Manufacturing valuations

Manufacturing valuations

Manufacturing valuations typically include some consideration of the fixed assets held by the entity and the rate of return required on those assets. Related manufacturing valuation considerations include the current utility rate for the equipment, the potential capacity of the equipment, the age and state of the equipment and the ongoing capital maintenance costs as well as the reinvestment costs for growth.

Other key manufacturing valuation components include the level of domestic and overseas competition, competitive advantage, intellectual property and brand, product mix, customer breakdown, supplier and supplier agreements, exposure to and outlook for exchange rates and commodity prices, stock and working capital requirements.

Given the asset based of a manufacturing business 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

Manufacturing practice valuation engagements have included the following:

• The valuation of an international chemical timber manufacturing business. Report prepared on a proforma basis to include all international distributors. Report prepared to assist the shareholders in understanding the potential combined valuation of a merger.
• The valuation of a consumable durables manufacturer specialising in shutters and security products. Valuation report prepared for business owner in consideration of future exit options.
• The critique of a valuation report relating to an international electrical equipment manufacturer in a shareholder dispute