tax free cash flows which are then discounted at a rate that reflects the investors’ required return to
arrive at a present value of the income stream. Within this generic approach it is possible to value debt and equity separately or the firm as a whole, but in the case of a
private company the second approach is simplest as it avoids the problem of determining debt and equity rates of return. The free cash flow measures the cash available to
secure financing after all operating expenses, taxes, and necessary investments in working capital and property, plant and equipment are paid. While it is the most
theoretically correct and it is fundamentals-driven, it fails to consider market perceptions, can be long and arduous and is highly sensitive to the inputs, like the hurdle rate
and growth rate used to find a proper terminal value.
2) Relative valuation
3) Cost approach
Relative valuation’s underlying principle is to estimate value by looking at comparables thus giving a pretty good indication of the price the market is willing to pay. It
comprehends two approaches: trading multiples and precedent transactions. Multiples are based on public information from traded companies. Here, the value comes from
the market price of companies engaged in similar business activities and that share similar risk-return characteristics. Likewise, recent transactions concerning similar or
equal assets may provide a good indication for value (Caselli & Gatti, 2004). Both approaches, though quick and straightforward, do not capture true intrinsic value and are
easy to manipulate. Sound judgement should drive its use.
Cost approach assesses the cost of recreating the business from scratch. Two methods were considered: reproduction cost which takes into account the book value of all the
assets needed to start a replica of the business and adjusted book value which analyses the market value of a company’s assets to determine the company’s value. Being
bottom-up methods, the quality depends on how the value of the whole relates to the sum of the parts. Although it may provide a reasonable estimate and can be useful as
a “sanity check” for other valuation methods, it fails to account for the future, rather it is based on the past.
B) Financial component
C) Recommendations
To appraise if a target’s acquisition is a commendable choice, distinct aspects have to be taken into account, both micro and macro. To scrutinize these elements and
materialize their influence on the decision, the strategic component was developed.
The value drivers were organized under three broad dimensions: internal, external and exposure, respectively. The first one includes the items related to the company’s
nature and procedures; the second one refers to the extrinsic conditions; and the last one regards other issues that may also have an impact. Then, for each dimension two
sub-groups were defined: company and marketing, market/industry and macro environment, and upside potential and downside risks.
Assign a classification (selected from a list of three options) and a weight to each value driver and then a weighted average score(1 the worst - 3 the best) per group is
automatically generated. In the “partial dashboard” sheet graphs, which facilitate the perception of the output, are presented and, this time, assign a weight to each group
which will then ponder in the strategic score.
This model is an interactive dynamic tool that was developed for m&a deals between public or private companies from different industries, sizes and life cycle stages. It is a
decision model divided into two major components: strategic and financial. The first one tries to analyse the suitability of the target according to distinct drivers while the
second focuses on the estimation of the fair value. There were two main goals behind the creation of this tool: 1) combine a financial perspective with other value drivers
that usually are not quantifiable and may be just as relevant factors for the decision and make it as flexible as possible so that it can be applied to a big variety of firms; and
2) simplify, automate and summarize the decision making process, making it perceptible for everyone, from probationers to experts
A) Strategic component
This part of the model entails two steps:
To begin with, you should understand which deal structure suits you better. For that purpose, you need to go through a shorten list of questions, selecting an option and
assigning a weight according to the relevance of each item for the case. A recommendation, not mandatory, is then automatically engendered.
The second step concerns the valuation itself. By filling the inputs tab, the enterprise value will be automatically computed in accordance with each valuation method and
the infamous football field graph is generated under the partial dashboard tab. Financial score valuation comes from a comparison of valuation results with the ask price.
General
Throughout the model there are some comments with hints and explanations to help you and one line of instructions per sheet. The input cells are the red ones. Non-input
cells should not be altered by inexperienced users.
In the final dashboard sheet you can find three graphs summarizing the analysis and you have to assign a weight to each component, financial and strategic, according to
your goals and the business features. The final decision algorithm is given by a weighted average of the strategic and financial scores.
