EQUITY RESEARCH
CAG International AG
Fair Value: 13,5 Mio. Euro
October 11th 2019
Please read our disclosures regarding potential conflicts of interest as well as our disclaimer at the end of this document!
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CONTENTS
OVERVIEW AND KEY FIGURES
03
BUSINESS MODELL
04
EXECUTIVE BODIES, SHAREHOLDERS AND HISTORY
07
STRATEGIC CONSIDERATIONS
12
MARKET AND COMPETITIVE ENVIRONMENT
18
CORPORATE TRAINING AND LEARNING ON THE STOCK EXCHANGE
19
SWOT ANALYSIS
21
FINANCIAL PLAN AND DCF ANALYSIS
22
PEER GROUP ANALYSIS
27
VALUATION AND COMMENTS
28
BALANCE SHEETS AND PROFIT AND LOSS ACCOUNTS 2016, 2017, 2018
29
SELECTED REFERENCE CLIENTS
32
DISCLAIMER & CONFLICTS OF INTEREST 33
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OVERVIEW AND KEY FIGURES
ISSUER CAG International AG • CAG International AG specializes in e-learning, corporate training, and corporate transformation.
• The company provides well-crafted, comprehensive and custom-made learning programs for large, international organizations.
• Today, ist learning and training services reach over 200,000 internal staff and employees.
• The customers of CAG International AG include leading manufacturing, financial, services and consumer products companies in the Scandinavian market and aborad. The company delivers over 1,500,000 blended learning, web-based, and classroom programs a year in more than 30 languages
• Furthermore, the company fosters strategic alliances and partnerships with international corporations such as Intrepid Learning, CrossKnowledge, InfoPro Worldwide Inc., WBT Systems, corpedia and Junglemap.
REGISTERED OFFICE BAAR, SWITZERLAND
WEBSITE WWW.CAG-INTERNATIONAL.COM
YEAR ESTABLISHED 2016 (2000)
LEI 8945 00SQ 8FO2 Z909 KI30
SHARE CAPITAL CHF 768,828.56
NUMBER OF SHARES 6,406,904
CLASS REGISTERED SHARES
PAR VALUE CHF 0.12
CUSIP NOT ISSUED
ISIN CH0330937209
CFI ESVUFR
WKN A2DQNE
SYMBOL (VIENNA STOCK EXCHANGE
CAG
STOCK EXCHANGE VIENNA STOCK EXCHANGE
APPLICANT ISSUER
SEGMENT DIRECT MARKET
TRADING MODEL CONTINUOUS TRADING
MARKET MAKER ICF BANK AG
CAPITAL MARKET COACH CAPITAL LOUNGE GMBH
Source: Capital Lounge GmbH
Source: CAG International AG
CAG International AG (in CHF) 2018 2019e 2020e 2021e
REVENUES 1,385,213 1,974,760 2,764,664 3,870,529
COST OF SERVICES 320,144 415,094 691,166 967,632
GROSS PROFIT 1,065,069 1,559,665 2,073,498 2,902,897
STAFF COSTS 842,735 1,036,946 1,244,099 1,354,685
OTHER EXTERNAL COSTS 417,250 398,704 691,166 870,869
OTHER OPERATING EXPENSES 6,535 22,117 27,647 38,705
EBITDA -201,451 101,898 110,587 638,637
EBIT -202,761 82,150 82,940 599,932
FREE CASH FLOW TO EQUITY -202,725 61,613 62,205 449,949
IPO-Analysis Risk Sector Compilation / Updates
Type: IPO-Valuation medium GICS 11/10/2019
EV: 20,6 Mio. EUR Beta: 1,2 IT- / Educational Services yearly
Source: Capital Lounge GmbH
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BUSINESS MODELL
CAG International AG offers clients a special outsourcing solution called CORE™. The CORE™
engagement model unencumbers a company’s internal training resources to quickly increase
efficiency and effectiveness while instantly reducing cost and moving key items out of the
client’s profit and loss responsibility. The CORE™ engagement model effectively mitigates
many problems connected to traditional outsourcing practices.
Core Business Operations:
The company provides the following products and services:
1. Agility Tools and Methods
2. Decision Making & Business Intelligence
3. Live and Remote Workshops
4. Learning Management Systems (LMS)
5. Special Training Programs
By combining training systems acquired from customers with the introduction of proprietary
learning management systems developed by the company CAG International AG is able to
quantify existing corporate knowledge assets, develop new and optimize existing corporate
training protocols, and attain training goals within a shorter period of time. As a result, the
client’s learning experience is better-targeted, faster, and generally superior to that provided
by companies which rely on in-house training programs.
CAG International AG is able to address the corporate training needs of very diverse set of
industries ranging from transportation, logistics, pharmaceuticals, finance, and information
technology, to tourism and manufacturing.
A diverse array of product offerings allows the company to respond to the diverse and
dynamic needs of its customers. For clients with more sophisticated needs, CAG International
AG is able to provide completely custom-tailored e-Learning solutions through its flexible
Learning Management Systems (LMS) software platform. The company intends to exploit and
further develop its inroads into the e-Learning market by taking advantage of technological
advances in software and hardware and the relative ubiquity of laptops, tablet computers and
smartphones. These advances allow to offer learning solutions that do not require expensive
and costly employee travel to live courses and conferences.
Agility Tools and Methods: Minerva Carve-Outsourcing CORE™
This corporate agility brand has its basis in focusing the clients’ resources back towards core
competencies and away from maintaining a captive vocational education institution within
the organization. By divesting non-core operations the clients realize immediate returns on
investment and reduced administrative and personnel costs.
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Dynamic Navigational Center3 (DNC3)
A key part of the company’s client service strategy is information collection and dissemination.
The DNC3 provides a comprehensive interface to Key Performance Indicators (“KPIs”) and real-
time information in an easy-to-read and use format where every corporate agility tool is
graphically and clearly displayed.
STA+R
Systematic Training Audit and Recommendations – STA+R – is a trademarked corporate agility
auditing process tool. STA+R measures existing training functions and sub-functions and
provides a detailed, industry specific best-practices analysis.
Other corporate agility tools and methods owned or licensed by the company:
▪ Understanding Transformation and Agility (Strategic)
▪ Forward Decision Drivers (FDDs) (Operational)
▪ 7S Framework (C7S) (Strategic)
▪ Inclusiveness Funnel (IFS) (Operational)
▪ Rolling Budget System (RBS) (Operational)
▪ Marketing Responsibility Assessment (MRA) (Strategic)
▪ Overhead Value Analysis (OVA) (Operational)
▪ Leadership Assessment (Strategic)
▪ Injecting Entrepreneurship into your organization (Strategic)
▪ Setting up a virtual or physical DNC (Operational)
▪ Evaluating direction with the Strategic Triangle (Strategic)
More Information on these tools can be found in “Mastering Agility, Successfully Navigating
Uncertainty”, written by Hans Amell and Kurt Larsson and available through Amazon.com or
via the Minerva Group.
E-Learning and Blended Learning
E-Learning or “electronic learning” is the term most used to describe training over the
internet. The term includes all kinds of training adapted for public, private, and corporate
educational requirements. This term can also include aspects of artificial intelligence, gaming,
multimedia, etc.
Blended learning is e-learning plus a balanced mix of traditional classroom or face to face
coaching. The idea is to blend more understanding, emotion and personal contact into the dry
logic often associated with strictly e-learning applications, and to reduce the costs associated
with traditional classroom settings without sacrificing direct and in-person student-teacher
interaction.
