Guideline Public Company Method

The Guideline Public Company method entails a comparison of the subject company to publicly-traded companies. The comparison is generally based on published data regarding the public companies’ stock price and earnings, sales, or revenues, which is expressed as a fraction known as a “multiple.” If the guideline public companies are sufficiently similar to each other and the subject company to permit a meaningful comparison, then their multiples should be nearly equal. The public companies identified for comparison purposes should be similar to the subject company in terms of industry, product lines, market, growth, and risk.

In another variation of this method, the valuator may determine market multiples by reviewing published data regarding actual transactions involving either minority or controlling interests in either publicly traded or closely held companies. In judging whether a reasonable basis for comparison exists, the valuator must consider: (1) the similarity of qualitative and quantitative investment and investor characteristics; (2) the extent to which reliable data is known about the transactions in which interests in the guideline companies were bought and sold; and (3) whether or not the price paid for the guideline companies was in an arms-length transaction, or a forced or distressed sale.

To identify guideline companies that might be comparable to the Company that is the subject of this valuation report, we reviewed data provided by the Center for Economic and Industry Research, a service affiliated with the National Association of Certified Valuation Analysts. The data was compiled by BIZCOMPS and Multex, two widely-used providers of data.

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