1) Discounted Cash Flow
The model presents some caveats that must be recognized:
- garbage in garbage out, the output is totally dependent on the scepticism applied to inputs;
- it ignores the fact that one value that is currently 0 may be positive or negative in the future;
- it ignores the possible gains from the financing of the deal which can affect the decision (but never the valuation);
- discount rate assumed to be the same for every year of the projection period;
- equivocal comparibility of the peers selected;
- as every theoretical valuation, is fallible as it relies on future perspectives and forecasts
24
III. NATIONAL EXPANSION
APPENDIX 3.1: Methodology Strategy II
Figure 45: Methodology
25
APPENDIX 3.2: Oporto’s Boost Competitors
Table 6: Products diversity map (Source: Desk research)
Table 7: Groups’ competitors (Source: Desk research)
COMPETITION Walking Segway Sidecar Twizy Tuk tuk Bike e-Bike Scooter GocarClassic CarsBuguiesBoat VespaEscape
Games
Other
activities*
BOOST X X X X X X X X X
Inside Tours X** X** X** X
Blue Dragon X X X
E.Fun X X X X
Vieguini X X
North Road X X X X
L&L X X
Baja Bikes X
Fold’n Visit X X
Sportours X
Porto Rent a Bike X
Tuktour X
Tuking People X
SideRide X X
Rental Motorbike X X
Oporto share X
Classic Porto X
Scape Challenge X
Exit Games X
oPorto adventures X
CoolTouroPorto X X
Detours X
Latitude 41 X
Private
Tours
Corporate
activities Description
BOOST X X
Inside
Tours X X
Located in Lisbon but with a lot of services in Porto through
partnerships as Blue Dragon and Tuking People.
Blue
Dragon X X
The nº1 of 60 activities in Porto according trip advisor. Provides many
services and controls Porto Rent a Bike and Baja Bikes Porto. It has
many partnerships with online ticket sellers and promoters.
oPorto
adventures X X
Sell many radical experiences as canoeing, rappel, slide, trekking, and
rafting to particular or corporate events.
CoolTour
oPorto X X
Provides walking and van tours around the Porto and other nearby
cities. Organizes events, meetings, conferences and team buildings
(BTT, Paintball, slide, rappel, karts, peddy-paper and so on).
Latitude 41 X X
Organizes team buildings, events, meetings, conferences and private
tours. Main activities: BTT, Paintball, slide, rappel, karts, peddy-paper
and so on.
26
APPENDIX 3.3: Business Model Canvas – Boost Oporto
(Source: Desk research)
27
APPENDIX 3.4: Congress Rankings
Table 8: Worldwide Ranking - number of meetings per city (Source: ICCA Annual Report)
28
29
Table 9: European Ranking - number of meetings per city (Source: ICCA Annual Report)
30
APPENDIX 3.5: Decision Matrix score attribution
Table 10: Decision Matrix Score attribution (Source: Desk research)
Score attribution
INVESTMENT
<5000: 3
[5000;10000]: 2
>10000: 1
PEOPLE
When it needs no one apart from the client to operate: 3
When it needs a guide during the tours: 2
When it needs an employee person fully dedicated: 1
OPERATIONAL COMPLEXITY
When it is ready to be used when the customer arrives, needs low coordination efforts and usually do not
requires frequent maintenance: 3 - Segways and E-bikes do not need frequent maintenance, do not require
any driving license nor special coordination.
When it requires some preparation and coordination and regular maintenance: 2 - GoCars, Scooter, beetles
and buggies need driving licenses and require some maintenance. Tuk tuks and GoCars also need some
maintenance and require to organize tours.
When it requires frequent maintenance and high coordination efforts: 1 - escape hunt requires a lot of
maintenance and coordination of groups
DEMAND
Based in Lisbon's forecasts
- Segways, GoCars and bikes are those with higher demand in Lisbon
- Tuk tuks and beetles have regular demand. Scooters are not being rented in Lisbon but considering the
number of guests that asks for scooters in Lisbon and the number of operators in Oporto, the demand is
expected to be regular.
- Escape hunt, when looking for the online booking of Oporto operators is really low
- Buggy has low demand in Lisbon and is a product that is not innovative
PROFIT
Based in Lisbon's gross margins: Segway: 82%; GoCar: 92%; Tuk tuk: 61%; E-bike: 73%; Scooter: 94%;
Beetle: 65%; Buggy: 95%; Escape Hunt: 82%
FIT WITH OPORTO
The relation between each product and Oporto’s characteristics:
- geographical
- cultural
- legal
- weather
COMPETITION
Based in the analysis made to Oporto competitors - number of competitors operating in Oporto VS
dimension of the market
Segway: 1 (but big)
GoCar: 0
Tuk tuk: 2
E-bike: 6
Scooter: 5
Beetle: 1
Buggy: 0
Escape Hunt: 2
EASE OF IMPLEMENTATION
Average of resource requirements and Operational Complexity
EASE OF PENETRATION
Average of Expected Results and External threats
31
APPENDIX 3.6: Oporto – Prices Comparison
Table 11: Prices Comparison (Source: Desk Research)
Oporto comparing with Boost Prices
Service Competitors average
price p/hour
Boost
Price
Difference
(%) Description
Segway (p/hour) €19.17 €28.33 68% Prices in Porto are around 32%
lower than Boosts.
