CBA sell out of CUP, page-11

An asset value is a function of what a willing buyer and a willing seller can negotiate. The two directors of Countplus One clearly did not believe the CUP offer was fair so have walked 12 months after the last three principals of Wearne after failing to reach a negotiated valuation with CUP also walked.
But what are the principals buying. CUP thinks they are buying clients and have a valuation of an Intangible asset in their accounts called Acquired Client Relationship and Goodwill. But who is the relationship with, CUP the ASX listed company, the location of the firm, the name of the firm, most likely not, but with the principal/adviser who that client has a relationship with. CUP would say the employee restraints ensure the clients do not follow their relationship person at the firm when they leave.
But if you go back in history the hearsay is Beames & Associates from Canberra wanted out, made an offer that CUP refused, so everyone of the principals left, set up a new business outside the 100 klm zone and the majority of the clients walked.
This is where the CUP model is broken, the directors have no idea that the real value of the business are the people. After 7 years, 3 CEO’s and countless Direct Equity Plans being promised, nothing. The new CEO outline his views May 2017 to the AFT, and stated that he wanted principals to own up to 60% of their businesses.
http://www.copyright link/business/...ce-countplus-ceo-matthew-rowe-20170530-gwg2hh
But 12 months on nothing has happened why.
Have the director have put a collar on the CEO as to the CUP valuation, so as to protect the Acquired Client Relationship and Goodwill balance? I think yes.
What CUP is failing to understand, that without principals, to provide the client relationship there is no business. The principals are the asset.
If the principals what to buy back 100% then the market is saying the current valuation $0.63 per $1 of fees.
(111,222,559 shares * $0.58 ASX market value divided by $104m fees). What the directors should be doing is offering the principals the ability to buy back 49% at $0.63 per $1 in fees, so that their cost is now the same as every other shareholder market value. Remember the principals in general got shares in CUP at $1.42 and have already suffered a loss of 55.6% as what they got $1.42 is now worth $0.58. To offer equity at any more than the current valuation of CUP means the principals are starting behind.
Bearing in mind that CFS took a premium of $44m on the float (note 17 CFS financial accounts).
But the effect on the Acquired Client Relationship and Goodwill scares the directors, but the reality is the market has already done the market adjustment in the share price so why not reflect the valuation in the accounts, fix the model, and match the Risk and the Reward.
In 2010 Barry told me this new model is a partnership between the principals who run the business and CUP who provides the finance, the networking and the common bond. But alas there has been no reward for the principals who sold their businesses for $1.42 per share that is now worth $0.58, their reward for increasing the EBITDA by 10%, is more shares.
What happened to the ‘Partnership’, the countless emails on the Direct Equity Plan coming soon Barry, and the Owner/Diver model Matty?
The alternative is for the principal to walk, do 12 months gardening leave at a cost of $200,000 then start up again either in partnership with an existing business cost $400,000 working capital and watch $1,000,000 of Acquired Client’s follow the relationship for a total cost of $600,000 of which you get back the working capital and this is a real asset.
Guess what the cost of walking is $0.60 and the valuation by the market is $0.63 per dollar of fees.
Only a Financial Adviser could make this balance, and that Ambitious1 is a reasonable valuation.