Value Identified for Emerging, Fast-Changing Energy Segment; Sale Complete
Client: U.S. Bioethanol Subsidiary – International Bioenergy Company
Challenge: Value Assets of Emerging Industry Segment
As demand for alternative energy sources began to swell in the late 1990s and continued into the new century, one of the nation's largest producers of ethanol biofuel began exploring the possibilities of a sale and leaseback of an existing facility. One of its lenders, a major U.S. money center bank, agreed to provide financing based on expert valuations for such scenarios. The lender had previously engaged AccuVal for similar assistance in appraising companies in the chemical industry. Unlike the chemical industry, however, biofuel is a relatively new and rapidly changing business. Consequently, historic valuation parameters and market benchmarks were not readily available, and analysts' projections for the biofuel industry's outlook ranged from negative to highly optimistic.
AccuVal Approach
To cut through the ambiguity and arrive at a reliable valuation, AccuVal began a crash course in learning about this rapidly evolving energy category. The firm talked to numerous experts, read voluminous reports, and leveraged its reservoir of knowledge of the chemical industry and the chemical processes involved in turning grain into fuel. AccuVal also applied its experience in dealing with commodities and studied the political climate and its likely effect on legislation. Using all these tools, the firm ultimately generated a supportable valuation that pointed to positive outcomes for the company and its industry in the near future.
Bottom Line: Lender Concurs With Valuation; Company Ultimately Sold
AccuVal delivered its appraisal report, spelling out various approaches the bank could take. The bank was impressed that the valuation included a thorough, realistic and generally upbeat guideline about the company's outlook. The deal performed well, giving the company the freedom to expand while providing good returns for the lender.
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