In any joint venture, the value of what both parties are bringing to or expect to take out of the joint venture is normally of critical importance to the joint venture parties. However, in our experience, it is surprising how often valuation is skated over and little quantification of the value of assets being put into a joint venture or the expected dividend income or exit value is carried out.
Going into a joint venture
For companies considering entering into a joint venture, we work with clients to:
- identify what each party is bringing to the joint venture such as brand or knowhow;
- assess and quantify what value is expected to be created by the joint venture;
- value the contribution of each party to the joint venture; and
- determine what % interest each party should have in the joint venture and whether cash or other consideration should be paid from one party to another.
We also assist clients in considering what value they expect to get out of the joint venture in terms of dividends or other income and value on exit.
In many situations, at least one party will be contributing assets which are intangible such as brands, technology and knowhow. These assets are sometimes considered to be more difficult to value than physical assets such as land and buildings. However, there are well established valuation methods which are used to calculate the value intangible assets bring to a joint venture and to help clients negotiate a fair recognition of their contribution.
At City Valuation Advisory, we provide this role either advising one party to the joint venture or acting independently between both parties to provide objective valuation advice and opinion.
Exiting a joint venture
For clients facing an exit from a joint venture, we can assist in providing advice on the following:
- Understanding the basis of valuation set out in the joint venture agreement(s) and any process set out for the valuation; and
- Preparing a valuation of the joint venture as a whole and /or determining what value should be allocated to the shareholding of the party who is exiting the joint venture.
As for entry to a joint venture, City Valuation Advisory can provide valuation advice to one party or a formal independent valuation opinion for both parties which may in some circumstances be final and binding on the parties under the terms of the joint venture agreement.