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Mobile Learning
Today’s busy professionals appreciate the opportunity to study while on the move and today’s
mobile devices provide more computing power than ever. The company’s platform deploys a
number of tools to produce customized digital training applications for smartphones and
tablets permitting the clients to instantly distribute training programs remotely to personnel
around the globe and continuously track progress and adjust methodologies in real-time.
Live and Remote Workshops
The company offers customized sales and sales management training workshops tailored to
the clients’ specific needs. Workshops are based on proven collaborative sales techniques
blended with clinics on “soft skills” such as conscious communication and body language
awareness. This unique combination enables each participant to understand, act upon, and
complete every stage of the sales process more effectively. The result is higher close rates,
fewer customer returns, and a measurable increase in customer loyalty. The company also
offers leadership training to improve the leadership skill-sets in senior sales executives.
Furthermore, CAG International AG offers customer service training programs. These
packages are designed to sharpen the necessary communication skills with the ultimate aim
to provide a seamless, outstanding customer service experience, and in the process, to
generate more contagious customer loyalty.
Learning Management Systems (LMS)
CAG International AG has at its disposal two modern, cloud-based distinctive Learning
Management Systems (LMS), focused on deploying different learning strategies. The company
continues to survey the marketplace and evaluate new systems for potential additions to its
platform.
Special Training Programs
CAG International AG also offers bespoke training programs designed from the ground up for
unique or non-traditional training requirements.
The management of CAG International AG believes that the work environment should be a
positive and developmental space. Challenges presented by the faster pace between new
implementations and changes, increased volatility, increased personnel changes, rapidly
shifting laws and tax rules, as well as a drastic trend in ever shorter business cycles, all
contribute to turbulence and uncertainty and are prone to frustrate the goal of a positive and
developmental workplace.
The service offerings are designed to provide agile assistance to our clients to enable them to
identify, act quickly, decisively, then measure and learn from the constant changes and
adjustments needed to survive and more importantly thrive in a competitive global
environment.
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EXECUTIVE BODIES, SHAREHOLDERS AND HISTORY Its two Directors, Hans Amell, and Kurt Larsson and Swiss Manager Oliver Speilmann manage the
company at present. The broadest powers are vested in the Board of Directors to act under all
circumstances on behalf of the Company. The Board of Directors (subject to Shareholder approval
where applicable) directs the general management of the Company as well as the policies for
administration and investment. Any or all members of the Board of Directors may be dismissed only
under the circumstances prescribed by the Memorandum and Articles of Association.
EXECUTIVE BODIES
Hans B. Amell – Founding Partner, Chairman, CSO
Mr. Amell began his career with McKinsey & Co. (Scandinavia) in 1978. He has spent over two
decades providing clients with management and operational advice. Mr. Amell has frequently
been called upon to execute change in Fortune 500 and Global 1000 companies from C-level
or Board positions including as a corporate officer and Senior Vice President of Marketing for
Allied Signal, Senior Vice President of Marketing for Unisys, Chief Operating Officer of
Rosenbluth International, Managing Director of The Conference Board, President and General
Manager of Ericsson Workstations (Sweden), Chief Executive Officer and General Manager of
Ericsson (Denmark), Senior Vice President of Cognizant Corporation, as a Corporate Officer
and Senior Vice President of Dun and Bradstreet and Chairman, President and CEO of Dun and
Bradstreet’s Software Units.
Mr. Amell’s career as a change agent has focused on the converging technologies of hardware,
software, telecommunications and business services. Mr. Amell holds a BA/MBA equivalent in
Marketing and Organizational Behavior from the University of Stockholm and Uppsala. Mr.
Amell also attended the Post-Graduate ISMP Executive MBA Program sponsored by McKinsey
at the Harvard Business School and holds post graduate credentials in Marketing. Author with
Kurt Larsson of the newly released hit business book “Mastering Agility, successfully
navigating uncertainty”.
Christer Sandin – Head of Stockholm Office and Country Manager for Sweden
Christer Sandin has 19 years’ experience in B2B Services sales and Management, having
successfully developed and led global sales teams as senior executive in learning and
corporate development. Christer started his career with sales at a small startup within
consulting and outsourcing of students before he moved on to selling ERP system at both small
and larger suppliers such as Visma for a couple of years. 10 years ago, Christer started his
career within learning as KAM and Sales Manager at Outsmart AB, which was renamed to
Minerva Group. Christer is since 2016 leading the Swedish operations at Minerva Group.
Christer has a background from engineering physics at Luleå university of technology.
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Malina Andrén – production manager and head of Gothenburg office
Malina Andrén has 19 years’ experience in strategic and operational communication as well
as production management within digital learning production at various positions at digital
learning suppliers.
She is responsible for daily operations including hiring, staff scheduling and supplier
management. Her background is Masters of science Computational linguistics at Gothenburg
University.
Kennet Oxelgren
Kennet Oxelgren began his career in the music-industry in 1979 as chief accountant for
Polydor AB . In 1990 became CFO for PolyGram AB and CFO for Universal Music AB as well as
Chairman of the Board. 1991-1999 was even CFO for Sweden Music AB and reported directly
to Stikkan Andersson of ABBA Fame. Today, he works as CFO for The Artist House Stockholm
AB and reports to Ola Håkansson. Also engaged in a number of consulting projects mostly in
the Music Business. Began as Chief Economic Officer at Minerva Group in December, 2018.
Martin R Wade III – Partner in Residence
Mr. Wade is Chief Executive Officer of IMSI, Inc. He also served from 1998 to 2000 in Mergers
and Acquisitions at Prudential Securities and from 1996 to 1998 as a managing director in
Mergers and Acquisitions at Salomon Brothers. From 1991 to 1996, Mr. Wade was National
Head of Investment banking at Price Waterhouse, LLC. Mr. Wade also spent six years in the
Mergers and Acquisitions department at Bankers Trust and eight years at Lehman Brothers
Kuhn Loeb. Mr. Wade is credited with participating in over 200 Mergers and Acquisitions
transactions involving a variety of Fortune 500 clients.
Mr. Wade was a partner in M/A Group at both Lehman and Solomon Brothers where he
completed over twenty software company acquisitions and sales. From 2000 to 2006 , Mr.
Wade served as Chairman and CEO of a public software development company where he was
responsible for acquiring or establishing the commercial development of many leading
software products. Mr. Wade has also consulted with other companies such as Alliance One
in the development of proprietary inside software into successful outside products.
Mr. Wade is a member of the Board of Directors of NexMed (OTC: NEXM), Command Security
Corporation (OTC: CMMD) and Energy Transfer Group of Dallas, Texas.
Kurt Larsson – Director & Resident Partner
Mr. Larsson has an extensive background in international sales and marketing management
having sold everything from car tires in Houston, Texas to retail banking delivery systems in
over 20 different countries to tons of retail investment gold bars and coins. His
accomplishments include being in the President’s Club for top sales in three different
organizations as well as the author of 4 books. He currently sits on the Board of 4 companies,
has been Sales Director for a precious metals investment company and has a B.S. in Finance
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from Virginia Tech. He is also an Executive Coach and has worked both in London and
Stockholm as such.
For over past 20 years he has driven his own educational consulting company Expanding
Understanding, specializing in effective communication in leadership, sales, service and
teamwork. His workshops, seminars and coaching sessions focus upon the growing
importance the Collaborative Sales Model and the leveraging effect of more conscious body
language. He has worked in these areas with organizations such as Ericsson, SEB (Banking) and
Sabre Travel Network.
