Valuation range anchors a partner buy-out at a Friedberg haulier

Situation

A regional logistics company in Friedberg (Hessen), 60 staff, about €6.5 million revenue a year, running contract distribution for food and building-materials customers in the Wetterau. Two shareholders held 60% and 40%. The minority partner wanted to retire, and the majority partner wanted to buy his shares.

Both had a number in mind, and the numbers were about €800,000 apart. Neither had more behind his number than a rule of thumb from a trade association. A full opinion from an auditor (Wirtschaftsprüfer) would have cost a multiple of what either wanted to spend on a first step, and taken months. They needed a range they could both accept as a starting point, with the reasoning open.

Approach

An indicative valuation gives a range, with the method shown, so that the parties argue about assumptions instead of about a number. It is a working document for negotiation and planning, and the first page says so.

We used the multiples method, which values a business at a number of times its yearly earnings, the number taken from what comparable businesses have sold for. The earnings figure was EBITDA, meaning earnings before interest, tax and depreciation. Reported EBITDA was about €585,000 a year, or 9% of revenue, and we adjusted it for one item only: the minority partner’s salary, which falls away after his exit, so about €70,000 a year came back in for a normalised figure of about €655,000.

For the multiple we drew on eight published sales of regional transport firms in Germany and Austria over four years and on listed logistics groups, discounted for size, because a firm this size sells for less per euro of earnings than a listed group. That gave 4.0 to 5.0 times EBITDA.

Enterprise value is what the whole business is worth before its debts. The firm carried about €400,000 of net debt, mainly vehicle financing, which comes off to give the value of the shares.

Nothing in the memo is tax or legal advice. The tax adviser (Steuerberater) handles the tax on the sale and the lawyer drafts the share purchase agreement, each on their own ground.

Result

In this scenario the memo put enterprise value at about €2.6 million to €3.3 million and equity value, after net debt, at about €2.2 million to €2.9 million. The 40% stake was therefore worth about €880,000 to €1.15 million before any discount for a minority holding. The partners agreed on €950,000 within three weeks, and the agreement went to the lawyer with that figure.

What it cost

The engagement cost €3,900 as a fixed price, quoted before the work started. That bought the twelve-page memo with method, comparables and the bridge from enterprise value to equity value, an adjustment discussion with both partners, and a one-hour call on the result. Delivery took two weeks. A signed opinion, if ever needed, goes through a partner auditor (Wirtschaftsprüfer) and was not part of this engagement. The work is covered by our 100% money-back guarantee: full refund on request within 14 days of delivery.

Every fixed-price engagement carries the 100% money-back guarantee. How the guarantee works →