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£148,000
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Read the case study →Personal servicesManagement buyout
Management buyout: a studio, its landlord and a £153,000 loan
Details have been anonymised and some figures rounded to protect client confidentiality.
- Sector
- High-end body art and jewellery studio
- Purpose
- Phased management buyout
- Size
- c.£750,000 turnover
- Region
- North of England
£471,000
Central value of the whole equity
£318,000
Central value if the loan is removed first
£25,000
Market rent adopted, against about £50,000 charged
54%
Delivery cost paid to self-employed artists
The situation
The sole owner of a well-known studio wanted to hand the business to her management team in stages over several years. She needed an independent figure to test any price against.
The difficulty
The studio rented its premises from a company the owner also controlled, at about twice the market rent. The studio had also lent £153,000 to that property company. Most of the people generating revenue were self-employed, not employees. An earlier informal figure of around £700,000 came from a broker who wanted to buy, with nothing in writing.
What we did
We assessed market rent on the floor area and local lettings at £25,000 and adjusted earnings to match. We showed turnover had levelled off after a fall, with the profit recovery coming from cost savings rather than growth. Because the £153,000 loan could stay in the company or be taken out before any shares moved, we valued it both ways so the team could see the effect.
The outcome
Whole equity value of £427,000 to £500,000, central £471,000, with the loan staying in the company. If the loan is removed first, £274,000 to £347,000, central £318,000. The earlier informal figure was recorded and given no weight.
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