Asset valuations drive lending certainty
The GoIndustry DoveBid survey provides much food for thought T
he team at GoIndustry DoveBid has recently commissioned an independent study of
the perceptions of UK lenders and professional advisers in respect of asset valuations. Business Money reports on the story behind the numbers. With increasing demand for asset-based lending for refinancing, management buy- outs, acquisitions and turnarounds, the need for accurate asset valuations has never been greater. The findings of the GoIndustry DoveBid survey are revealing; asset-based lenders, many of whom until very recently were content to fund solely against accounts receivable, are now far more willing to fund businesses with inventories using a revolving debt facility. In fact, 78% of respondents said that they had engaged a professional external valuation on inventories in the past 12 months. A number of asset-based lenders complement these facilities with term lending against fixed assets, such as unencumbered plant and machinery and freehold property. After inventories, plant and machinery was reported as being a key area for asset appraisal by 74% of respondents. This was followed by property (67%), accounts receivable (19%) and intangible assets (17%). There are a range of circumstances in which the respondents said they would recommend the services of an asset valuation specialist. Top of the list was for lending purposes (88%). This necessitates a detailed valuation report to satisfy the lender’s credit committee, not only in terms of market value, but also to address the level of market and credit risk involved, with up-to-date asset intelligence to support this advice. Distress or insolvency and business acquisition or disposal are complemented by due diligence,
44 November/December 2010
portfolio and risk reviews as the cornerstone of on-going credit monitoring.
It is essential that lenders receive specific, realistic valuations against individual assets, as opposed to considering a blanket assessment over a general basket of securities. This provides transactional confidence and greater availability of capital and this in turn promotes greater market certainty. Anticipated loans-to- value vary widely depending on the nature of the asset. The vast majority of respondents would expect to see advances of around 70-80% against accounts receivable; stock/ inventory at 50%; plant and machinery also at 50%; property/real estate at 70% and intangible assets at 10%. The qualities most sought after in a valuation company are the accuracy and reliability of valuations, and responsiveness and speed of information. The relationship with the valuations team, together with access to the maximum market data related to asset sales are also of importance. When asked to describe the current trading cycle for various industries, the survey highlighted that telecommunications (static 70%, growth 20%) and biotech (static 47%, growth 43%) were holding up well. Food and beverage is also viewed positively (static 50%, growth 33%) as is the electronics industry (static 54%, growth 29%). Industries currently perceived to be finding themselves in a less favourable phase of the economic cycle are aviation (recession 63%, static 36%); textiles (recession 54%, static 42%); retail (recession 50%, static 50%) and commercial property (recession 54%, static 35%). This survey has highlighted two factors influencing the asset-based lending market. Firstly, the need for specific, dependable and timely asset intelligence to support banks, asset-based lenders and other financial
Business Money Fast facts
GoIndustry DoveBid’s global team conducts asset valuations in over 30 industrial sectors and 70 different countries around the world. Their website,
www.go-dove.com, receives more than four and half million visitors from over 200 countries which equates to more than 40 million page views annually. The GoIndustry DoveBid auction website is now in the top 0.5% by traffic globally.
institutions in making informed asset risk decisions. Secondly, that many lenders are providing value against inventories and plant and machinery in particular, not just debtors. Now, companies are examining their own balance sheets more closely to identify where capital is tied up and how they can become more intelligent in the use of their assets. Detailed valuation of the specific assets to be funded and structured financial reporting gives lenders the confidence to stretch funding over and above the amount that would typically be available under a formula-driven approach. Pricing and speed of deal determination are of the essence in respect of transactions and lenders depend upon accurate information to support their asset risk decisions.
Unparalleled access to the most extensive asset sales dataset, deep business insight and a focus on building strong relationships provide the basis for GoIndustry DoveBid’s Asset Intelligence services. This, combined with instant access to more detailed proprietary information, means that GoIndustry DoveBid is a preferred choice with lenders seeking rapid, reliable and accurate valuations advice.
www.go-dove.com/valuations
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