Engineering practice valuations

Engineering practice valuations

A key component in preparing an engineering practice valuation is determining a market salary for the owner practitioner(s). This is particularly relevant when valuing a smaller Engineering practice, where adjusting for a market salary may eliminate any profits available to an investor. Owner compensation is a key issue in court cases, see Corbon & Klousner (2015) and Scott & Scott (2006).

Often engineering practices depend on certain project and so the valuation requires a review of those projects, including assessing the dependency and risk of larger projects and clients, the size and length of contracts, the period held and the probability of renewal and or further related work. Also important is to review and analyse current orders, quotations and tenders and the outlook for projects.

A key issue can be determining the extent that the client relationships reside with the practitioner. Does the goodwill reside with the engineering practice or with the practitioner?

Another key issue is assessing the industries within which the practice operates, for example mining, oil and gas, or road infrastructure, and the exposed risk ad outlook for those industries.

Engineering practice valuation engagements have included:

• the valuation of a national engineering business providing electrical and project management services to the mining industry; expert report prepared for the trustee of the bankrupt estate WA
• valuation of a civil engineering business providing geotechnical and geosynthetic services; valuation required for the potential acquisition of a shareholder’s stake
• valuation of an engineering consultancy business primarily within road infrastructure; expert valuation report prepared for a family dispute within the Federal Circuit Court NSW