His passions include his family, jogging, technology, Austrian economics and the study of
conscious body language. He is also a certified International Body Harmony Teacher with over
20 years of hands-on experience in this conscious and soft touch method of bodywork. He is
also the two-time Past President of the Stockholm International Rotary Club, resides in
Sweden and speaks the language fluently. He still loves to travel.
Jared Schnackenberg – Partner in Residence
Prior to the Catalyst Acquisition Group, Mr. Schnackenberg was the President of Oticon
Medical, U.S.. There, Mr. Schnackenberg was recruited to prepare the U.S. organization to
bring to the U.S. market a new cochlear implant system, something which hasn’t been done
in the last 20 years. Mr. Schnackenberg assumed full responsibility for the U.S. organization
and for the support to cochlear implant clinics, ENT physicians, Audiologists and recipients.
Operating in a FDA class III market his whole career, Mr. Schnackenberg brings a wealth of
experience to the field. Mr. Schnackenberg has developed a solid track record building and
leading high-performance teams within sales and marketing, service, regulatory, clinical
research, and reimbursement departments.
Prior to Oticon Medical, Mr. Schnackenberg was Vice President, North American Sales and
Service for Advanced Bionics, another neuromodulation cochlear implant company. He served
with Advanced Bionics for 11 years, gaining deep experience in hearing implants and proving
success in relationship-building and business development.
Schnackenberg earned a Master of Arts in Audiology from the University of Northern Colorado
and holds board certification in Audiology with a specialty in Cochlear Implants from the
American Academy of Audiology.
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SHAREHOLDERS As the date of this Business Analysis and according to the shareholders’ register, the shareholders breakdown is shown in the table below:
SHAREHOLDER BENEFICIAL OWNER(S) SHARES PERCENT
Catalyst International, Ltd Hans Amell
Robert Vollers
4,283,070 66.9
Orbital AG Cyrill Staeger 480,268 7.5
Trifft Group AG Cyrill Staeger 480,268 7.5
Gores Trust Tewfik Gores 443,794 6.9
Kotzubei-Beckmann Trust Jacob Kotzubei 146,821 2.2
Hans Amell 572,684 9.0
TOTAL 6,406,904 100.0
HISTORY On 7 August 2016 CAG International AG acquired all of the shares issued and outstanding of
CAG Sweden AB (a company limited by shares and incorporated under the laws of Sweden on
2 July 2010 with registration number 556814-4082). At the time of the acquisition, CAG
Sweden AB operated as a holding company with two wholly-owned subsidiaries: MCLP
Sweden AB (the operational entity in the e-learning and corporate training space formed on 4
May, 2000 and MA Sweden AB (a technology holding entity created on 2 February, 2013 to
manage licensing and royalties related to intellectual property developed by the company).
Both subsidiaries are companies limited by shares, formed under the laws of Sweden with
principal offices currently in Stockholm, Sweden (see Figure I, below).
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History of the subsidiaries Outsmart AB was founded in 2000 by Volvo Technology Transfer AB, Sigma AB and Volvo
Trucks AB. In 2010, Outsmart was acquired by Catalyst International. Volvo Technology
Transfer AB required a Swedish Holding Company to own 100% of this Acquisition. Therefore,
CAG Sweden AB (Owned 100% by CAG International AG) owned 100% of MCLP Sweden AB.
Under Catalyst’s direction the company’s business model evolved to include developing and
presenting digital content for learning system support in the form of a platform-based
“learning management system” (an “LMS”). Consulting services to support individual
customer needs and provide ongoing support and development were rolled out soon after
inception.
Catalyst expanded the enterprise’s corporate strategy to include advanced management
consulting services. The combined business strategy aimed to leverage the existing training
platform with information management services to enable the executive corps within The
company’s clients to collect data on and analyse existing levels of corporate training and
expertise within the organization. Once this data is collected, management can use The
company’s services to quickly develop and deploy training programs to address internal needs
in the areas of marketing, sales, compliance, and administration. The company now markets
these services under the “Corporate Agility” brand.
To facilitate rapid adoption within an organisation, Catalyst offers a unique “Carve-
Outsourcing” model in which Catalyst acquires or “carves out” existing training and human
resource functions within an organization and, while rationalising and leaving the resources in
place with the client, runs the new group as an “on-site” consulting vendor (hence “Carve-
Outsourcing”).
Using this acquisition model, on 2 February, 2013 CAG Sweden AB acquired parts of SJ Service
Academy, the internal training function of Swedish Railways eventually housing the new
acquisition in the newly formed entity “MA Sweden AB” (for “Minerva Academy Sweden”).
Following the restructuring of the Swedish Railways project, The Group streamlined MA
Sweden AB and expanded the mandate of the firm to include services to external customers.
Substantial changes gripped the corporate training market between 2012-2015. Despite this,
during this period the Group maintained and expanded its client and partner portfolio which
include firms such as SKF AB, SCA AB Following a period of downsizing in the Group added
GANT Pyramid AB and Cellmark AB to its client list.
Debt management issues, SJ restructuring, and a difficult regulatory and employment-
compliance environment in Sweden, along with extremely high benefits and pension expense
in that country caused MCLP Sweden AB to seek restructuring to reduce fixed personnel
expenses and certain other debts. MCLP’s restructuring request was granted by Göteborgs
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Tingsrätt in Gothenburg, Sweden on 2 March 2018. The company was able to significantly
reduce personnel expense and restructure certain debts but was thereafter obligated to
finance its current operating costs from current cashflow.
CAG International AG is now focused on expanding its operations around two core-
competencies: delivering and supporting LMS, and deploying digital content in the field of
education technology. The company’s target market remains large and multi-national
corporations and other enterprises with acute training needs.
STRATEGIC CONSIDERATIONS
Sales and Marketing Summary
CAG International AG was created as the parent company and platform company for
marketing the world-wide expansion using its proprietary services of CORE™, STA+R™ and A²
Index™ as drivers for growth:
CORE™ is a unique outsourcing system that mitigates most issues encountered in traditional
outsourcing by “carving out” existing corporate learning functions and selling the service back
to the client on a long-term contract.
STA+R™ is a proprietary tool that effectively analyses all aspects of a learning organization
against the accumulated inventory of industry best practices.
A² Index™ is a world leading proprietary survey based tool to assess a company’s corporate
agility.
The early sales strategy entails the retention of four senior executives with extensive
outsourcing experience to market and sell services with an early focus on markets in Europe
and the United States. Following an intensive introductory training program to familiarize the
new executives with our service offerings and platform, CAG International AG will conduct a
detailed market segmentation and develop potential market introduction efforts.
The corporate learning market is large and extremely fragmented, both on the supply as well
as the demand side. Corporate learning has become a major obstacle to corporate agility.
Training cannot be developed until products or services are well defined and ready to launch.
Life cycles of new products and services are growing shorter.
Developing a training curriculum or creating an effective corporate learning program is a
highly specialized skill and is generally not a core competency of the target clients: large global
corporations. CAG International AG faces challenges in its sales efforts from internal sources
within its clients, particularly where its services promise to reduce headcount (for example in
human resources departments). As a result, CAG International AG views the sales process as
beginning at the C-Suite level.
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The sales and marketing strategy therefore begins with senior executive level networking and
participating both as speakers and sponsors of high-level events. Public relations professionals
and opinion leader initiatives will be paramount. Deep collaboration with transformational
and change agent entities and serial acquirers (for example large investment groups or private
equity funds) is also a key strategy.
