Case Study – Valuation Advisory to a Construction Consulting Firm

Case Study #15 – Valuation Advisory to a Construction Consulting Firm

Company X (company details removed for privacy purposes)

InteleK was engaged by the financial advisor of a construction management firm that was contemplating an internal equity sale to employees.

With a successful track record of projects in the market, the company had been approached several times by external investors and competitors interested in its attractive margins and growth profile. The company sought assistance in determining a reasonable valuation range for a potential transaction, however, throughout the process, the collaborative work between management, financial advisors and the valuation team unveiled several alternatives for value enhancement.

With an established reputation and reasonable size, the company had the potential to take its operations to the next level. Specific steps were identified to facilitate this transition:

  • Significant Financial statements cleanup: despite being a knowledgeable player in the industry, the company faced challenges with the quality of its financial statements. Our team addressed material errors to be rectified for accurate financial reporting.
  • Positioning in the right space: the core of the business was not being properly communicated to the investment community; after careful research, we determined that a “construction consulting” firm would be more highly valued than a “construction management” firm, and the first definition better aligned with the operative nature of the business.
  • Access to external funding: leveraging its size and stable cash flows, the company had the potential to access external funding through debt to finance a potential transaction while optimizing its capital structure and delivering superior value to its shareholders.
  • Expense management: the company had great potential to continue expanding margins by appropriately managing personal-nature and discretionary expenses. By moving from a traditional family-owned business to a professionally managed company, value could be significantly enhanced.

After weeks of extensive work and research, the valuation consulting engagement evolved into a comprehensive step-by-step guide for management to maximize value. As a result, the planned transaction was postponed, and management committed to continue working with InteleK to implement the action plan. By following our guidance, the company is projected to add several million dollars in value in the coming months.

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