Car rental valuations
Car rental valuations focus on the vehicles held by the entity and the rate of return required on those assets. Related car rental valuation considerations include the current utilisation rate of the vehicles, the target utilisation rate and industry benchmark, the age and state of the vehicles and the ongoing capital maintenance expenditure as well as the reinvestment expenditure for growth.
Other key car rental valuation components include the franchise agreement terms including term and fees, location, competitive advantage, product mix, customer concentration, commercial customer contracts, barriers to entry, supplier and supplier agreements, exposure to and outlook for the industries it operates in and working capital requirements.
Given the asset base of a car rental 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.
Car rental valuation engagements have included the valuation and financial modelling of two large car rental businesses for potential acquisitions and the valuation and analysis of a mining related car rental business for restructuring purposes.