Initial Target Industries
Certain industries have higher training expenditures than others and thereby are a higher
priority at the outset. Various reasons contribute to these industries’ higher level of
expenditures, including: greater need for compliance with the law, quality standards and
industry requirements; higher rates of change that require training to stay competitively
abreast; workforce demographics which demand greater investment in career-enhancing
skills; and corporate cultural emphases on knowledge attainment.
The early target industries include:
High Technology and Communications Firms.
These companies usually represent the leading edge in training, compensation, and quality
practices. They have large internal training staffs and generally spend more money per
employee on training than any other industry group. They also are more likely than any other
industry group to embrace learning technologies to deliver training.
Pharmaceutical, Health Care, and Medical Device Manufacturing Firms.
Safety and quality assurance programs are a key part of these businesses given their high
exposure to product liability and other legal, regulatory, and compliance risks. Quality control
programs and advanced workplace practices are essential needs. Some of these programs are
mandatory due to governmental and industry regulations. These companies have some of the
largest per-employee expenditures and invest heavily in most forms of training using both off-
the-shelf and customized programs. However, most training dollars are spent on “in person”
programs and hard assets (e.g. corporate university campuses). These existing programs
present an enormous opportunity for cost improvement.
Financial Services and Insurance.
Because most employees in these sectors are trained on the job, these organizations spend a
considerable amount of money on classroom education programs. Many firms in these
industries have dramatically dispersed geographic operations (e.g. commercial and retail
banking). They are also positively inclined to use computer-based training. Like some sectors
of the health care industry, many members of the financial services and insurance industry
are required to complete a minimum number of hours of continuous education programs to
maintain certifications and stay current with the changes in their industries.
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Large Diversified Manufacturing.
Many manufacturing companies have large “legacy” training departments. Many of these
organizations have “corporate universities” that were created in the 1980s and 1990s with
associated infrastructure (facilities, large in-person training departments, etc.). As competitive
pressures have increased, these companies are under increased scrutiny to improve financial
performance yet have not been at the forefront of embracing e-Learning technologies. While
these companies have significant amounts of “blue-collar” employees, many of these
organizations have decided to offer significant career education in order to attract highly-
skilled employees (or retain their legacy workforce). In addition, the demographics of certain
companies’ workforces increase the importance of legal compliance training courses that
inform them on proper workplace conduct. The financial opportunity offered by large
diversified manufacturing companies makes these organizations ideal target clients.
There are certain characteristics of a firm or recent material events that may serve as catalysts
for change in the training department and increase the likelihood a potential client will
contract the company’s services. These include:
Forward-Thinking Management Teams
The ideal client is a forward-thinking organization that embraces modern management and
workforce practices, particularly the ongoing education of its workforce. In the quest to
maintain a competitive edge, the client’s managers often do business with new, cutting edge
organizations that can show demonstrable gains to the bottom line, particularly those that do
so using technology.
History of Outsourcing Non-Core Competencies
This potential client is amenable to outsourcing and has already outsourced or is taking steps
to outsource some of its non-core components. For example, Ericsson, British Petroleum,
most airlines, J. P. Morgan Chase, Bank of America have conspicuously outsourced many of
their non-core operating functions.
High Turnover Rates
Companies that experience high-turnover rates often under-invest in employee education due
to a fear of losing such investment in the near term. Companies in high-turnover industries
that can deploy inexpensive programs will gain a competitive advantage over those that do
not.
Firms with Significant Regulatory and Compliance Education Requirements
Many legal, financial services, and healthcare firms have significant mandatory and
continuous training requirements. Most of such training is still conducted “live” and could be
offered on a more efficient basis via blended learning and e-Learning.
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Rapidly Growing Organizations
Mainly due to resource constraints, many rapidly growing organizations are unable to keep
pace in building a training department to service the needs of their expanding workforces. The
concept of outsourcing this service may be very appealing to these organizations because they
can divert the accumulated cost savings to other revenue generating investments
Geographically Disperse Operations
Organizations with geographically dispersed operations can reduce travel expenses and
minimize productivity losses by having employees participate in training at their desks as
opposed to fixed-cost generating regional training centres.
Turnover in Training Department Management or Recent Training Failures
Many training departments are plagued by management turnover. The higher the
management turnover, the more likely an organization will be prepared to outsource the
function. Furthermore, organizations with high profile or costly training failures such as
headline-making discrimination lawsuits, conspicuous product liability issues, or a failed
product or service launch due to an undereducated sales force, may be inclined to take
remedial action by outsourcing the training function within the human resources department.
High Per-Employee Spending at Under Performing Organizations
Numerous large corporations are under performing yet continue to maintain bloated training
departments. This function often remains bloated in part due to senior management
inattention.
Non-existent Training Department At large Organizations
There are two types of large organizations that do not have an organized training function.
Some have eliminated any internal training function owing to dissatisfaction and short term
cost savings efforts. In other corporations, the training function simply never has been
consolidated and continues to be executed locally in an inconsistent manner.
Turnover at C-Level
In cases where there has been turnover at the senior management level the new management
team may be more willing to take aggressive steps towards change. This is particularly true
where executive turnover is a result of underperformance by the prior management team and
the new team feels the need to focus down to core competencies and fewer managerial
priorities.
Our Multi-Stage Marketing Plan
Stage One: Anchor Clients (Years 1-2)
Stage One involves growing the CAG International AG through complementary
acquisitions, strategic alliances, introduction of selected training products and securing
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CORE™ (Carve Outsourcing™) contracts with organizations CAG International AG has
targeted as potential anchor clients.
These are forward-thinking, companies that have a situational reason or general
propensity to consider outsourcing their entire training and/or education programs.
The ideal anchor client is based in Europe or the United States, has 20,000 or more
employees, and maintains an annual training budget of at least $30 million. The
successful implementation of the training program with the anchor client will establish
the company’s credibility and demonstrate viability in the marketplace. Furthermore,
with market leadership, ongoing thought leadership through its research capabilities,
effective execution, establishment of key partnerships, and selective acquisitions, CAG
International AG believes that many existing training services clients are potential
outsourcing anchor clients.
The company estimates that it may take as little as six months and as long as 18 months
to secure the initial anchor client and negotiate the associated service level agreement.
Stage Two: International Expansion (Years 2-3)
The second stage entails more aggressively marketing our services by highlighting
successes with anchor clients and expanding our focus to include companies outside
Europe and the United States.
The company’s unique experience in implementing training outsourcing solutions and
the company’s purchasing leverage should accelerate and shorten the sales cycle
during the early stages of our marketing campaign. Furthermore, the company’s
platforms, content relationships (or ownership), and operational or execution
expertise should allow it to target certain vertical industries effectively. In the latter
parts of this stage, CAG International AG feels that it will be able to provide training
outsourcing solutions on a profitable basis to companies with as few as 10,000
employees and training budgets of at least $15 million annually.
Stage Three: Leveraging a Premium Brand, Downmarket Focus (Years 3-5)
In stage three we believe our experience and reputation will result in a premium brand,
well positioned for a strategic potential buyer or a secondary large IPO. Size and scale
will also allow us to target smaller companies as well as multinationals. We expect in
this stage to profitably service corporations with as few as 2,000 employees with
annual training budgets as little as $5 million.
