Case Study – Valuation of a Food Wholesaler for Liquidationt

Case Study #12 – Valuation of a Food Wholesaler for Liquidation

Company X (company details removed for privacy purposes)

InteleK was engaged by the owner of a food wholesaling company struggling to survive. They sought assistance in determining a reasonable valuation range for corporate restructuring and negotiations with creditors. Despite a successful 30-year history in the industry, a strong brand, and several subsidiaries (retail stores) across New South Wales, the company had been severely impacted by the COVID-19 outbreak, resulting in store closures, inventory damages and accounts receivables written off.

Key considerations in this engagement included:

  • A substantial amount of intercompany transactions, loans, and investments between subsidiaries and the holding company.
  • An overly complex organizational structure comprised of different business models and legal entities under the same brand, making financial analysis challenging.
  • Above-average risks due to the legal context surrounding the valuation.
  • Subsidiary-specific competitive landscapes arising from different locations, teams, and clientele.

To address these challenges, we adopted different valuation premises based on the viability of each subsidiary. We excluded intercompany transactions from the balance sheet and adjusted income statement transactions to reflect market rates, unveiling the fundamental economic performance of each business.

Our valuation framework carefully considered the defensibility of assumptions related to the market value of assets, various claims on these assets, personal guarantees supporting certain obligations, and the specifics of each lease agreement.

By understanding the unique risks faced by each subsidiary and the holding company, we provided the client with defensible asset value ranges. These ranges aided in negotiations with creditors and guided the eventual liquidation of the business.

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