Thursday, October 7, 2010

Using Inventory Valuation to Improve Lending Terms

GoIndustry DoveBid Valuation Services was recently engaged by an Asset-Based Lender (ABL) to re-appraise the inventory of a leading manufacturer and distributor of industrial fasteners. Following the teams valuation back in 2009, the lender had put an inventory facility together and was requiring a re-appraisal to update the terms currently offered.

Our valuation covered 9 UK and Ireland sites, of which two of the largest sites by value were visited.

The task of appraising this company continues to test the powers of the spreadsheet, analysing over 100,000 SKU’s (Stock Keeping Units) spread across all of the locations. Several pivot tables, spreadsheets and charts later, the analysis enabled the valuations team to build a full selling profile of the inventory on hand which was used to calculate the appraisal reducers required to sell the inventory within the defined exit period.

At the time of our first visit, the company together with many other businesses within the UK were being affected by the global recession. Since then, the industries in which the company feed into have started to recover, resulting in an improvement of the company’s performance. This showed through in many areas of our valuation, including inventory turn and selling profile, resulting in an overall improvement in our valuation.