Spectrum Equity Fund may perform detailed valuations on portfolio companies and companies under consideration. Typically these valuations are performed under nine to eleven different methodologies or approaches. The overall fair market valuations are quite extensive and incorporate or analyze various reports, company historical and projected balance sheets and incomes statements, comparable sales of similar companies, industry trends, recast financials, goodwill analysis, etc.

Unlike valuing an automobile or a residential property (where comparable sales figures determine value) a business valuation is not that straight forward and financial buyers, strategic buyers, banks, and buyout funds tend to have different methods which they prefer. This is why we try to cover most methods utilized in the marketplace.

Two companies that appear identical as far as type, revenue and earnings can have vastly different values because of a variety of factors. These include;

•	How much is spent on research and development
•	To whom and where they sell their products (end users vs. OEM’s or distributors)
•	Branding streangth and intellectual property protection (patents, copyrights,trademarks)
•	Domestic and foreign marketing alliances
•	Sales and marketing teams
•	Management team and employees (age, training, turnover, experience, non-compete agreements)
•	Manufacturing plant (age, condition) and procedures (JIT, inventory turnover, efficiency, etc.)

Since synergistic buyers (as opposed to financial buyers who only look at the future return and risk on their investment) use a different yardstick altogether we tend to think about a company eventually being a merged entity with a combination of lower overhead, duplicated equipment and personnel, lower costs, increased buying power/leverage, greater management depth, stronger borrowing capacity, and revenues higher than the total of the two parts (moving the target’s product through the acquiring company's distribution channels and its product through the target’s), etc.

Our expertise becomes evident when we are soliciting these synergistic partners/buyers and need to demonstrate to them how the new combined company might look significantly different than might initially appear.

At the final stages of an eventual exit a company may need to retain or spin off certain pieces or divisions of the business in order to maximize shareholder value. Oftentimes there are divisions that generate lower return on equity and put a dampener on the overall value of the company. Many times these divisions should be retained and, with the proper focus, energy, and allocation of capital, turned around to appropriate levels of profitability.