CEO to CEO’s Fact Sheet on InfoVera and the TEVO® Score

Posted on August 6, 2018

About InfoVera

InfoVera is the country’s leading Market Value Reporting Agency (MVRA) with a purpose and mission to be the preeminent value assessment, management and growth platform for privately held companies.  The company utilizes the proprietary TEVO® Decision Engine tools.

Leadership:

InfoVera is led by Linas Jarasius, CEO and Chairman of Sterling Creek Holdings, Inc., the holding company for Infovera, which created and provides the TEVO® score.  He spent ten years as a partner in Swiss Avenue Partners, a consulting firm helping companies have better exits by understanding their value drivers.  It was this experience that led to the development of the analytical tool now known as TEVO®. Prior to Swiss Avenue Partners, he was a corporate financier, business coach and mentor with experience in the Australian, Asian, European and US markets. His career began with 15 years in the IT industry that culminated in founding and taking public a multi facet, HR-based services provider.

Allen Jost has driven much of the development of InfoVera’s proprietary algorithm that creates the TEVO® Score.  He has more than 30 years of experience in marketing and credit risk management data analytics with companies such as Metromail, Citicorp and Commercial Credit Finance Company.  Dr. Jost built the first successful credit card fraud detection scoring models in the financial services industry.  By the late 1990s, those fraud models were used to screen credit card transactions on nearly 80% of the credit cards in the United States and about 40% of all credit cards worldwide.  He has a PhD in Applied Statistics and he is an inventor and co-inventor listed in seven patents that deal with credit card and identity fraud detection analytics systems and the original patent on residential property appraisal statistical models.  In May 2000, Dr. Jost was selected as one of the “Top 100 IT Leaders in the United States” by Computerworld magazine.

About TEVO® Score

Using a proprietary, predictive analytics engine that blends financial and non-financial data, the TEVO® Score quantifies the opportunity gap between a company’s current and potential value. The scoring engine utilizes industry data sources including S&P Capital IQ and BVR (Business Valuation Resources) Market Data and compares selling prices, financials and other performance data from thousands of companies across industries and time to determine a TEVO® score for companies.

Data Sources Detail:

About S&P Capital IQ

Capital IQ is the research division of Standard and Poor’s. It provides detailed research and analysis of the stock market to a variety of investing stakeholders. Capital IQ offers data feeds to advisory firms, banks, corporations, investment managers, private equity funds, universities and more, providing overall market awareness and investment analysis audiences can use to inform their investment strategies.

Every year, Capital IQ collects and analyzes more than 135 billion data points in order to serve as the leading provider of financial services research.  The data Capital IQ collects and reports to its users includes company profiles, executive summaries, financial information and independent analyst reports. Capital IQ investigates financial news, market insights, company performance data and sector-specific data. The firm provides subscribers with historical and current information on more than 60,000 public companies and two million private firms.

About BVR (Business Valuation Resources)

BVR’s flagship product, Pratt’s Stats, is the largest database of complete, auditable private company financial statements and deal terms in the world. Their data and methodologies are also the basis for countless partnership agreements, buy-out terms, fairness opinion, and other business agreements where interested parties must come to terms on the value of privately-owned business assets. Today, every informed stakeholder in business valuation, performance benchmarking, or risk assessment turns to Business Valuation Resources. Their market data, news and research, and expert opinion are tested daily in tens of thousands of private company valuation reports—whether required by the SEC, IRS, international regulation, or the rigors of litigation or audit review.

Pratt’s Stats (now DealStats) is a robust online database that boasts the most complete financial details available on 29,300+ acquired private companies, with up to 149 data points that include six valuation multiples and 13 financial ratios. Each transaction includes detailed data to apply the market approach, derive a selling price, benchmark performance, or perform a fairness opinion analysis and BVR analysts rigorously review every transaction to ensure the most trustworthy data.

In addition to publicly available data, the information for this document is obtained directly from business owners through Infovera’s affiliate partners (of which CEO to CEO Inc. is one).

Introduction to Market based Assessment

Enterprise Value is impacted by internal factors (which are subject to the control of management), and external factors, such as macro-economic or political changes (which are not). Viewed as a whole, the internal factors guide external parties such as lenders, investment banks, merger & acquisition firms, business brokers, investors and potential acquirers regarding the overall health or “going concern” of a business.

Going concern factors include:

• Strength of future earnings
• Quality of infrastructure and base business
• Depth and effectiveness of management team and operations
• Value of intangible assets
• Value of customer base
• Future revenue, margin, market and product opportunities

“Going Concern” is a future-looking concept, and at its heart, is the likelihood that the business, going forward, will be strong and produce dependable and increasing profits. The patent pending TEVO® Score is the world’s first decision engine that measures going concern risk and calculates the likely range of multiples (EBITDA, Sales, Margin) for privately held businesses. The range mirrors FICO scoring used to measure creditworthiness.

Infovera’s approach is to estimate a company’s Total Enterprise Value. There are several valuation methods. However, for the majority of businesses seeking to understand their value, a market approach is (by far) the most common.

Simply speaking, the value of an enterprise is determined by multiplying the most relevant performance factor for a particular industry (such as Sales, Margin or EBITDA) by a multiplier. For example, if a company were to have an applicable EBITDA of $1 million and the assessed multiple is 5x, then the market value of that business would be $5 million.

In practice, assessing the performance measure is generally data driven from financial history and it’s a single number. By contrast, the applicable multiple is more fluid, and strives to predict the future of the business, and fits within a range. For the example listed above, the range of applicable multiple could be as wide as 2.5x to 9.0x, making the possible market value fluctuate between $2.5 million and $9 million based on $1 million of EBITDA.

The reason why two companies with the same EBITDA in the same industry will have different multiples is the difference between their going concern risks reflected in their multiplier. The TEVO® Score measures and quantifies the going concern factors and places the company within the applicable range.

Methodology

To perform a marketability analysis, Infovera, with the support of its licensed affiliate, conducts the following steps:

1. Estimates the company’s EBITDA
2. Searches for and identifies transactions involving the sales of relatively similar companies to the company and multiples for comparable companies based on their NAICS (used to be called their SIC code).
3. Assesses and analyzes the implied transaction multiples for a variety of financial metrics
4. Applies appropriate multiples to the company’s current revenue, gross profits and normalized EBITDA (where available)
5. Company specific information, collected through an interview process and via reviewing financials and other company information is input to TEVO® Decision engine and score, applicable basis and multiples calculated.

Validity

For ten years, this methodology was used and developed by Swiss Avenue Partners, a firm co-founded by Linus Jarasius, the current CEO and Chairman of Infovera.  During that time and since, hundreds of businesses were analyzed and optimized with this approach.

Since Infovera’s founding in 2015, the benchmark developing process has been automated, allowing for building a proprietary database of TEVO® scored data in every industry, broken down by asset and revenue ranges.  Over a million individual companies have been assigned a provisional TEVO® score based on public data, and nearly a thousand companies have provided information to Infovera allowing them to do a more detailed analysis, further bolstering the database.