After researching the companies, Jones investigated general industry trends, which he analyzed through trade associations and journals, Web sites, and other independent resources. One of the ways that an expert evaluates a company's worth is by comparing its risk and reward with all other possible investments that might exist. The final documents seem, at first glance, to be deceptively modest in scope. The meat of the report consists of several pages in which Jones calculated the value of each company according to a variety of different appraisal methods. A careful reader of those methods would quickly come to the conclusion that valuation is indeed an art and not a science.
Different methods yield different numbers.
Relying on market rules of thumb for companies in the distribution business produced considerably higher numbers, although those figures also varied widely. When Hotze and Watts received the reports, they shared a quick telephone call in which they confirmed that they both felt good about the numbers. Of course, as with any corporate merger, that was the beginning and not the end. I want to make certain that nothing great already exists which we can buy or merge with. But the one thing that our valuation experience gives us is a blueprint for how to carry out another merger, if that's the route we go.