GoCar (p/hour) €13.32 €10.42 128% Prices of similar products are
around 28% higher in Porto.
Bikes (p/day) €25.00 €29.00 86% Prices of electric bikes in Porto are
around 14% lower in Porto.
Bike tour (p/hour) €7.45 €11.53 65% Prices in Porto are around 35%
lower but bikes are not electric.
Beetle (p/hour) €53.00 €9.11 582% Boost Prices are around 5.8 times
lower than similar tours in Porto.
Scooters (p/day) €33.39 €35.32 95% Prices in Porto are around 5%
lower in Porto
32
APPENDIX 3.7: Boost’s Oporto Organizational Structure
Figure 46: Boost’s Oporto Organigram (Source: Desk Research)
Boost CEO
Oporto Director
Store Manager
TourGuides
Store employee
Mechanic
Events Manager
Events staff
Financial Manager
33
APPENDIX 3.8: Boost’s Oporto P&L
Table 12: Boost’s Oporto P&L (Source: Desk Research)
APPENDIX 3.9: Budget requirements
Table 13: Budget requirements (Source: Desk Research)
Product Purchasing Price Units Budget
GoCar New: € 5,000.00 10
€ 60,000.00 Used: € 2,000.00 5
Segway New: € 7,500.00 5
€ 87,500.00 Used: 5,000.00 10
Bike New: € 1,200.00 20 € 24,000.00
Beetle Used + maintenance: € 6,000.00 10 € 60,000.00
Scooter New: € 1,500.00 20 € 30,000.00
Total € 261,500.00
2016 2017 2018 2019 2020 2021
ExpectedRevenues €266198,82 €487142,83 €508771,73 €537241,18 €545299,79 €553479,29
RevenuesIndividuals €69705,38 €126612,94 €133010,75 €140332,85 €142437,84 €144574,41
RevenuesEvents €196493,44 €360529,89 €375760,98 €396908,33 €402861,95 €408904,88
GOGS €72665,59 €134114,66 €140165,38 €147897,61 €150116,08 €152367,82
GOGSIndividuals €8431,43 €15317,43 €16194,14 €17031,43 €17286,90 €17546,20
COGSEvents €64234,16 €118797,23 €123971,24 €130866,19 €132829,18 €134821,62
Overheadcosts €18612,88 €56396,99 €57615,91 €59133,40 €60020,40 €60920,71
Personnelexpenses €77583,33 €133000,00 €133000,00 €133000,00 €134995,00 €137019,93
Marketingcosts €15528,26 €24357,14 €25438,59 €26862,06 €27264,99 €27673,96
EBITDA €81808,76 €139274,04 €152551,85 €170348,10 €172903,32 €175496,87
Depreciations €38583,33 €44583,33 €44583,33 €44583,33 €44583,33 €44583,33
Gocars €10000,00 €10000,00 €10000,00 €10000,00 €10000,00 €10000,00
Segways €14583,33 €14583,33 €14583,33 €14583,33 €14583,33 €14583,33
e-bikes €4000,00 €4000,00 €4000,00 €4000,00 €4000,00 €4000,00
Beetles €10000,00 €10000,00 €10000,00 €10000,00 €10000,00 €10000,00
Scooter €0,00 €6000,00 €6000,00 €6000,00 €6000,00 €6000,00
Amortizations €0,00 €0,00 €0,00 €0,00 €0,00 €0,00
EBIT €43225,43 €94690,71 €107968,52 €125764,77 €128319,99 €130913,54
Taxes(22,5%) €9725,72 €21305,41 €24292,92 €28297,07 €28872,00 €29455,55
NetIncome €33499,71 €73385,30 €83675,60 €97467,70 €99447,99 €101457,99
OCF €72083,04 €117968,63 €128258,93 €142051,03 €144031,33 €146041,33
CAPEX €231500,00 €74583,33 €44583,33 €44583,33 €44583,33 €44583,33
Gocars €60000,00 €0,00 €0,00 €0,00 €0,00 €0,00
Segways €87500,00 €0,00 €0,00 €0,00 €0,00 €0,00
e-bikes €24000,00 €0,00 €0,00 €0,00 €0,00 €0,00
Beetles €60000,00 €0,00 €0,00 €0,00 €0,00 €0,00
Scooter €0,00 €30000,00 €0,00 €0,00 €0,00 €0,00
NWC €16127,77 €13291,24 €1298,18 €1728,10 €486,68 €493,98
NWC €16127,77 €29419,01 €30717,20 €32445,30 €32931,98 €33425,96
IFCF €247627,77 €87874,58 €45881,51 €46311,43 €45070,01 €45077,31
FCF -€175544,73 €30094,05 €82377,42 €95739,59 €98961,31 €100964,01
