Valuations can be needed by business owners for a variety of reasons, including sales of the company, investment by new shareholders, fund raising, stock exchange listing etc. In disputes, they can be needed in breach of warranty claims, divorce, compulsory purchase etc.
We are regularly instructed to consider claims arising out of compulsory purchase, both for acquiring authorities and for businesses that the subject of the compulsory purchase order (CPO). Typically, these are for publicly funded developments where it is necessary to acquire land to allow the development. This can include land needed, for example, for infrastructure developments or major regeneration and development.
Where the business can be relocated, we can be asked to calculate the impact on profits of the disturbance caused by relocation. On some occasions, the business cannot be relocated, so we have to value the business that is being extinguished.
The range of businesses we are asked to value is very diverse. We are also often asked to value part of a business, where it is just one of several sites that is subject to CPO.
We have undertaken many such cases in the retail sector. Where the site being acquired is part of a large chain of retailers for example, it is possible to use the actual performance of other branches to give an indication of likely levels of trade but for extinguishment. Where the site is unique, then one has to value the business on the site from first principles.
In one such case, our M-D had to value part of a business being operated from a unique site extracting a natural resource. We therefore worked with the business’s own staff to identify the key financial metrics for the business and to create cash flow forecasts taking into account the costs of the processes and the revenues that would be generated. We analysed the market for the product and how that was considered likely to develop in the future. We also liaised with industry technical experts to assess the longevity of the site but for extinguishment.
Valuations can be needed by business owners for a variety of reasons, including sales of the company, investment by new shareholders, fund raising, stock exchange listing etc.
We have undertaken many such cases in the retail sector.
We then derived a discount rate to apply to those cash flows to arrive at the present value of the site. The discount rate took into account the various risk factors that would affect the business on the site. The expert acting for the other party approached the valuation in a very similar way and it was possible to narrow down the difference between our opinions to an acceptable range so the acquiring authority and the land owner were able to reach a settlement.