Manufacturing valuations

At Lotus Amity, we provide manufacturing valuations. We provide these business valuations in disputes, transactions and for tax purposes.

Manufacturing valuations typically require an analysis of the capital assets held by the entity and the rate of return required on those assets. Other key considerations include the current utility and potential capacity of the assets, the age and state of the assets and the ongoing capital maintenance costs as well as the capital expenditure required for growth.

Other key issues may include the level of domestic and overseas competition, competitive advantage, future demand and supply, intellectual property and brand, product mix, customer concentration, supplier agreements, legislation and licensing issues, exposure to and outlook for exchange rates and commodity prices, and working capital requirements.

Given the asset based of a manufacturing business there is usually 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.

Useful public resources include:

Experience

Manufacturing practice valuation engagements have included the following:

The valuation of a minority interest in a concrete manufacturing group. Key issues included significant demand growth and non operating land holdings, price elasticity to demand, closure of plants and impact on volume, potential licensing issues, customer concentration, market share, significant future capital expenditure, and joint venture investment. Minority interest valued using weighted Income and Market Approaches. Under the Income Approach cash flows modelled under different scenarios. Under the Market Approach guideline Australian public companies and transactions considered.
The valuation of an international chemical manufacturing group. 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. Key issues included significant revenue growth and overseas expansion, changes in pricing, distribution agreements, and potential manufacturing plant expansion. Equity valued under an Income Approach modelling cash flows under different growth scenarios and cross checked to a Market Approach.
The valuation of a consumer durables manufacturer. Valuation report prepared for business owner in consideration of future exit options. Key issues included forex and commodity prices, aluminium prices, installation and advertising costs, maintenance capital expenditure and salary for owner. Business valued using an Income Approach and cross checked to a Market Approach.
The critique of a valuation report relating to an international electrical equipment manufacturer in a shareholder dispute. Key areas critiqued included the interest being valued, the information gathered, the information relied upon and analysed, the sales and performance analysis, valuation approach adopted and justification, compliance with the Australian and International Valuation Standards.