34
IV. INTERNATIONAL EXPANSION
APPENDIX 4.1: Methodology Strategy III
Figure 47: Strategy III's Methodology
APPENDIX 4.2: Boost Madrid in numbers
Table 14: GoCar Madrid total sales, costs and EBITDA (Source: Boost)
2011 2012 2013 2014
January € 1,694.92 € 2,753.70 € 1,189.20 € 3,547.93
February € 3,389.83 € 6,686.95 € 649.79 € 1,823.50
March € 13,559.32 € 9,626.51 € 5,508.51 € 9,358.00
April € 18,644.07 € 11,116.27 € 11,518.42 € 10,398.39
May € 25,423.73 € 22,135.43 € 15,223.76 € 14,674.38
June € 25,423.73 € 13,344.99 € 12,008.04 € 5,832.05
July € 16,101.69 € 10,508.58 € 3,955.89 € 3,426.21
August € 13,559.32 € 5,961.30 € 2,108.77 € 811.30
September € 25,423.73 € 22,096.55 € 7,098.31 € 11,601.24
October € 25,423.73 € 9,191.36 € 5,270.14 € 14,341.89
November € 22,881.36 € 7,831.86 € 1,429.23 € 3,435.40
December € 3,389.83 € 1,608.15 € 2,767.60 € 776.03
TOTAL SALES € 194,915.25 € 122,861.65 € 68,727.66 € 80,026.33
Individuals € 104,237.29 € 63,015.73 € 15,403.36 € 10,271.40
Groups € 90,677.97 € 59,845.92 € 53,324.30 € 69,754.94
Total Costs € 180,767.82 € 146,420.18 € 59,145.59 € 74,443.80
EBITDA € 14,147.44 -€ 23,558.53 € 9,582.07 € 5,582.54
35
Figure 48: GoCar Madrid - Total Sales
Figure 49: GoCar Madrid - Total Costs
Figure 50: GoCar Madrid – EBITDA
36
APPENDIX 4.3: Tourism in Madrid
Table 15: Tourists, amount spent and average stay in Madrid’s Autonomous Community (Source: INE Spain)
2011 2012 2013 2014 2015*
International visitors 4,478,060 4,463,531 4,227,479 4,546,559 5,077,528
Domestic visitors 3,840,552 3,463,878 3,293,355 3,837,743 4,298,272
Total number of visitors 8,318,612 7,927,409 7,520,834 8,384,302 9,375,800
Total expenditure by tourists
(millions of €) 5,188 4,893 5,020 5,478 4,718
Total expenditure per tourist (€) 1,168 1,103 1,187 1,205 1,239
Average stay (nights)
7.4
7.3
7.3
7.2
7.1
APPENDIX 4.4: Porter’s Five Forces Analysis for Madrid
Figure 51: Porter’s Five Forces Analysis for Madrid (Source: Desk research)
37
APPENDIX 4.5: Competition in Madrid
Table 16: Tours operators’ map (Source: Desk Research)
Table 17: Major events agencies in Madrid (Source: Desk Research)
COMPETITIONPrivate
renting
Private
tours
Group
Tours
Corporate
activitiesWalking Gocar Segway Bike e-Bike B-bike Patines Scooter Buguies Vintage
Escape
Game
Tapas,
cook, …
BOOST PORTUGAL X X X X X X X X X X X
BOOST MADRID X X X X X
SANDEMANs X X X
Madrid Day Tours X X
Insider's Madrid X X X X
Show me Madrid X X X X
Gourmet Madrid X X X X
MadWay X X X X X X
Bravo Bike X X X X X X
Rent & Roll X X X X BIKES
BajaBikes Madrid X X X
Trixi Madrid Bike Tours X X X X X
Mobeo Smart Transport X X X
BearBike X X
Madrid2wheels: Segway tours X X X X X
URBAN MOVIL - Segway Trip X X X X X (Out) X (Out) X X (Out) X
MadSegs X X X
Madrid-Segway X X X X X
Funky Rider X X X X
Segway travel Madrid X X X
Seg City Tours X X X X
EnSegway Madrid X X X
EasyMobile (Segway Fun Es+Event Point) X X X X
Cooltra X X X X
Vintage Cars Tours X CAR
Madrid 600 X X CAR
EXIT Madrid X X X
BrainBreak Madrid X X X
The Rombo Code X X X
Enigma Expres X X X
The X-Door Madrid Gran Via X X X
Out.: Outsourcing
AGENCIES Private
renting
Private
tours
Group
Tours
Corporate
activities
Xvaganza X
Very Special Projects X
Best Day Eventos X
Dreams & Adventures X
Cititravel
TLC X