Pricing of Services
Upon signing of an engagement with a client, all client training expenditures within specified
training areas covered by the CAG International AG service level agreement (“SLA”) will be
billed directly the client. CAG International AG offers clients significant pricing flexibility via
four pricing methodologies: “Guaranteed Savings”, “Cost Plus”, “Purchase Option”, and
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“Hybrid”. Regardless of the pricing methodology for any particular client, the company’s
implementation process and schedule will largely remain the same.
Guaranteed Savings Method
Under the “Guaranteed Savings” methodology, CAG International AG establishes a baseline
per-employee spend-rate for the corporate client. As most corporations do not track training
expenditures as a separate expense item, there necessarily will be an interim, post-SLA signing
period of a minimum six months (the “pass-through period”) during which CAG International
AG will ‘pass-through’ all training expense items as incurred with a small administrative fee
added. During this period the company will also conduct a pre-SLA audit to determine as
accurately as possible the full extent of client expenditures incurred in the 24 months
preceding the SLA date. Analysis of the pre-SLA audit and spending during the six-month post-
SLA period will yield the total amount and forms of training currently conducted, the efficacy
of such training, and a baseline per-employee spend rate (the “BPE” rate). This BPE rate will
provide basis against which future expenditures will be measured. The allowable growth rate
(due to inflation) and minimum cost savings against the BPE rate will be determined on a
client-by-client basis and negotiated as part of the SLA.
CAG International AG assumes that the average allowable growth rate and minimum cost
savings will be 5% and 15% respectively under the Guaranteed Savings pricing option. Upon
completion of the pass-through period, CAG International AG shall bill the client according to
whatever incremental guaranteed savings rates have been agreed to in the SLA .
Cost Plus
The Cost Plus pricing methodology is also commonly used in outsourcing engagements,
particularly in situations where baseline current spending is difficult to determine. Under the
Cost Plus methodology, all costs of CAG International AG to manage clients’ training
operations are billed back to client with a small additional administrative fee. The Cost Plus
arrangement is easier to implement, as detailed pre-SLA audits are less necessary. Cost Plus
ensures a higher quality of training but not guaranteed savings, although the Company will try
to produce cost savings to clients so that they will be inclined to renew their contracts. The
company also expects that Cost Plus clients will be more sensitive about the dollar level of
upfront process improvements made by CAG International AG into the relationship (e.g. into
software, infrastructure, etc.) in order to be able to deliver better service at lower cost over
the term of the SLA. Furthermore, the company expects that the administrative fee added to
pass-through costs will be small at the outset of the SLA (estimated at 5%) but shall increase
over the SLA period (up to 20%), as the company brings promised efficiencies and efficacy to
client’s training operations.
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Purchase Option
Another form of transaction that will be considered by the company is the “purchase” of
existing corporate training departments in the form of “buy out”. Under a buy out structure,
CAG International AG would pay an upfront amount of cash in exchange for a long-term
contract to continue to provide training management services. Any amount of guaranteed
savings under such a contract will be reduced to account for the adjusted Net Present Value
(NPV) of the upfront payment. This alternative may be attractive to companies looking to
improve their capital structure and show short-term gains.
Hybrid
To provide additional flexibility, CAG International AG can offer any blend of the Guaranteed
Savings and Cost Plus methodologies to potential clients (the “Hybrid” pricing model).
ACQUISITION STRATEGY
CAG International AG believes that there are numerous opportunities for acquisitions within
the corporate training industry. Acquisitions are particularly attractive for the foreseeable
immediate future due to industry uncertainty and extreme fragmentation. At present CAG
International AG assesses that there are thousands of small training firms with headcounts of
between 5-10 training professionals. The company’s acquisition strategy will focus on those
targets that can provide a unique and sustainable competitive advantage or the acquisition of
existing clients. CAG International AG will also target potential acquisitions of other
intellectual capital suppliers to training departments. This may include companies that provide
unique and proprietary training content, as well as highly regarded companies that provide
training consulting services to an attractive customer base.
MARKET AND COMPETITIVE ENVIRONMENT
THE CORPORATE TRAINING MARKET
▪ According to www.trainingindustry.com, in 2013, worldwide global corporate training
expenditures totalled approximately $ 307 billion with 75% of expenditures taking
place in North America and Europe, while Asia accounted for much of the balance.
▪ Global Market Insights predicts that the eLearning market will exceed $ 200 billion by
2024.
▪ ResearchMoz expects the Corporate workforce development training market to grow
at a CAGR of 13.26% from 2017-2021.
▪ The „Training Industry Report 2017“ states that United States corporations spend an
average of approximately 0.7% of their total annual revenue on corporate training.
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Further analysis (source: Trade Conference Information) revealed the following trends:
▪ Organizations now invest over 40% of their training related budget on employees,
compared to just under half on customers.
▪ These same companies only invest 7% on suppliers and channel partners.
▪ Companies in North America spend almost 60% of their training budget on internal
activities (people, facilities, etc.), and over 40% of the budget on services from outside
sources. This means a market for outsourced training of almost $ 60 billion and an
insourced spending budget of more than $ 80 billion.
▪ Training BPO (business process outsourcing) services in North America amounted to
approximately $ 5.76 billion, or 9.7% of the external spend for training services. This
includes both comprehensive and selective outsourcing deals.
COMPETITION
The company’s competitors include: Cornerstone, On Demand, Click2Learn, Centra, and
Skillsoft.
The company believes it maintains a critical competitive advantage versus its competitors via
the superior digital platform it offers services from, its holistic approach to training and
analysis (“Corporate Agility”), and its ability to maintain internal knowledge and expertise
through our Carve-Outsourcing enrolment process.
This proprietary approach mitigates traditional problems associated with conventional
outsourcing arrangements. The offered solution is designed to capitalize on opportunities for
shorter turnaround cycles with very low or no risk for the client
CORPORATE TRAINING AND LEARNING ON THE STOCK EXCHANGE
The following table shows ten selected companies (in alphabetical order) out of the corporate
training and learning industry that are publicly traded:
COMPANY EXCHANGE ISIN MARKET CAP REVENUE 2018
Career Education Corp NASDAQ US1416651099 1.3 Mrd. EUR 492.6 Mio. EUR
Cornerstone OnDemand, Inc. NASDAQ US21925Y1038 3.0 Mrd. EUR 459.0 Mio. EUR
GP Strategies Corp. NYSE US36225V1044 197.7 Mio. EUR 463.7 Mio. EUR
Grand Canyon Education, Inc. NASDAQ US38526M1062 4.7 Mrd. EUR 716.5 Mio. EUR
InVision AG Deutsche Börse DE0005859698 39.1 Mio. EUR 13.1 Mio. EUR
Laureate Education, Inc. NASDAQ US5186132032 1,8 Mrd. EUR 3.0 Mrd. EUR
SER Educational S.A. São Paulo Exchange BRSEERACNOR5 634.1 Mio. EUR 294,0 Mio. EUR
TAL Education Group NYSE US8740801043 12.4 Mrd. EUR 1.5 Mrd. EUR
Tarena International, Inc. NASDAQ US8761081012 53.2 Mio. EUR 286.8 Mio. EUR
Zovio Inc. NASDAQ US98979V1026 30,3 Mio. EUR 399.0 Mio. EUR
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Detailed profiles of the peer companies:
Career Education Corp.
Career Education Corporation provides private for-profit postsecondary education in the
United States and Canada. The Company offers a variety of bachelor's, associate, and non-
degree programs, with a core curricula of information technologies, visual communication and
design technologies, business studies, and culinary arts.
Cornerstone OnDemand, Inc.
