Heavy machinery business valuations

Heavy Machinery Industry Valuations

Heavy machinery industry valuations focus on the equipment held by the entity and the rate of return required on those assets. Heavy machinery often relates to the agriculture, construction and or mining sectors and with or without operators.

Heavy machinery industry valuation considerations include the current utilitisation rate of the equipment, the target utilisation rate and industry benchmark, the age and state of the equipment and the ongoing capital maintenance expenditure as well as the reinvestment expenditure for growth.

Other key heavy machinery industry valuation components include competitive advantage, intellectual property and brand, product mix, customer concentration, barriers to entry, supplier and supplier agreements, exposure to and outlook for the industries it operates in and working capital requirements.

Given the significant asset base of a heavy machinery there is the potential to secure debt against the assets. Debt holders typically require a lower return than equity holders, due to the security of the debt on assets. The return debt holders require depends on factors such as default risk, being the risk the entity in unable to service the debt.

Experience

Heavy machinery business valuation engagements have included:

• The valuation of company providing demolition services, excavation services and heavy-duty equipment hire. Share valuation report prepared for a share transaction between related parties for tax purposes.
• The valuation of an oil & gas service provider, providing equipment such as pumps and monitoring equipment to keep wells producing. Valuation report prepared for a related party share transfer.
• The valuation of a diamond and reverse circulation drilling equipment businesses. Business valuation report prepared for restructuring and ATO purposes.
• The valuation of a vacuum truck and progressive cavity pumps equipment business. Valuation report prepared for internal purposes for incoming and exiting shareholders.