Private business valuations

Private business Valuations

Lotus Amity specialises in providing private business valuations. Private businesses valuations are provided for a range of purposes and these purposes include:

Valuing private business often involves taking into account certain nuances and subtleties, these include:

Owners and family members working in the business and not receiving a market salary
Assets used for personal use and or personal expenses
Unusually high working capital and inventory levels
Lack of debt funding
Trust and or group structures
Limited or absence of market data to support the prices paid for similar businesses

Private Business Valuation Approach

No matter the size of the private business, all out reports adhere to the Australian and International Valuation Standards. Consequently, we consider and apply the three key valuation approaches: Income Approach, Market Approach and Cost Approach.

Some Australian valuers refer to the Future Maintainable Earnings method (FME). We feel the FMV method is often flawed and inconsistent with the International Valuation Standards.

Instead we adopt a comprehensive and granular approach to valuations. We carry out detailed operational, financial and industry analysis. This includes analysing revenue and profit trend, monthly working capital requirements, customer contracts and pipeline and customer risk.

We carry out this analysis to estimate and model future cash flows and the risk attached to those cash flows to derive an intrinsic value. We then analyse the market pricing information to assess if the market supports our valuation.

Private Businesses Valued

We value private business in a wide range of industries. We are particularly passionate about industries that are focussed on being environmentally sustainable, such as biodiversity and renewable energy. Our industries include:

The size of business that Lotus Amity value range between turnovers of $500,000 to $300 million. Private business valuations may also include the value of intellectual property, goodwill, preference shares, debt and options.

Private Business Valuation Case Studies

The following are case studies illustrating our range of private business valuations.

The valuation of a hotel pub group, comprising of freehold and leasehold pubs and bottle stores. Valuation of the shares required for tax purposes in relations to a scrip for scrip transaction. Key valuation issues included the difference in the revenue sources between pubs (such as gaming income, bar and food income, accomodation, bottle store income and drive in income), proposed refurbishment and development expenditure and the impact on future revenue and margins, and the impact of special shares and management fees.
The valuation of the equity in a group of veterinary clinics. The report was prepared for the ATO to establish if shareholders were eligible for scrip for scrip roll-over relief under Subdivision 124-M of the Income Tax Assessment Act. Income approach adopted projecting and modelling cash flows for each business.
The valuation of a sporting footwear and apparel retailer, operating from ten stores and online; key issues included the valuation of significant surplus inventory and the impact on future margins. Share valuation report prepared to determine the cost basis for the transfer of shares to a testamentary trust for tax purposes.
The valuation of an ultrasound recruitment business contracting out allied health workers across Australia. Valuation required for tax purposes in relation to a restructure. Discounted Cash Flow method adopted under the Income Approach. Valuation issues include estimating future revenue given significant recent growth, estimating capacity for staff supply and expansion and expected salaries.
Valuation of ordinary and preference shares in a national early learning centre company operating childcare centres. Valuation required for tax purposes in relation to the potential acquisition by a large international private equity firm. Valuation issues included clawback terms linked to future site acquisitions and greenfield site development and the distribution of future preference share proceeds dependent on achieving rate of return hurdles.
Valuation of a parties 100% interest in a company operating an engineering business primarily within road infrastructure. Lotus Amity prepared a single expert valuation report for the NSW Federal Circuit Court. The report analysed sales, the impact of COVID-19, contracts and quotations, project outlook, owner market salary, sales forecast and adopted an income and market valuation approach.
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.
Valuation of a sole beneficiary interest in a trust providing property finance, business finance and insurance broker services. Lotus Amity prepared a single expert witness report on behalf of both parties which analysed the business operations, income and loan book, expenses and balance sheets and adopted an Income, Market and Cost approach to value the company.