Global Financial & Investment Research

Situation

• US-based VC firm requested JMI to help its Partners in analyzing exit valuation for their renewable energy portfolio company.
• JMI was asked to provide the outline of the specifics to be reviewed for the valuation exercise, including details of the portfolio company.

Outcome

• Provided a detailed review and synopsis of deals and exit valuations within the US renewable energy space and the exit valuation range.
• Created a deal enhancer document emphasizing the strategic advantage of the portfolio company.
• Created a list of potential strategic (competitors, value chain etc.) and financial buyers (sale to PE fund) for the portfolio company.
• Helped the VC firm take an informed decision regarding exit opportunities, enabling them to realize optimum return on investment.

Situation

A United-States based Real Estate Fund wanted to raise money for acquisition of one property.

• They wanted JMI to prepare an Investor Deck which highlight all the major details about the property.
• The Project involved creating a buy side case which include detailed community and deal overview, market opportunity, location - area highlights, Cash flows, return analysis, business plan and risk analysis.

Outcome

• JMI helped the client in preparing strategic presentation for the acquisition.
• JMI team delivered a 20-25 pages investment deck which was used by the client to showcase it to potential investors.
• JMI also helped the client in reaching out to potential buyers.

Situation

• Our client, a private equity firm that investments in early stage growth companies wanted to adopt a data driven deal origination process.
• The client wanted to build a platform to identify potential targets for deal origination based on specific criteria and investment strategies.

Insights on S&P 500

Based on quantitative analysis of last 100 years of S&P 500 data, we found that S&P 500 trades

• 66% of the time 1 SD (standard deviation) above its 10 years mean, 28% of time 2SD above its 10 years mean and only 2% of time 3SD above its 10 years mean.
• Historically SPX touches 3SD after a gap of 10-20 years and it normally results in 30% correction eventually in the next 2-3 years.
• Currently, S&P 500 is trading at around 3,850 which is just 7% shy of 3SD event at 4150. The last instances when the SPX crossed 3SD were in 1988 and 1987 and in both the events, it eventually resulted into 30% correction in the next 2 to 3 years.
• The current SPX set up is unforeseen in the last 20 years and hence not captured empirically by financial research houses.

We believe that SPX may move towards a maximum of 4150 however risk-reward is not much in favor and hence eventfully may correct to 3000 levels in the next 2-3 years.

Insights on Nasdaq

Based on quantitative analysis of the last 35 years Nasdaq data, we found that Nasdaq trades.

• 62% of the time 1 SD (standard deviation) above its 10 years mean, 52% of time 2SD above its 10 years mean, 11% of time 3SD above its 10 years mean and only 1% of time 4SD above its 10 years mean.
• Currently, Nasdaq is trading around 13,500 and has crossed 3SD event at 13000 and is 15% shy from 4SD event which is at 15500. Nasdaq touched 4SD only once in its history just before 2000 dotcom crash which resulted into its losing resulted in 83% erosion of value. Nasdaq has crossed 3SD recently only after a gap of 20 years since 2000.

We believe that upside in Nasdaq is limited to maximum 10-15% from here while downside could be very high as it is moving into bubble zone not seen in the recent times.

Insights on DJIA

Based on quantitative analysis of last 30 years, we found that DJI trades

• 66% of time 1 SD (standard deviation) above its 10 years mean, 31% of time 2 SD above its 10 years mean and 0% of the time 3 SD above its 10 years mean.
• Currently, DJI has crossed 30,200 level which is 2 SD above its 10 years mean. Dow has historically been comfortable at 2SD and hence we expect Dow jones to move up further from these levels as 3SD event is 20% away from the current levels.

On comparing DJI index with other indexes, we believe that DJI can offer better risk-reward in the near future compared to NASDAQ, SPX and RUT.

Insights on RUT

Based on quantitative analysis of the last 33 years data, we found that RUT trades

• 79% of time 1 SD (standard deviation) above its 10 years mean, 32% of time 2 SD above its 10 years mean and only 1% of time 3 SD above its 10 years mean.
• Currently, RUT is trading at 2,150 and has crossed 3SD event. Prior to 2021, RUT crossed 3SD event only 2 times in the last 30 years, in 1997 and 2013-14. In both cases RUT fell by 30% in the next 2-3 years.

We believe that there is no major upside left in RUT and risk-reward is not at all in the favor of any long trades in RUT. We expect RUT to fall to 1500 levels in the next 2-3 years.

Conclusion

• Russell 2000 is into unchartered territories and investors should be cautious.
• Amongst all the 4 indices, DJIA looks the best from risk-reward perspective for the next 3-5 years.
• SPX is just 5-7% shy of the critical 3 Std Deviation event which happened just before 2000 dotcom burst and 1987 Black Monday Crash.

Results

• JMI team kept track of the latest financials and identified the key economic and market-driven factors that have an impact on the TMT sector.
• JMI team delivered the updated financial model with the latest market updates on a daily basis.

Situation

• A US-headquartered IB firm wanted support on valuing a US-based packaged Juice manufacturing company.
• The Project involved doing a merger analysis of two entities followed by valuation across various methodologies.

Value Delivered

• The output involved a financial model with different scenarios (Base, upside and downside), Sensitivity and football field analysis.
• Figured out the post-merger valuation of company at EV/Adj. EBITDA multiple of 4.2x through Football field analysis.

Situation

JMI worked closely with senior team members in creating an entry strategy for European Markets.

• Phase I - Construct a comprehensive database of all mid and large cap companies across sectors.
• Phase II - Create multiple filters to shorten the focus on particular sectors and companies.

Value Delivered

• Submitted a comprehensive database of all mid and large sized European corporates.
• Profiled identified companies on key operating and performance metrics.
• JMI also organized management meetings with 15 European companies shortlisted on the basis of Company’s analysis.

INTRODUCTION

A mid-market private equity fund wanted to invest in a US-based digital lending fintech company. Historically, the PE fund relied upon traditional, manual, and defensive methods of due diligence. The fund wanted to get deeper data-driven due diligence insights on the company’s products, market positioning, customer beliefs, and organizational culture. JMI's data analytics team was roped in to leverage the JMI data analytics platform to get actionable insights on four broad areas, which included:

• Product Reviews: We scraped the data from community websites, aggregated internal KPIs, and used machine learning techniques to construct deep learning to curate sentiments on trends and key imperatives.
• Customer Lifetime Value: Used a probabilistic model to predict the future count of the transaction and its monetary value for each customer, potential churns, and primary market drivers that could improve top-line growth.
• Customer Acquisition Cost: Analyzed customer-level data to observe the acquisition cost across different channels and regions with diverse demographic compositions across market segments.
• Organizational Culture: Deployed a dashboard that provides insights on company attrition rate and analysis based on employee experience, gender, educational background, etc. Also, the web scrapped data from review websites to get insights on employees' beliefs about company culture.

JMI's proprietary models and data aggregation platform produced unique and powerful insights on business revenue and margin performances based on raw transaction-level data along with core business capabilities and market drivers such as production capacity, sales and distribution KPIs, cash flow, and potential trends in the competitive market, etc.

The JMI data analytics platform set up during diligence for investment evaluation was further extended to capture the company’s everyday business intelligence in order to retain the key insights and data sources that underpinned the deal thesis and value creation plan over the investment cycle.