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Equipment leasing valuations

Equipment leasing valuations

Equipment leasing valuations focus on the equipment held by the entity and the rate of return required on those assets. Related equipment leasing valuation considerations include the current utilitisation rate of the equipment, the target utilization 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 equipment leasing 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 asset base of an equipment leasing 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. 

Equipment leasing valuation engagements have included the valuation of an oil & gas equipment leasing business, providing equipment such as pumps and monitoring equipment to keep wells producing; for a share transfer and the valuation of a drilling businesses; valuation required for restructuring and ATO purposes.