Creative Business Enterprise Valuation Approach Secures $200 Million Funding
Client: Pulp-Paper Mill and Packaging Business
Challenge: Identify Creative Approach to Finding Value
A leading U.S. forest products company was selling a large pulp and paper mill plus a packaging business in South Carolina. Given the industry economics and its labor-intensive nature, the buyer could make the deal work only if employees agreed to wage concessions in return for shares in the new company, and assurances that pensions and other benefits would be honored. To fund the $280 million transaction, the buyer needed to secure financing for approximately $200 million. The lenders realized, however, that if the new company's assets were appraised only for their value in the event of a liquidation, the real estate and machinery would not yield nearly enough to let the deal go through. Needing a more creative approach, several lenders recommended the buyer contact AccuVal.
AccuVal Approach
Instead of taking the traditional removal-value approach, AccuVal thought a business enterprise approach was more appropriate and could yield the value necessary to complete the deal. However, the appraisal team faced some hurdles. Because the company had been part of a diversified global company, separate financials for the spin-off did not exist. AccuVal worked with the former parent company in reconstructing the financials of the spin-off business. The firm also looked at the spin-off's income streams and determined that its converting operations had substantial values that could be leveraged. In addition, AccuVal analyzed market demand as well as the utilization of machinery, and recommended ways to generate higher machine-time profit margins.
Bottom Line: Spinoff Qualifies for $200 Million; Deal Gets Done
AccuVal demonstrated to the lenders a business enterprise valuation that was not only more appropriate for the industry but also reflected the true nature of the assets. The lenders agreed and approved the $200 million debt financing.
The AccuVal AdVantage™
In-depth experience in the pulp and paper industry. An ability to assess and solve difficult transactions with innovative solutions. A reputation recognized globally by investors, money-center banks, venture capitalists and financial syndicators. That's The AccuVal AdVantage™ at work.
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