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"Duff & Phelps Corporation" was incorporated on April 23, 2007, Company is sole managing member of "D&P Acquisitions". Since the company is sole managing member of "D&P Acquisitions" the financials of "D&P Acquisitions" will be combined with company's financials although company holds only 34.5% equity interest (approximately) in "D&P Acquisitions".
"D&P Acquisitions" a leading provider of independent financial advisory and investment banking services.
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The Financial Advisory segment provides valuation advisory services, corporate finance consulting services, specialty tax and dispute and legal management consulting services.
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The Investment Banking segment provides M&A advisory services, transaction opinions and restructuring advisory services.
Revenue
Company generate revenues from financial advisory and investment banking services. It typically enter into these engagements on a time-and-materials basis, a fixed-fee basis or a contingent-fee basis.
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Three months ended June 30,
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Six ended December 31,
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FY 2007 |
FY 2006 |
FY 2007 |
FY 2006 |
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Financial Advisory
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Revenues
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65,739 |
44,822 |
124,432 |
85,078 |
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Segment operating income
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9,420 |
5,676 |
20,562 |
10,836 |
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Segment operating income margin
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14.30% |
12.70% |
16.50% |
12.70% |
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Investment Banking
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Revenues
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21,353 |
7,301 |
40,131 |
17,598 |
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Segment operating income/(loss)
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7,420 |
-562 |
13,816 |
1,283 |
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Segment operating income margin
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34.70% |
-7.70% |
34.40% |
7.30% |
Competition
Within its Financial Advisory segment, it compete primarily with the consulting practices of major accounting firms, such as
Within its Investment Banking segment, it compete with
Customers/industries served
Company's clients includes
Its clients operate in a broad array of industries, including automotive, consumer products, energy, financial services, healthcare, industrial products, media and entertainment, pharmaceuticals, real estate, technology, telecommunications and utilities.
In 2006, company conducted over 4,400 engagements for over 2,400 clients located around the globe, including approximately 36% of the S&P 500 companies.
Its top ten clients represented 12% of its revenues in 2006, and no single client accounted for more than 3% of our revenues in 2006.
Offer & Objects of issue
For Offer & Objects of issue Click here......
Financials ($ in thousand)
Company's financial year ends on December 31.
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Consolidated statements of operations
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Six month ended June 30, |
Year ended December 31, |
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FY 2007 |
FY 2006 |
% ch |
FY 2006 |
FY 2005 |
% ch |
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Revenues:
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Financial Advisory
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124,432 |
85,078 |
46% |
189,486 |
35,460 |
434% |
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Investment Banking
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40,131 |
17,598 |
128% |
57,256 |
38,466 |
49% |
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Reimbursable expenses
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6,058 |
6,574 |
-8% |
12,526 |
4,313 |
190% |
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Total revenues
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170,621 |
109,250 |
56% |
259,268 |
78,239 |
231% |
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Direct client service costs:
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Total direct client service costs
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118,280 |
74,956 |
58% |
166,648 |
60,768 |
174% |
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Operating expenses:
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Total operating expenses
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53,558 |
34,353 |
56% |
76,308 |
27,570 |
177% |
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Operating income/(loss)
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-1,217 |
-59 |
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16,312 |
-10,099 |
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Other (income)/expense:
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Total other expenses, net
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2,550 |
1,657 |
54% |
5,112 |
2,066 |
147% |
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Income/(loss) before income tax expense
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-3,767 |
-1,716 |
120% |
11,200 |
-12,165 |
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Provision/(benefit) for income taxes
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946 |
-27 |
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701 |
330 |
112% |
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Net income/(loss)
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-4,713 |
-1,689 |
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10,499 |
-12,495 |
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Other financial data:
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Adjusted EBITDA
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34,351 |
12,354 |
178% |
44,051 |
10,836 |
307% |
Six month ended June 30, 2007 financials includes Equity-based compensation of $29,839
Six month ended June 30, 2006 financials includes Equity-based compensation of $4,187
Company's operational income show's a growth of nearly 29% and 53% in FY 2006 and Q1, 2007 respectively as compare to corresponding periods.
Its operational income show's less growth as compare to its revenue growth due to rise in R&D expenditures and also to some extent due to, rise of services share in total revenue which yield less margins as compare to licensing.
Valuation/Offer value ($ In million)
(Assuming "Duff & Phelps Corporation" holds 100% equity interest in "D&P Acquisitions")
At offer price of $17.5 per share "Duff & Phelps Corporation" is valued at nearly $591 million
| Share Price |
Total shares |
"D&P Acquisitions" Valuation |
| $17.5 |
33,796,965 |
$591 million |
Although company is currently showing loss but mainly due to high expenditure/provision for equity based compensation (a significant portion of which is due to certain one-time grants associated with recent acquisitions) and also due to acquisition retention expenses and other merger and acquisition costs, which are generally non-recurring in nature or are related to deferred payments.
Moreover with recent acquisitions company has added many new services in its offering and also has expands its reach in Europe and Asia which offers significant business opportunity due to current economic boom in region.
Company/Industry expectations
(these are just assumptions and company can perform differently)
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Expected revenues growth of nearly 20%, year on year for next 2-3 years.
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Operating margin at 10-12% due to higher revenue and low equity based compensation, acquisition and interest related expenditure.
Negatives
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Competition is expected to rise.
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Company had made significant acquisitions in recent past and its success is very much depend on success of these acquired companies.
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Company is a new entrant in Asia market and its future growth is to some extent depends on its success in Asia market.
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Company success is very much depends on its management personals loss of any key personal can effect company adversely.
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In advisory business reputation and brand value play very important role, any decline in brand value can hit company adversely and can result in loss of clients.
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Significant part of fund raised will be used to give exit option to existing shareholders and will not go to company.
Positives
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Rising M&A activities worldwide due to rising globalization and rising number of multinational companies/corporations.
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Extensive range of services offered :- Company offers a full range of financial advisory services along with M&A and restructuring services. Company provides many of these services through its recently acquired companies ("Chanin Capital Partners LLC" & "Standard & Poor’s Corporate Value Consulting"). Cross selling of these services will provided company a new growth opportunity as most of these services are related with high probability of cross selling. Moreover tax related complex services offered by company will allow it to attract more clients in other services space.
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Strong brand name with leading market positions :- Duff & Phelps brand is well recognized. Additionally, according to Thomson Financial, in 2006, company is the number two independent provider of fairness opinions (which we define as excluding investment banks that engage in underwriting, capital markets or lending activities) in the world based on number of opinions delivered, and, according to The Deal, a top ten global provider of restructuring services based on number of assignments.
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Pure advisory player :- Company provides purely advisory services and don't includes itself into related services like audit or Sarbanes-Oxley Act Section 404 compliance services, public capital raising, trading, underwriting or lending activities.
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Global presence :- Company delivers its services through offices in 21 cities, including six international offices. Its international offices are located in Amsterdam, London, Munich, Paris, Tokyo and Zurich.
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Its existing relationship with clients.
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Tougher and ever changing tax law, financial regulations.
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Successful history of acquisitions.
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Entry in new markets :- Company through acquisition ("CVC" September 30, 2005) increases its presence Europe market and very recently in Asian market through a referral agreement with "Shinsei Bank, Limited." Japan.
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Healthy balance sheet.
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Advisory services particularly tax related and restructuring advice services are less effected by any economic slowdown.
This article reflects personal view of the author about the company and one must read offer prospectus and consult its financial adviser before making any investment decision
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