Looking to maximise the sale value of your business?

Jan 20 2016

 

Getting your asset register in order should be your first priority...

With a large number of organisations still reliant upon spurious fixed asset data held in spreadsheets, achieving an accurate picture of the balance sheet and true profitability can prove a major challenge and a potential deal breaker. Failure to put in place an accurate, up to date asset register could result in the company assets being significantly undervalued. It could also undermine the organisation’s ability to demonstrate strong cost control through asset reallocation and, with no asset maintenance history, a potential purchaser has no insight into asset health and the potential investment required, which could further reduce the price offered.

Asset value is an important part of any valuation, yet while many UK organisations appear highly confident of the value of their corporate assets, claiming a high percentage accuracy of the asset register, in reality around 50% of assets on the books are actually no longer in use. As a result, a proportion of items on the asset register are still being depreciated after disposal, reducing profitability without just cause.

Top tips to maximise the value of a business

  • Create a strong management team
  • Prioritise profitability
  • Build a diverse customer base
  • Keep detailed financial records
  • Develop a USP (unique selling point)
  • Know where the business is going
  • Get specialist help
  • Know the value of your business

The problem is that while most companies have good systems in place for recording initial investments, they pay lip service at best to managing later asset disposal. Far too many organisations are still reliant upon spreadsheets for recording assets and create confusion by failing to record the movement of assets between locations. Whilst that may not affect their value to a finance team concerned primarily with depreciation, should a company opt to divest a number of locations, inaccurately recorded assets could severely compromise the value of the agreement to either party. 

With such a lack of robust information, how can any acquiring organisation undertake due diligence on behalf of shareholders? And for those organisations looking to maximise company value prior to a sale, poor asset information can only result in significant undervaluation.

Any business looking to sell needs to ensure its asset information is up to date and trusted. Without accurate records about asset life, usage and refurbishment history, potential acquirers will struggle to put a correct figure on asset value. And without access to a consolidated asset register that also records asset maintenance, it will be impossible to ascertain an asset’s longer term value to the business. The result will undoubtedly be a significant reduction in any potential offer.

If you would like to learn more about how an accurate asset register can provide a platform for improved cost control or you are under pressure to start demonstrating sound business practice, contact RAM today and we will be happy to help. Email solution@realassetmgt.co.uk or telephone +44 (0)1689 892 127.