In the context of financial restructuring, if a distressed business cannot be turned around, there is an increasing request from clients (both lender and company side) for valuations. In particular, stakeholders are most concerned about where the “value break” is as this can form the basis of decisions by stakeholders on different exit options. Our specialised valuations team have worked alongside our restructuring colleagues on a significant number of projects to meet this demand.
What's on your mind?
- What is the value of the business as compared to the current level of debt?
- What might be the value of the business at a future date (is it more effective to trade through the downturn in the cycle or foreclose on the debt)?
- What strategic disposal options are available in current situation and what is the value of the business for each of these options?
- What is potential buyer audience and what are they likely to pay for the business?
How we can help
- Consideration of potential purchasers’ appetite and ability to transact should be analysed to determine potential disposal options to preserve value in the business for the key stakeholders.
- Detailed through the cycle analysis based on comparable companies and key sector indicators allows to estimate whether sector multiples ever return to historical levels and how long it will take for these to recover to long-term levels.
- Where an administrator or prospective administrator is planning to implement a non-consensual solution or a consensual solution is being negotiated, the administrator will often ask for a valuation to be performed by a party independent to the negotiations to confirm where the capital structure breaks.
- Analysis of comparable transaction and indication of level of M&A activity and appetite in sector, helps to assess price range which vendors have been willing to accept for a company with similar circumstances.
What's in it for you?
- If valuation work is considered upfront it can be integrated into ongoing legal negotiations.
- Understand what the business drivers are and what their impact is on valuation.
- Preserve value in the business for the key stakeholders.
- Our multi-disciplinary team has successfully delivered most of the recent high profile restructuring assignments in the retail sector.
- Through our extensive investment in research in the sector, KPMG’s retail practice is consistently leading research and thought leadership in the retail space. Access to this knowledge will allow us to robustly challenge Management’s plans/strategies and add valuable insight to you.
- We have worked with leading banks in Europe and Middle East and know key persons there.
- A large national clothing retailer with over 900 UK stores was facing a dramatic decline in the discretionary spending of its target customers, leading to sustained declines in like for likes sales. The high operational gearing meant that this underperformance led to a forecast covenant breach and concerns over short term liquidity.
- We were appointed to advise the Senior Lenders. Our wide ranging role included a detailed assessment of a significant store closure plan and opining on the prospects for the UK clothing market and the adequacy of the Group’s key strategies. We have assessed pricing analysis on a going concern basis for both normal and accelerated sale process. With refinance options exhausted, the business has gone into administration where our Corporate Finance team were leading a process to sell the business as a going concern.