Industry: Air Transportation and Unmanned Aircraft Systems (UAS)

Engagement Type: Valuation

Client Performance: Double-digit annual growth over several years, and nearly double revenue increases between 2014 and 2018

Problem

Mosaic ATM (Mosaic) is a closely-held private company and has issued stock options to their employees. Stock options must have an established exercise price to determine the value of the options as of the date of the grant. As a closely held business, there is no marketplace where the shares can be traded. Therefore, an independent valuation is necessary to meet all regulatory requirements. In 2012, Mosaic engaged The McKelvey Group (TMG) to perform an independent fair market valuation of the company.

Solution

In each year since 2012, TMG has provided our expert opinion of the fair market value of Mosaic in a formal report that provides insight and analysis of the company’s results and projections, along with industry trends, competitor positions, and macro-economic conditions. This independent report has not only established annual exercise prices for the options to meet regulatory requirements, but also provided key insight to Mosaic management for strategic planning purposes.

Early in the relationship, the valuation reports helped confirm management concerns about profit pressures due to the concentration risk of being a pure government contractor. The reports also identified the margin and competitive risk of being a services-only company. Mosaic used this insight to begin diversifying into the commercial marketplace and moving away from purely labor-based services. Today, the company has transitioned from a pure government contractor providing labor resources to the Federal government into a diversified business providing industry expertise, analytics, simulation, and integration products/solutions to both the commercial and federal aviation marketplaces.  This transition directly increased the value of the company through both robust revenue growth and increased margins.

Results

During the course of its partnership with TMG, the value of Mosaic’s stock option plan has increased significantly over time, delivering a real reward, and continued incentive, to their long-term employees. Mosaic has achieved significant, double-digit annual growth over the past several years, nearly doubling revenue between 2014 and 2018. The company is no longer a start-up. It is a thriving, growing enterprise with a bright future. The partnership between TMG and Mosaic has helped unlock the true potential of a company that is well-managed, financially savvy, and customer-focused.

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The McKelvey Group has been a true partner and advisor throughout our years of partnership, and we know we can always count on them to deliver the expertise that continues to drive our business forward.
~ Brian Scott, Chief Financial Officer, Mosaic ATM