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Assets may be invisible, but can still be valuable.

Byline: By John Craig & Peter Sayle

A realistic evaluation of a company's assets is critical in the early stages of a business turnaround or restructuring.

Specialist asset valuers work closely with the turnaround professionals on this and the first questions to be answered include:

Does the balance sheet give a true reflection of the company assets?

Are historical valuations correct?

What assets are under-utilised?

Can assets be sold to release capital?

Is there compliance with current statutory requirements?

Can anything be done to produce early cash injections?

The asset valuer will produce a consultation report relating to all assets. This will include the identification of sites and buildings with valuable alternative uses which could be sold.

Where a property is leasehold there are additional issues to consider such as rent reviews, lease renewal, onerous covenants and potential dilapidations claims.

Insurance cover will also be examined, and if the premiums are too high and rising then solutions will be addressed.

Other issues are planned maintenance and the preparation of budgets for works to prevent disasters occurring. Immediate rate savings may also be made through rating appeals after re-organisation of production.

A current assessment will also be made of the town planning position in order to establish any material restrictions on use or opportunities for added value.

The property can be used as security for funding and any increase in value since the last valuation can be quickly assessed. A sale and leaseback could be effected.

When it comes to machinery and other business assets, the machinery valuer could comment on good housekeeping, production layout, potential capital expenditure and health and safety ( all ingredients in the improvement of efficiency and profitability. As with property, it can be disastrous if insurance isn't current for machinery, as values can change quickly due to currency changes etc.

The machinery valuer can identify assets which are little used or unused. Often minimal re-organisation can release assets which can be sold. Also if the machinery is little used, consideration to out-sourcing the production process can be given.

Asset based lending is now a major source of funding and wholly owned assets can be considered for this purpose. Chattel mortgages can be considered and used as additional collateral.

An inventory appraisal of stock is vital. An asset valuer will ask; Is the company holding too much stock? Can space be released or de-rated? and can older stock be sold? Often investigations show that the allocation to the machinery category of capital allowances can be altered and backdated to produce cash.

In the past assets could be seen and touched, however, now they may be invisible but still very valuable. The asset valuer can assist the turnaround professional in identifying, protecting, harnessing and exploiting these assets as part of his overall programme. The potential value of intangibles should not be underestimated.

John Craig and Peter Sayle are directors at asset valuers Sanderson Weatherall.Contact john.craig@sandersonweatherall.com or peter.sayle@sandersonweatherall.com.
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Title Annotation:Business
Publication:The Journal (Newcastle, England)
Date:Jun 22, 2005
Words:494
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