Case Study:Family Law-business valuation
Wise Owl acted here for a wife, whose husband owned a 33% shareholding in his family manufacturing business. His accountants had valued his shareholding at Nil.
The main assets of the business were a modern manufacturing plant, and cash balances. The valuation amount was based on the average of weighted EBITDA and adjusted Balance Sheet amounts.
As part of the discovery process, Wise Owl requested sight of the plant register. This was compared with the photographs and information on the company website, and the historical information in the financials. A specialist machinery valuer estimated the current value to be €0.75m higher than the WDV value, which increased the Balance Sheet valuation amount.
Cash of €1.6m was significantly higher than required for normal working capital. Valuation methodology recognises such cash as Net Distributable Cash which could be returned to the shareholders without harming the business. Wise Owl identified €1.2m here, which increased the EBITDA valuation amount.
Wise Owls certified valuation amount of €530,000 recognised the intrinsic value of these two asset classes.
A discount is often applied to the valuation of a minority interest as the market is limited for such shares. Wise Owl examined CRO records and discovered that shares of another family member had been redeemed at par twelve years previously. This precedent supported Wise Owls contention that a discount for minority interest should not be applied here.
At settlement talks, once the opposing barrister read the detailed valuation, he immediately increased his settlement offer to an amount which met our client’s expectation.