Business and Real Estate Valuation Mandate for Corporate Restructuring
Independent valuation of a Swiss operating company separating business and real estate value to support corporate restructuring
Description of the mandate: valuation of a Swiss automotive services player with real estate-operations separation
The engagement focused on the determination of the fair economic value of the shares of a Swiss company operating a network of carwash stations and owning the real estate assets linked to its operations. The business valuation was intended to separate the value of real estate assets from that of the operating business, with a view to a spin-off and an optimisation of the ownership structure.
The valuation needed to clarify the real profitability of operating activities independently of real estate assets, while defining a target structure better suited to the company's future governance and financing.
Key challenges: isolating operating performance from real estate value
The main challenges of the mandate were:
- distinguishing operating value from the patrimonial value of the properties;
- measuring intrinsic operating performance without distortion linked to property ownership;
- proposing a capital restructuring separating real estate and operating entities (internal spin-off);
- ensuring consistency between the economic valuation and consolidated cash flows.
Approach and outcomes: combining substantial value, earnings, practitioners, multiples and DCF by perimeter
The valuation deployed several complementary approaches applied to two distinct perimeters:
- a substantial-value approach, to assess the net value of real estate assets adjusted to market value;
- an capitalised earnings approach, applied to recurring operating activity after market rent;
- the practitioners' method, combining earnings and substantial value;
- a transaction multiples approach, based on comparables in automotive services and industrial cleaning (EV/EBITDA multiples typically between 5.0x and 8.0x);
- a DCF approach to measure the future profitability of the isolated operating perimeter.
The work established a differentiated economic value range: on the one hand, the value of operating activity (cash flow generation), on the other hand, the patrimonial value of real estate assets (adjusted patrimonial approach). The valuation served as the basis for an internal restructuring resulting in the legal and financial separation of the two divisions, clarifying responsibilities and strengthening financing capacity in each perimeter.
Illustrative example: numerical application to a carwash network with dedicated real estate
For illustrative purposes only — unrelated to the actual data of the mandate — a network of 8 carwash stations generating CHF 5M in revenue with a consolidated EBITDA of CHF 1.1M could, after separation, exhibit (i) an operating value (OpCo) of around CHF 3.5M to 5.5M (multiple of 5.0x to 7.0x on OpCo EBITDA after market rent of around CHF 400k/year), (ii) a real estate value (PropCo) of CHF 5M to 7M depending on leases and locations. The differential vs the pre-spin-off consolidated value documents the arbitrage gain from separation.
Summary: 5-week mandate, five cross-checked methods, basis for a real estate/operations spin-off
Business valuation mandate delivered in 5 weeks for a Swiss carwash player. Five methods deployed (substantial value, earnings, practitioners, multiples, DCF) applied by perimeter. Deliverable: independent report serving as the basis for an operations/real estate spin-off legally separating the two divisions.
Frequently asked questions: spin-off, OpCo/PropCo, Swiss taxation
Why separate OpCo and PropCo?
The OpCo/PropCo structure provides (i) enhanced financial readability (pure operating vs real estate profitability), (ii) financing flexibility (mortgage debt on PropCo, equity financing on OpCo), (iii) tax optimisation (deductible rents, real estate depreciation), (iv) an option to sell each division independently to specialised acquirers.
How to set the market rent between OpCo and PropCo?
The intragroup rent must comply with the arm's length principle (OECD) to avoid any tax risk. It is calibrated based on (i) rents observed for comparable premises (commercial real estate yields), (ii) replacement cost, (iii) a market yield on the property's market value (typically 5-7% in Switzerland for commercial real estate).
What multiples for automotive services?
For automotive services (washing, mechanics, maintenance), observed EV/EBITDA multiples range between 5.0x and 8.0x, with dispersion depending on revenue recurrence, the brand, territorial coverage and land ownership. The isolated OpCo perimeter (without real estate) is generally valued at the lower end of the range.
What taxation for a spin-off in Switzerland?
In Switzerland, a spin-off can be structured as a tax-neutral restructuring (art. 19 LIFD, art. 24 al. 3 LHID) under certain conditions, in particular the maintenance of tax-relevant values and the absence of transfer to a third party for 5 years. A prior tax ruling is strongly recommended to secure the treatment.
How long does the valuation for a spin-off take?
The standard duration is 4 to 7 weeks, depending on the complexity of the real estate portfolio (number of sites, lease types) and the quality of analytical accounting already separating operations and real estate. The mandate described was completed in 5 weeks.
Is the report enforceable against the merger auditor?
Yes. An independent report compliant with Swiss standards (Chambre fiduciaire, EXPERTsuisse) and IVS is generally acceptable to the merger/demerger auditor (art. 41 LFus) and to the tax authority as part of the ruling. To go further: holding company structures in Switzerland.
Similar mandates: other business valuations and restructurings
The transactions shown include those completed by, or with the involvement of, Hectelion team members in current or previous professional roles. They are presented for illustrative purposes only and do not imply exclusive responsibility by Hectelion.
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The transactions presented were carried out by, with the contribution of, or with the participation of members of the Hectelion team in the context of functions performed currently or previously.