Corporate reorganisation: Valuation in support of structural optimisation In a globalised economy where multi-faceted businesses have an array of interconnected stakeholders, corporate organisational structures can become very complex.
Valuing illiquid assets during a volatile market is significantly more complex than during a stable market as pricing metrics and benchmarks are highly
Large organisations with simple group structures are a rarity, whilst many mid-market businesses and SMEs have complicated structures due to the number of interconnected functions and assets that contribute to performance, and the diversity of available financing arrangements. The ever-increasing role of intellectual property in the value proposition of businesses also plays a part, as tax optimisation and transfer pricing arrangements lead to multi- jurisdictional structures and intra-group cost and profit sharing. Arrangements such as intercompany loans, guarantees and share pledges add further complexity by transferring financial obligations or risks between different parts of a group. For businesses that are growing or managing change corporate structures are fluid, with a continual need for legal entities to be created, adapted or closed down and for assets to be capitalised, transferred and protected. Acquisitive companies face the additional challenge of combining organisational structures in an optimal manner. ‘Corporate Reorganisation’ is a catch-all term covering transactions that facilitate the transfer of corporate items such as assets, liabilities or legal entities between different parts of the same corporate group, on a solvent basis.
Such reorganisations are driven by a variety of factors which include preparation for a sale or divestment, integration of business units following an acquisition, and optimisation in respect of operations, risk management or tax. Processes can range from the simple to the complex – a single asset transfer on the one-hand, to a full strategic reorganisation on the other and whenever corporate reorganisations take place, valuation is central to the process. Assessing the value of the items being transferred between different parts of a corporate group is important for several reasons.
volatile and recovery pathways so varied. Jim Davies Corporate Finance
Jim Davies Partner Financial Advisory London +44 (0)7841 829 826 jim.davies@frpadvisory.com
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