How To Value a Farm Agricultural Business

Business valuations are frequently performed when one company acquires another company, when a company is targeted for an acquisition, when a company’s capital structure is reorganized, when a company splits up, or when a company enters bankruptcy in liquidation or reorganization. The transactions may include entire or partial acquisitions, divestitures, liquidation, or recapitalization. Mergers will generally require both companies to be valued, while an acquisition may require only a single valuation. The terms of the transaction generally include cash, notes, stock, or a combination of these forms of payment.

Typically most business valuations are performed to determine the proposed value of a business, Agrilend focuses on the enterprise value of the business which includes all equity stakeholders or shareholders, interest bearing debt, net working assets, fixed assets as well as intangibles also described as goodwill. The reasoning implicit in The Agrilend model is the typical business valuation of an ongoing concern will provide a methodology for valuing its monetary efficiency by the market, asset, and income approach, however when dealing with established food manufacturing brands there is a different element to be considered to determine which constitutes its inherent customer base and brand positioning and therefore the multiple the target company can be purchased at or resold to a secondary private equity group, lender, or investor with an emphasis proportionally irrespective of discounted cash flows, capitalization rate, risk free rate, debt capital structure, capital asset pricing method, equity risk premium or company specific risk premium. In food manufacturing established brands with distribution in retail, it is still necessary to gauge the capital structure to determine the weighted average cost of capital to make a decision for a minority or majority purchase, however Agrilend places an emphasis on this intangible value with greater weight. Oftentimes investors retain Agrilend just for our opinion on a target Agricultural company in this niche just for this reason alone. Remember brand loyalty can be intergenerational and span decades into a dynasty. Intangibles dictate your market share in the agricultural business no matter if you are producing milk, cheese, beef, pork, seeds, grain or corn to name a few. If you would like some consulting free at no charge, please email me at robertmorgan@agrilend.co or visit us at www.agrilend.co