UK Food manufacturer - shares valuation
The client, a leading UK food manufacturer, had been acquired by a financial investor in a leveraged buyout. At the time of the buyout some of the management subscribed for ordinary shares in the company. Management leaving the company subsequently were required to sell their shares back to the company. A team from PwC was brought in to provide a 'Fair Value' opinion in accordance with the company's Articles of Association. The company directors used this value to determine the share price that would be offered to exiting shareholders.The areas requiring special consideration included the wording of the Articles, the market value of the debt, the effects of leveraging, and the actual price paid for the business. The PwC team built a financial model based on the company's projections and employed discounted cash flow and market approach valuation techniques to determine the value of the business, reconciling any changes in the value since the time of the buyout.
PwC modelled the prospective cash flows of the various debt instruments, and considered the effect a change in ownership would have on the company, its investors and its lenders. Technical skills, combined with experience of providing expert valuation services, enabled the team to provide the client with a thorough and robust valuation that could withstand scrutiny. That gave the client the comfort they needed in determining a share price, ensuring that the exiting shareholders were offered a price consistent with the spirit of the Articles, and the protection the company needed should the shareholders challenge the offer price.
