Take Stock

The traditional asset valuation and disposal business has changed dramatically in recent years as UK plc moves from a manufacturing economy to a service economy. Traditional assets such as machinery & equipment and freehold property are often replaced with industrial and consumer inventory and intellectual property such as IPR, trademarks and domain names.

The role of the traditional valuer has evolved into that of a professional advisor where they are required to get to grips and understand how to value and dispose of these changing asset types which require an in-depth understanding and intensive management to ensure maximum realisation is achieved for creditors.

Take inventory for instance. The valuation requires a unique combination of business analytical skills, accountancy knowledge and workout experience to arrive at an accurate realisable value.

The disposal of inventory requires a strong set of sales and negotiation skills supported by a deep understanding of the work-outs channels whether it’s by selling inventory at a discount to the existing customer base or whether selling to a competitor or any other buyer via the private treaty, on-line auction or live auction routes. The exit plan should map out the exit period, key staff to be retained, control of infrastructure, existing customer service issues and discounting strategy.

“Inventory can be wide ranging, constantly changing, extremely complex and needs to be thoroughly understood to be accurately valued”

The work of the restructuring professional is complex and time-consuming and there are onerous implications if potential problems are not identified in a swiftly manner.  It is important for the valuer to work closely with restructuring professionals to provide accurate valuation advice and affect the disposal strategy, maximise the value of recovery for creditors and examine the value and title throughout the sales process. They should expect as a minimum from the valuation professional:

• A deep understanding of the fabric of the business by being embedded with the sales team
• Accounting knowledge of costing, margins, inventory turn
• Inventory profiling , dynamics, mix, ageing and slow moving and obsolesce
• Customer profiling, concentration, branding, royalties and contractual issues
• Suppliers, retention of title issues, liens and ransoms, obstacles
• Goods in transit feasibility analysis
• Detailed exit strategy with appropriate costing
  
  

Managing accelerated inventory realisation (AIR) programmes is complex, and without any structured processes in place it is easy to lose value. The AIR programme involves selling slower moving fringe inventory while retaining maximum value of the core inventory while the business is up for sale.

As with all market valuations, as well as a deep understanding the key is experience as this assists in providing sound advice as the issues, challenges, opportunities and realisable value is known. Next time you engage a valuation expert to value inventory take stock and make sure you have the right partner to provide the correct advice and expertise to achieve maximum realisation.