Case Study – Valuation Advisory – Exit Planning

Case Study #8 – Valuation Advisory – Exit Planning

Company X (company details removed for privacy purposes)

  • InteleK was engaged by the board of directors of a well-established company in the engineering services industry. The company offered a full spectrum of specialists in several market niches, providing various solutions to the building sector. After being in the market for several decades, achieving superior growth rates and profitability, management was planning for an exit.
  • Despite being an SME, the successful engineering company was becoming a relevant player in the region, and it was expected to continue growing at a good pace, which would have the potential to attract several bidders. The results of the valuation would have a material impact on the strategic decisions of the firm as well as on the personal decisions of the parties involved, particularly, insiders with a large stake in the business.
  • Our challenge was then to determine a reasonable range of values based on defensible assumptions in terms of risk-reward profile, potential for growth, and the incorporation of different strategic pathways, to guide the process of selling and transferring the company's stock. Furthermore, it was necessary to educate the board in business valuation practices so they could develop the best action plan.
  • Establishing a defensible position was key in this engagement, as the company was expected to negotiate with financially savvy audiences. To achieve this, we needed to work closely with management to understand the nature of the business and its competitive advantages. We also relied on factual evidence from both financial and non-financial sources, since this is a growing industry with several potential investors, each one with a different point of view.
  • With years of experience in business valuation, and with a clear understanding of the environment in which the company operated, InteleK presented different valuation methods based not only on the financial projections provided by management but also on the observed market multiples and premiums paid by investors in recent transactions.
  • With all our data, tools, and insights at hand, we were able to guide management in determining a reasonable valuation range and what to expect in a negotiation. To our surprise, management was underestimating the true potential and attractiveness of the business and was potentially leaving several million dollars on the table. The board was able to identify the strengths and weaknesses of their business and how to leverage market data to gain a significant advantage in a potential stock sale.

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