Cornerstone OnDemand, Inc. develops and markets on demand employee development
computer software. The Company offers software includes learning development, enterprise
social networking, performance management, and succession planning. Cornerstone markets
to multi-national corporations, large domestic enterprises, midmarket companies, state and
local public sector organizations, and colleges.
GP Strategies Corp.
GP Strategies Corporation provides performance improvement services and products. The
Company's customers include multinational companies in manufacturing and process
industries, electrical power utilities, and other commercial and governmental customers. GP
Strategies also manufactures and distributes molded and coated optical products.
Grand Canyon Education, Inc.
Grand Canyon Education, Inc. provides online post secondary education services. The
Company offers graduate and undergraduate degree programs in disciplines of education,
business, and healthcare.
InVision AG
InVision AG develops software products with a focus on enterprise-wide workforce
management.
Laureate Education, Inc.
Laureate Education, Inc. provides educational services. The University offers undergraduate
and doctoral degrees in business and management, medical and health sciences, engineering,
information technology, architecture, education, law, communications, and hospitality
management. Laureate Education operates worldwide.
SER Educational S.A.
Ser Educacional SA operates a Brazilian education company. The Company offers higher
education course in Brazil through multiple institutions.
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TAL Education Group
TAL Education Group provides educational services. The Company offers comprehensive
tutoring services to students covering core academic subjects such as mathematics, English,
Chinese, physics, chemistry, political science, history, and biology. TAL Education Group serves
students in China.
Tarena International, Inc.
Tarena International, Inc. provides professional education services. The Company specializes
in Information Technology (IT) professional education services including classroom training.
Tarena International offers its services throughout China.
Zovio Inc.
Zovio Inc operates as an education technology services company. The Company provides data
management and software to curriculum and financial aid, including enrollment, retention,
academic, and tuition for higher educational institutions, upskilling courses, degree programs,
and certifications for employers. Zovio serves customers in the State of California.
Adjusted by the exclusion of the companies with peak figures, the average price/sales
ratio of the peergroup is 4,18.
SWOT-ANALYSIS
STRENGTHS
▪ Appealing history and development of the company’s participations since the year
2000.
▪ Reference clients such as Deutsche Bahn, Galderma, Schenker, Swedbank, TUI or
Volvo serve the reputational strength to acquire new clients.
▪ Strong strategic alliances and partners such as CrossKnowledge, InfoPro Worldwide,
Intrepid Learning, Junglemap or WBT systems put CAG International AG in the position
to acta s a full service corporate learning provider as one-stop-shop.
▪ Experienced management: the Executive Board has decades of experience in
providing clients with management and operational advice.
WEAKNESSES
▪ Fluctuation in revenues: the company's operating revenue may fluctuate due to
seasonality, budget cycles of the Group's customers etc., which may cause the Group's
results to be above or below investor expectations.
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▪ Dependence on key individuals: The company is strongly dependent on the expertise of its founders. Losing key personnel would probably include losing key clients.
▪ Small size of the company: currently, CAG International AG has to be considered as relatively small compared to its main competitors. This refers also to the financial means within the industry sector.
OPPORTUNITIES
▪ Speeding up the internationalization process by getting access to additional funding
sources due to the listing on Vienna Stock Exchange.
▪ Benefiting from cross-boarder corporations:The clients of CAG International AG are
huge international corporations offering the opportunity to win the same client in
additional countries.
▪ Expansion of market position: The acceleration of growth will quickly result in an increase in market share.
THREATS
▪ Storage of sensitive data: loss and theft of data/failure to implement secure data
controls could have a negative impact on Group’s operational performance.
▪ Failure to effectively manage growth: Failure to adequately manage growth and its
resulting resources and working capital requirements could place a strain on the
current human, financial and operational resources (including infrastructure).
▪ Unsuccessful client management: The company’s success depends on its ability to
retain existing clients and to attract new clients.
FINANCIAL PLAN AND DCF ANALYSIS
The company’s management provided revenue projections based on sales pipeline and
market share analysis. Some customer concentration was apparent with 5 pending projects
representing 60-65% of revenue projections in years 2 and 3. To evaluate the plausibility of
these revenue growth curves we conducted a comparable company analysis by identifying 14
firms as likely peers in similar lines of business (consulting with significant software,
information technology, and networking elements as significant parts of the business’ value
change, and status in their niche as early-movers). We focused on firms with available revenue
data in a similar stage of development (Series A-B or self-funding firms no more than 4 years
from formation). After further research we eliminated two firms from our analysis as
imperfect peers vis-a-vis to the Company’s line of business, and three firms which had unusual
access to significant financing resources (i.e. as portfolio firms of large venture capital funds
with significant invested capital interests and pre-committed future funding rounds, or, in one
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case, a firm that conducted an initial public offering prior to completing a Series C round) that
would be unrealistic for the Company to secure.
We calculated year-on-year revenue growth figures for the nine remaining firms and
synchronized those growth figures to the model years in management’s revenue build table
with the firm’s respective formation date at “Year 0”.
We observed a wide range of values in early growth years discouraging us from using the mean
as a reference figure. Further, negative revenue growth values in some years prompted us to
discard the geometric mean values, leaving us with the median value as a reference figure for
year-on-year revenue growth.
pre-model period model impacting period
years since inception 0 year 1 year 2 year 3 year 4 year 5 year 6 year 7 year 8
revenue growth (YoY)
C1 9.1% 11.7% 21.6% 62.6% 41.6% 60.0% 32.6% 19.1%
C2 38.0% 39.0% 42.0% 46.0% 45.0% 21.0%
C3 -11.5% 25.0% 23.1% 59.5% 42.5% 41.0%
C4 62.7% 302.6% 91.1% 75.6% 81.2% 62.9%
C5 62.3% 102.0% 81.5% 42.3% 35.2% 10.5%
C6 59.5% 102.1% 86.9% 191.3%
C7 16.1% 8.5% 11.6% 19.3% 22.1% 8.7% 8.0%
C8 62.6% 105.1% 28.6% 18.6% 11.1% 4.5%
C9 45.0% 20.6%
Mean 35.7% 46.1% 44.0% 66.4% 47.1% 43.7% 54.5% 32.7%
Median 35.7% 38.0% 42.0% 42.0% 38.4% 52.3% 32.6% 30.1%
Selected value 40.0% 40.0% 35.0% 30.0% 30.0% 25.0%
Delta to median value -2.0% -2.0% -3.4% 22.3% -2.6% -5.1%
To bring management’s revenue growth assumptions more in line with our findings we
significantly smoothed management’s revenue curve by discounting early-year growth figures
by as much as 50% and assuring that no single year-on-year revenue growth figure exceeded
the median of our comparable company analysis. As the resulting revenue curve remains
below the median of year-on-year revenue growth for the selected peer group we believe that
the final revenue growth figures used in our valuation are a more conservative and defensible
basis for modelling. The results of our comparable company analysis and the growth values
we selected for our valuation model are depicted in the table above.
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EXPENSE AND PROFITABILITY ANALYSIS
Gross Margin Analysis
As a general matter we found management’s “Cost of Services” figures in-line with
expectations. We performed some smoothing and corrected these figures to trend in the
direction of 40.00% of revenue by the final years of the model. The resulting Gross Margin
figure of 60.00% in year 7 aligns with our expectations of a growth firm offering tech-driven
platform services of comparable size in its 5th-6th year of growth and after one or two early-
stage financing rounds. While labeled “product related”, because of the nature of the “Other
External Costs” line items in the Company’s financials we excluded these from the Gross
Margin calculation to put that figure more in-line with the accounting treatment used by the
peer group we selected.
