Friday, March 11, 2011

Inventory Valuations Get Sticky

The GoIndustry Dovebid Valuations Team was recently engaged by an Asset Based Lender (ABL) to reappraise a manufacturer of self adhesive tapes.  Following a successful MBO supported by an ABL facility, the lender required an inventory reappraisal in order to assess the performance post buy-out.

The company manufacture as well as buy in adhesive tapes in various forms, with inventory on hand comprising of raw materials, work in progress and finished goods.  The work in progress is mainly produced to order and therefore in its own right would generate a relatively high value in an exit scenario. Raw materials together with the factored finished goods were reviewed for ROT, resulting in raw materials being eliminated and an element of finished goods due to the easily identifiable nature of the goods.

Raw Material price pressures had resulted in margins lowering, however with inventory turn improving our overall reported NOLV % was broadly similar to our prior appraisal resulting in the lender maintaining the facility at the same level. The appraisal involved two valuers visiting the company over one site day with site work included a test count, three different cost tests, retention of title and slow moving analysis and an exit cost calculation amongst other tests.

For more information on GoIndustry DoveBid inventory appraisals then please contact the GoIndustry DoveBid Valuations Team.