Valuation

food_manufacturing

Case Study: Valuation


Uncovering Intrinsic Value

Background

A well-known food manufacturing brand had been experiencing difficulties in communicating with their bank.

As a heavily geared business, the client needed to strengthen its finance capability and negotiating position with its Credit Manager.

Approach

Kennedy Needham advised its client to pursue two initiatives:

  1. Create a sophisticated business plan which would help the bank better understand where the business is at and where it wants to go.
  2. Conduct a thorough valuation of the business which uncovers sources of intrinsic business value, and looks beyond basic assets and balance sheets.
Outcome

Once the business had a solid business plan and a valuation from a credible and independent advisory firm (each complementing the other), the client’s borrowing potential became more flexible – and their relationship with their bank instantly improved.

What’s more, the business plan offered the client substantial strategic and tactical value which they used internally for clearer direction.

The valuation also improved engagement with key stakeholders and investors.

Key learnings

  • A thorough valuation can be extremely useful in determining the intrinsic value of a business. Once performed, the valuation can also be used for a variety of commercial purposes.
  • Lending institutions will have a better view of an organisation that can produce a sophisticated business plan which shows where they are and where they want to go.
  • When confronted with a problem, the obvious solutions may not always be sufficient. In this case, a valuation (without the supporting business plan) may have not been enough to improve the relationship.