Personnel Cost Analysis
To project personnel costs we used management’s early year assumptions and rounded
figures down, assuring that these figures generally trended towards 20.00% of revenue in the
final years of the model when the business should begin to enjoy certain economies of scale.
Other Fixed and Related Costs
Other than rounding percentage of revenue figures down to even numbers we found no
particular need to make major modifications to management’s other fixed cost assumptions.
EBITDA Margins
Our model’s EBITDA margins show steady increases, eventually ranging from 4.00% to 29.00%
in the final year of the model. We view these as in-line with conservative margins for similar
firms in similar lifecycle stages and supported by similar-industry operating margins in mature
firms, e.g.: Information Services: 28.87%, Software (Entertainment) 35.00%.
Taxes
We have used management’s general assumptions about effective tax rate (25.00%) and,
despite accumulated losses of in excess of CHF 1,000,000 ignored any potential loss-
carryforward or tax credits as we are in a poor position to evaluate the quality of those
assumptions without a more detailed tax-analysis. Net Income and Free Cash Flow figures in
our model may therefore be artificially low through Year 4, when cumulative EBIT exceeds
potential loss carry-forwards.
SELECTING INPUTS FOR THE DISCOUNTED CASH FLOW ANALYSIS
Risk Free Rate
Given the firm’s location and the fact that its consolidated financials are in Swiss Francs, we
looked to the yield to maturity rate on long-term government bonds issued by the Swiss
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National Bank to establish the appropriate Risk Free Rate for our analysis. As we elected to
use a 7 year discounted cash flow model we selected the 7 year rate on the yield curve for
Swiss Government bonds. At the time of this report’s writing this rate was -1.04%1, as this
figure was near 12 month lows we computed the 4 year average2 of the 7 year rate. The
resulting figure was -0.74%.
Normally we would be reticent to use a negative Risk Free Rate, but for reasons discussed
below we eventually found that the Risk Free Rate had little influence on our final valuation
figures.
Discount Rate
Given the difficulty presented by negative Risk Free Rates, we elected to use a multiple of the
default spread derived equity risk premium for Switzerland of 5.96%.3 Using a multiple (beta)
of between 1.4x and 1.5x and ignoring the negative Risk Free Rate we settled on 8.50% as a
suitable discount rate. We note in passing that our model uses a more aggressive discount
rate compared to prior valuation work done by the Company.
Terminal Calculations: EBITDA Multiple
While an exit multiple for a comparable firm would likely be elevated vis-a-vis large, publicly
held and widely-traded firms for which robust EBITDA multiple data is available, we elected to
use a conservative EBITDA multiple of 11.50x. We feel this figure compares favorably with
current multiples for publicly held firms in relevant industries/sectors. e.g.:
Industry EV/EBITDA Multiple
Education 11.59x
Entertainment 14.18x
Information Services 18.78x
Software (Entertainment) 16.22x
Software (Internet) 18.98x
Total Market 14.77x
Source: U.S. Enterprise value multilpes via Damodaran (January 2019)
Terminal Calculations: Perpetual Growth Method
Using perpetual growth method to calculate a terminal rate for the terminal year of our model
resulted in figures that dominated the model’s valuation and therefore we discarded these
higher valuations in favor of the EBITDA Multiple Method for terminal value calculation.
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VALUATION MODEL
in CHF Actual Partial Estimate
2018 2019 2020 2021 2022 2023 2024 2025
Revenues 1,385,213 1,974,760 2,764,664 3,870,529 5,225,214 6,792,778 8,830,612 11,038,265
% YoY 9.73% 42.56% 40.00% 40.00% 35.00% 30.00% 30.00% 25.00%
Cost of Services 320,114 415,094 691,116 967,643 1,567,564 2,037,833 3,532,245 4,415,306
% of Revenues 23.11% 21.02% 25.00% 25.00% 30.00% 30.00% 40.00% 40.00%
Gross Profit 1,065,069 1,559,665 2,073,498 2,902,897 3,657,650 4,754,845 5,298,367 6,622,959
Gross Margin 76.89% 78.98% 75.00% 75.00% 70.00% 70.00% 60.00% 60.00%
Staff Costs 842,735 1,036,946 1,244,099 1,354,685 1,567,564 1,698,195 1,766,122 2,207,653
% of Revenues 60.84% 52.51% 45.00% 35.00% 30.00% 25.00% 20.00% 20.00%
Other External Costs 417,250 398,704 691,166 870,869 1,045,043 1,358,556 1,324,592 1,103,826
% of Revenues 30.12% 20.19% 25.00% 22.50% 20.00% 20.00% 15.00% 10.00%
Other Operating Expenses 6,535 22,117 27,647 38,705 52,252 67,928 88,306 110,383
% of Revenues 0.47% 1.12% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
EBITDA -201,451 101,898 110,587 638,637 992,791 1,630,267 2,119,347 3,201,097
EBITDA Margin -14.54% 5.16% 4.00% 16.50% 19.00% 24.00% 24.00% 29.00%
Depreciation & Amortization 1,310 19,748 27,647 38,705 52,252 67,928 88,306 110,383
% of Revenues 0.09% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
EBIT -202,761 82,150 82,940 599,932 940,539 1,562,339 2,031,041 3,090,714
EBIT Margin -14.64% 4.16% 3.00% 15.50% 18.00% 23.00% 23.00% 28.00%
Financial Income 36 0 0 0 0 0 0 0
% of Revenues 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Taxes 0 20,538 20,735 149,983 235,135 390,585 507,760 772,679
Tax Rate (%) 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00%
Free Cash Flow to Equity -202.725 61,613 62,205 449,949 705,404 1,171,754 1,523,281 2,318,036
Risk Free Rate -0,74% CHF EUR
Discount Rate 8,50% 0.91844
EBITDA Multiple 11.50x
Terminal Rate 3,50% EBITDA in Terminal Year 3,201,097 2,940,023
FCFE in Terminal Year 2,318,036 2,128,982
7 Year (1-7) DCF of FCFE 3,993,373 3,667,682
Terminal Value According to:
EBITDA Multiple (11.50x) 36,812,613 33,810,261
Perpetual Grwoth Method (3,50%) 46,360,712 42,579,640
Total Firm Value Using:
EBITDA Mutliple 24,789,787 22,760,990
Perpetual Growth Method 30,183,760 27,722,043
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VALUATION DISCUSSION, SENSITIVITY ANALYSIS, AND CONCLUSION
Valuation Sensitivity Analysis: EBITDA Multiple vs. Discount Rate:
Valuation Sensitivity Analysis: EBITDA Multiple v. Discount Rate
Firm Value (EUR)
€ 22,767,990 9.00% 8.75% 8.50% 8.25% 8.00%
11.00x € 21,267,582 € 21,599,541 € 21,937,542 € 22,281,710 € 22,632,173
11.25x € 21,669,655 € 22,008,129 € 22,352,766 € 22,703,694 € 23,061,042
11.50x € 22,071,728 € 22,416,717 € 22,767,990 € 23,125,677 € 23,489,911
11.75x € 22,473,802 € 22,825,305 € 23,183,214 € 23,547,660 € 23,918,780
12.00x € 22,875,875 € 23,233,894 € 23,598,438 € 23,969,644 € 24,347,648
Reference Value (EUR Per Share)
19,220,714 9.00% 8.75% 8.50% 8.25% 8.00%
11.00x € 1.11 € 1.12 € 1.14 € 1.16 € 1.18
11.25x € 1.13 € 1.15 € 1.16 € 1.18 € 1.20
11.50x € 1.15 € 1.17 € 1.18 € 1.20 € 1.22
11.75x € 1.17 € 1.19 € 1.21 € 1.23 € 1.24
12.00x € 1.19 € 1.21 € 1.23 € 1.25 € 1.27
The mid-point of our valuation analysis results in a valuation of the firm at EUR 22,767,990
with an implied per share reference price of EUR 3.55. Using bounded EBITDA exit multiple
and discount rate sensitivity analysis we arrive at a potential range of valuations between EUR
22,008,129 and EUR 23,547,660 or implied per share reference prices of between EUR 3.44
and 3.68. The resulting valuation ranges are depicted in the figure above.
