Acquisition valuation in financial services

One of our clients within the financial services sector was considering the acquisition of a non-standard business “group”. For our client to have a good foundation for the negotiations, we carried out a valuation of the group.

Challenges

The main challenge faced in the valuation was the business group’s complex structure, which included companies and partnerships with different members, significant minority stakes, cross-holdings and complex remuneration agreements. Some of the LLPs were technically not part of the group but were included in the intended acquisition.

Solution

Due to the complex business structure and the significant trading activity between the entities, the Simmons Gainsford Financial Investigations team were required to perform a detailed elimination exercise in order to arrive at the right underlying numbers. When doing the valuation, the team from Simmons Gainsford Financial Investigations had to balance historic performance with future expectations. This involved building a detailed cashflow forecast model. The valuation methodology included use of comparable recent transactions as well as looking at relevant sector multiples, both historic and forward-looking.

Outcome

This elaborate valuation was then used as the basis for negotiations of the transaction, with the cashflow providing a focus of attention.