Eventíssimo X
38
APPENDIX 4.6: Alternative Strategies pros and cons
Table 18: Brief analysis of each alternative strategy (Source: Desk Reasearch)
Pros Cons
A. Maximize
GoCar Madrid’s
profits
Lower risk
Less costs (just have to buy tablets)
Synergies between Lisbon’s office,
workers and products
Few recruitment efforts needed
Slower growth
More conservative strategy with lower
financial potential
High dependence on procurement /
outsourcing suppliers
B. Operating
strategy similar
to Boost Lisbon
Company has knowhow in the tourism
entertainment industry
Founders and workers’ talent and
knowledge
Boost is the best in Portugal in logistics
and operations
Synergies between Lisbon’s office,
workers and products
Faster expansion
Easier to innovate
Mature and occupied market
High barriers to entry – Competitors and
prices are established
Higher risk – if the market doesn’t react the
investment made was huge
High Capital Requirements (> € 300,000)
Operates alone without previous experience
and market knowhow
C. Joint Venture
with strategic
partners
A big competitor becomes partner –
eliminates one competitor
Aligned interests between partners
Market consolidation
Gain good position in the market
Faster expansion
Shared risk among partners
Harder managerial decision making
Shared profits between partners
Different expectations from both parties can
result in JV’s failure
39
APPENDIX 4.7: Decision Matrix score attribution
Table 19: Decision Matrix score attribution (Source: Desk Research)
Resources
Investment
needed 8%
1: > €300,000
2: [€150,000 - €300,000]
3: < €150,000
Know-how
gained 10%
1: No know-how gains
2: No significant know-how gains
3: Significant know-how gains (e.g. local partner know-how)
HR needed 5% 1: When it needs an employee person fully dedicated
2: When it needs a guide during the tours
3: When it needs no one apart from the client to operate
Operational
Feasibility
Velocity 10% 1: The implementation and results are very slow
2: The implementation and results are observable, yet not fast
3: The implementation and results are fast
Complexity 8% 1: The implementation process is very complex
2: The implementation process require some operational efforts
3: The implementation is simple evolving few operational efforts
Potential
Market
Share 8%
1: Maintain market share
2: No significant increase of market share (+3%)
3: Significant increase of market share in a small time frame (+10%)
Sales 8% 1: No significant change in sales (< 25%)
2: Small increase in sales ([25%-50%])
3: Significant increase in sales (> 50%)
Growth 13% 1: The potential to accelerate grow is low
2: There is potential to grow and improve company’s performance
3: There is a huge potential to accelerate growth at a high rate
Risk
Operational 15% 1: High risk due to significantly high operational efforts evolved
2: Medium risk due to medium/high operational efforts evolved
3: Low risk due to not very high operational efforts evolved
Financial 15% 1: High financial risk due to significantly very high investment
2: Medium financial risk due to medium/high investment
3: Low financial risk due to not very high investment
40
APPENDIX 4.8: Business Model Canvas for Boost in Madrid
Figure 52: Business Model Canvas for Boost in Madrid (Source: Desk Research)