A complex valuation in Belgium
The shareholders of Critical Energy Services (CES) asked JBR Belgium to make a valuation of their company in connection with a mutual share transaction. The company responds to the rapidly growing market for temporary energy installations. The company is driven to offer efficient, reliable and sustainable solutions. CES serves a wide range of businesses such as data centers, heavy industry and renewable energy projects. The company operates on a 24/ 7 basis both remotely and 'on site'.
This ensures that modern industries are optimally served so that they are optimally operational and as efficient as possible.
Energy services sector of increasing importance
As mentioned, the owners of CES, contacted JBR Belgium with a request for a valuation. Their main office is in Antwerp and since some time they also have an office in the Netherlands (Breda). One is active throughout Europe and has about 25 employees.
Roughly speaking, the company has three divisions:
- Rental & Rehire, for example: load banks, transformers and switchgears
- Energy Services, for example: smart energy services, energy hubs and intelligent energy services
- Commissioning & Testing applications: turnkey projects, site surveys and load testing
Possible choices of valuation method
When a company is growing by leaps and bounds (70% year on year), careful consideration must be given to which method does most justice to its true value. We had to choose from the following three methods:
- Income Approach (Discounted Cash Flow).
- Market approach where the choice is the Comparable Company Analysis which assumes that the market is perfectly capable of pricing the future profitability of a company. Or else the Comparable Transaction Analysis which is especially important in M&A decision making because it incorporates the value of future synergies between buyer and target into the transaction price.
Why the income approach was chosen
The valuations taking the market approach (based on CCA or CTA) cannot possibly accurately reflect this company's unique business model. This is especially since no companies were found that were properly comparable.
We found the income approach to be the most appropriate because it allowed us to rely in part on relevant industry developments, our discussions with management and, of course, our own insights. With this method, the economic value concept of a company comes into its own the most because it is based on the future cash flows of this fast-growing company.
Contact us personally for more information
Wout Van Lierde
Business Analyst
Frank Hermans
Associate Partner