Valuations - Case Study: Valuation of a business for MBO
The problem
Our client was the management of a business who wanted to carry out an MBO. We were asked to
assess the value of the business prior to the negotiations starting.
Solution
There are no shortcuts when valuing a business. It is essential to "get to the heart" of the
operation to understand what it is worth. A five year analysis of the company financials and
budget projections identified key issues and important trends. We visited several supermarkets to
assess the visibility of the products compared to the competitors. Finally, we carefully reviewed
their technology licences before calculating our suggested price range for the negotiations.
Benefit to client
In this work it was our accumulated experience that added value to the client over and above
the task that they had set us. The technology licence agreements contained some cancellation
clauses that could be ruinous for the business and the licensing fees being paid were significantly
above the market rate so it became clear that it was essential for the MBO negotiations to cover both
price and the technology licence agreements.
