A key focus for distributor valuations is the stock held by the entity and the rate of return required on those assets. Related distributor valuation considerations include the age of stock, stock turnover and industry benchmarks.
Other key distributor valuation components include the supplier and supplier agreements and whether any exclusive distributor agreement and the terms of that agreement, competitive advantage, product mix, customer concentration, commercial customer contracts, barriers to entry, exposure to and outlook for the industries it operates in and working capital requirements.
Given the asset base of a distributor 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.
Distributor valuation engagements have included:
- valuation of thirty-five fuel stations and gas distributor business to assist in mediation due to a compulsory acquisition of land
- valuation of a large wholesale distributor business of outdoor leisure products; valuation required for a potential share acquisition
- valuation of a component distributor business; valuation required for a potential transaction
- valuation of a national hair product distributor business holding an exclusive distributor with hair salon wholesale and health & beauty salon customers; report prepared for a shareholder restructure
- expert witness valuation of a steel distributor business distributing sheds and fencing; joint appointment for family law purposes
- valuation of an air-conditioning distributor business to assist the minority shareholder claiming damages for oppression
- valuation of an electrical distributor business; valuation required to assist in a transaction
- valuations of the assets and goodwill of a wholesale lighting business in relation to misleading and deceptive representations; report prepared for the Federal Court. Trade Practices (ACL)
- critique of an independent valuation report of an importer and distributor business; report prepared for the Federal Circuit Court of Australia