PEER GROUP ANALYSIS
According to the peer group analysis of the before mentioned ten listed companies out of the
e-learning and corporate training industry, the average sales/ev multiple is 4,18.
The table below shows the market cap / price indication for CAG International based on this
multiple in the upcoming years:
2019 2020 2021 2022 2023 2024 2025
Revenues in CHF 1,974,760 2,764,664 3,870,529 5,225,214 6,792,778 8,830,612 11,038,265
Revenues in EUR 1,813,699 2,539,178 3,554,849 4,799,046 6,238,759 8,110,387 10,137,984
Market Cap in EUR 7,581,260 10,613,764 14,859,267 20,060,010 26,078,013 33,901,419 42,376,774
Price per shares 1.18 € 1.66 € 2.32 € 3.13 € 4.07 € 5.29 € 6.61 €
Valuations based on profit mutliples are not constructive at the moment.
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PEER GROUP ANALYSIS
As described before, the most reasonable way to calculate the fair value of CAG International
AG is the Discounted Cashflow Model (DCF), leading to a valuation (lowest range) of 22,008,129
EUR. A peer group analysis only based on revenue multiples is much less meaningful.
Therefore, we used for our final value a ratio of DCF (40%) and Sales/EV peer group comparison
(60%).
This method leads to the following present value of CAG International AG: 13,352,008 EUR
Accordingly, the fair value per share (6,406,904 shares issued and outstanding): 2.08 EUR
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BALANCE SHEETS & PROFIT & LOSS ACCOUNTS
BALANCE SHEET 2016 (SINGLE)
PROFIT & LOSS ACCOUNT 2016 (SINGLE)
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BALANCE SHEET 2017 (CONSOLIDATED)
PROFIT & LOSS ACCOUNT 2017 (CONSOLIDATED)
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BALANCE SHEET 2018 (CONSOLIDATED)
PROFIT & LOSS ACCOUNT 2018 (CONSOLIDATED)
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SELECTED REFERENCE CLIENTS
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DISCLAIMER & CONFLICTS OF INTEREST
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Wichtiger Hinweis / Haftungsausschluss der Capital Lounge GmbH: Alle Zahlen und Berechnungen in dieser Studie
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Wichtiger Hinweis / Korruption als strukturelle Erscheinung in Rumänien: Korruption auf vielen Ebenen ist
Alltag in Rumänien. Korruption und Amtsmissbrauch gelten in dem Land als gravierendes Problem. Die Kultur
der Korruption ist tief in den moralischen, konzeptuellen und praktischen Einstellungen eines bedeutenden
Teils der rumänischen Bevölkerung verwurzelt und wird in vielen Fällen noch als normale
Problemlösungsstrategie angenommen. Gründe hierfür sind die verbreitete Armut der Bevölkerung und die
Unterbezahlung der öffentlich Bediensteten: Besonders von orthodoxen Priestern, Behördenmitarbeitern,
Krankenhausangestellten und Lehrern werden Geldbeträge als Zusatzeinkommen eingefordert. Die
Gesetzeslage ist immer noch instabil; Abgeordnete verweisen darauf, EU-Stellen hätten sie zu
Antikorruptionsgesetzen gezwungen und verhindern in der Folge deren Umsetzung. Auch die
Selbstbereicherungsmentalität der politischen und wirtschaftlichen Eliten spielt eine große Rolle. Gemäß
Umfragen glauben 96 Prozent der Rumänen, dass Korruption zu den schwerwiegendsten Problemen im Land
gehöre. Ein Drittel der Befragten konnte Beispiele für die Zahlung von eigenen Schmiergeldern in den letzten
12 Monaten angeben. Die rumänische Sprache kennt 30 Redewendungen für die Umschreibung von
Schmiergeld. Bereits in den ältesten rumänischen Texten kamen die ursprünglich slawischen und türkischen
Begriffe bacșiș, ciubuc, șperț, șpagă und mită vor. Rumänien lag 2017 im Korruptionswahrnehmungsindex von
Transparency International im weltweiten Vergleich auf Platz 59, gleichauf mit Griechenland, hinter Italien
(54. Platz) aber vor Bulgarien (71. Platz). Zwar ist der innenpolitische Wille und der außenpolitische Druck –
besonders durch die Europäische Union – für Reformen vorhanden, jedoch sind die Sicherheitsbehörden und
die Justiz dabei strukturelle Gründe für das Phänomen und mit ihrer Aufgabe oftmals überfordert oder selbst
Teil des Problems. (Quelle: https://de.wikipedia.org/wiki/Korruption_in_Rumänien)
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(“WpHG”) and Article 20 Regulation (EU) No. 596/2014 as well as the Delegation Regulation (EU)
2016/958:
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Key 10: A member of Capital Lounge GmbH and/or the author of this business valuation is a member of
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The following keys are relevant for this business valuation: Key 1, Key 7
Statements pursuant to section 85 (1) WpHG and Article 20 Regulation (EU) No. 596/2014 as well as the
Delegation Regulation (EU) 2016/958: Information sources
The business valuation is based on information obtained from carefully selected public sources, in
particular from financial data providers, publications from the analysed company and other public
media.
Valuation principals/methods/risks and parameters
Company-specific methods from fundamental stock analysis, quantitative statistical methods and
models for the preparation of the business valuation in addition to technical analytical methods (inter
alia historical valuation approaches, substance valuation approaches or sum-of-the-parts valuation
approaches, discount models, the economic profit approach, multiplier models or peer group
comparisons). Valuation models depend on economic parameters such as currencies, interest rates,
commodities and economic assumptions. In addition, market sentiment and political developments
influence company valuations. Selected approaches are also based on expectations that may change
quickly and without warning depending on industry-specific developments. As a result,
recommendations and price targets based on individual models may also change accordingly.
Investment recommendations applicable to a 12-month time horizon may also be subject to market
conditions and therefore constitute a snapshot. Expected price developments may occur faster or
slower or can be revised upwards or downwards.
Compliance declaration
Capital Lounge GmbH has taken regular internal precautions to prevent conflicts of interest with regard
to the company analysed herein and to disclose possible conflicts of interest. Adrian Fuhrmeister,
[email protected] responsible for compliance with these precautionary measures.
Statement by the authors of the studies
All valuations, opinions and forecasts contained in this business valuation reflect the views of the
business valuation’s author. The author’s remuneration is not directly or indirectly related, whether in
the past, present or future, to the recommendation or views expressed in the business valuation.
The following online sources were used:
Bloomberg, Finanzen.net, Onvista.de, Ariva.de, Handelsblatt.com, Immoscout24.de
Wirtschaftswoche.de; and others
Copyright: Capital Lounge GmbH, October 2019
Analyst.: Alexander Coenen, Capital Lounge GmbH, October 2019
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