Business valuation mandate in the context of the restructuring and separation of real estate and operational assets

Mandate description

Evaluation mandate carried out on behalf of a Swiss company operating a network of car washes and holding the real estate related to its operation.

The mission aimed to determine the fair economic value of securities and to unbundling the value of real estate assets of that of operational activity, with a view to restructuring and optimizing the holding structure.

The assessment should make it possible to clarify the real profitability of operating activities regardless of real estate assets, while defining a target structure more suited to the future governance and financing of the company.

Key issues

The main challenges consisted of:

• Distinguish the operating value the heritage value of buildings;
• Measure the intrinsic operational performance service activity, without distortions related to land ownership;
• Suggest a capital restructuring separating real estate and operational entities (internal spin-off);
• and ensure consistency between economic valuation and consolidated cash flows.
  

The evaluation mobilized several complementary approaches:

• one substantial approach, to assess the net value of adjusted real estate assets;
• one performance-based approach, applied to recurring operational activity;
• The Practitioners' method, combining the performance-based approach and the substantial approach;
• one Multiples of transactions approach, based on comparisons in automotive services and industrial cleaning;
• And a discounted cash flow (DCF) approach, in order to measure the future profitability of the isolated operational perimeter.

Approach and results

The work made it possible to establish a differentiated economic value interval :

• on the one hand, the value of operational activity, based on the generation of cash flows;
• on the other hand, the heritage value of real estate assets, evaluated according to an adjusted wealth approach.

The evaluation was used as the basis for a internal restructuring of the company, leading to a legal and financial separation of the two divisions.

This approach made it possible to clarify responsibilities, to improve the readability of performances, and to strengthen the company's financing capacity in each area.