Divestiture (Spin Off) Financial Projection Model (Excel XLSX)

A Divestiture (Spin Off) Financial Projection Model is vital for companies undergoing spin-offs. It forecasts income, expenses, and cash flows, aiding strategic planning, valuation, and resource allocation. This model supports decision-making on spin-off structure, capitalization, and post-spin financial implications. Accurate projections empower companies to optimize value, assess the financial impact, and ensure a seamless separation. It enhances financial stability, attracts investors, and supports successful spin-offs by aligning financial strategies with divestiture objectives. This model is indispensable for companies spinning off business units, ensuring their financial viability, competitiveness, and effective execution of the spin-off strategy.

PURPOSE OF MODEL
User-friendly financial model to project and analyse the financial outcomes of a divestiture transaction involving the spin off of a subsidiary within a Group.

The model enables the user to:
• Determine how the sale proceed fund will be used;
• Project the pro-forma opening balance sheet post divestiture;
• Project the financial performance and position (3-statement financial forecast) over a 5-year period including and excluding divestiture transaction;
• Calculate the intrinsic value of the business including and excluding divestiture transaction using the discounted cashflow (DCF) approach.
• Understand transaction details in table and chart format
• Compare financial outcome of business including and excluding divestiture transaction in table and chart format to support decision making process on divestiture transaction.

The model follows good practice financial modelling principles and includes instructions, checks and input validations.

KEY OUTPUTS
The key outputs include:
•  Projected full financial statements (Income Statement, Balance Sheet and Cash flow Statement) across 5 years presented on a yearly basis for the business including and excluding the divestiture transaction;
•  Discounted cash flow valuation using the projected cash flow output including and excluding divestiture transaction
•  Ratio Analysis based on projected financial statements
•  Summarised tables and charts showing:
Key transaction impact and details
Waterfall showing movement in net assets following divestiture transaction
Key performance metrics and ratio comparison for business including and excluding divestiture transaction including revenue growth, EBITDA, net profit margin, ROE and debt to equity ratios
Key valuation comparison including and excluding divestiture transaction

KEY INPUTS
Setup Inputs:
•  Names of business
•  Name of subsidiary being divested
•  Currency;
•  Transaction close period;

Financials Inputs:
•  Latest P&L and balance sheet actuals for overall Group and subsidiary being divested;
•  Projection assumptions for business including and excluding subsidiary being divested which include:
Forecast revenue;
Forecast cost of sales;
Forecast operating expenses including depreciation;
Fixed asset additions;
Borrowing additions/repayments;
Dividend distributions;
Tax rate and interest rates;
Debtor and creditor days;
Inventory percentage of cost of sales;
Discount rate and terminal growth rate.

Divestiture Inputs:
•  Additional debt raised in spin off entity
•  Special dividend from spin off entity
•  Spin off transaction fees
•  Pro-forma Group opening balance sheet adjustments following divestiture.

MODEL STRUCTURE
The model comprises of 8 tabs split into input ('i_'), calculation ('c_'), output ('o_') and system tabs. The tabs to be populated by the user are the input tabs which include ‘i_Setup' for setup assumptions, ‘i_Financials' for Group / subsidiary actual and projection assumptions and ‘i_Divest Assump' for the transaction assumptions and pro-forma opening balance sheet adjustments. The calculation tabs takes the user-defined inputs to calculate and produce the projection outputs which are presented in the calculation tabs and ‘o_Dashboard' tab.

System tabs include:
•  A 'Front Sheet' containing a disclaimer, instructions and contents;
•  A checks dashboard containing a summary of checks by tab.

KEY FEATURES
Other key features of this model include the following:
•  The model follows good practice financial modelling guidelines and includes instructions, checks and input validations to help ensure input fields are populated accurately;
•  The model enables the user to prepare projections for the Group including and excluding divestiture to assess full financial impact of divestiture;
•  The model is not password protected and can be modified as required following download;
•  The model is reviewed using specialised model audit software to help reduce risk of formula inconsistencies;
•  Apart from projecting revenue and costs the model includes the possibility to model receivables and payables, inventory, fixed assets, borrowings, dividends and corporate tax;
•  Business names, currency and transaction close date are fully customisable;
•  The model included an integrated discounted cash flow valuation for the Group including and excluding divestiture for comparison;
•  The model includes a checks dashboard which summarises all the checks included in the various tabs making it easier to identify any errors.