Producers Seeking a Processing Plant

Business Valuation for a Potential Processing Plant Purchase

THE CLIENT:
In 2007, a group of agricultural producers had an opportunity to purchase a food processing facility that had been processing and marketing their commodity for many years. Its owner, one of the largest companies in the industry, had only limited operations in that region and had expressed a desire to sell the facility.

THE CHALLENGE – DETERMINE BUSINESS VALUE:
The facility had changed hands more than once in the preceding years, often not to the producers’ benefit. Attracted by the potential for additional value-added returns and concerned about the possibility that the facility would be bought by others and/or converted to other uses, the producers engaged Morrison & Company to perform a business valuation to determine its value.

THE RESULTS:
The current owner had made significant improvements and the facility’s best use was determined to be continuing processing the commodity it was designed for, though it was thought that conversion to alternative energy production might be feasible. Based on these and other factors, the business valuation we performed determined that the facility was worth considerably less than the $40 million asking price, at which the payback period would have exceeded 20 years and resulted in a negative net
present value.

Armed with this business valuation knowledge, our client avoided a potentially disastrous investment. In the years since our valuation, the owner has been unable to find a buyer and continues to operate the facility.