There can be a number of reasons why companies have a billboard valuation done, from looking at financing or completing a sale to evaluating a potential partner buy-out. No matter the reason, it’s important to realize that valuations can differ greatly depending upon the goal and who you hire.
In fact, in our experience, we have seen valuations vary from 20% of true market value all the way to over true market value. Why is this important to understand? Because in some cases, there may be a reason for you to aim for a lower valuation versus a higher one, depending on your goals.
If one of these applies to you, you will want to seek out firms with a deep database of merger and acquisition transactions. We can personally recommend:
The billboard industry it notoriously private about past transaction details. Because of this, many appraisers and valuation firms without transaction data, utilize lower service type business multiples when valuing billboards. If for whatever reason you are seeking a lower business valuation, an appraiser or business valuation expert with little to no billboard transactional experience will often provide a lower estimate based on more traditional general business multiples.
A few years ago, Stark Capital Solutions was engaged by a trustee involved in a family ownership dispute. One family member was attempting to buy out their siblings, who had no billboard experience. The individual looking to buy them out had hired a very reputable accounting firm that does business valuations. There valuation utilized very credible methodology for a service business, but lacked comparable billboard sale data. We were hired to evaluate the number they received, and our opinion of value came out 5x higher than what the accounting firm had given. The trustee had almost recommended moving forward with the accounting firms value!
Less than a year later when the family couldn’t come to an agreement, we were hired to help sell the billboard business. It ended up selling for 6x more than the original accounting firm valuation!
We thought we’d share this experience, and the different reasons for valuations, to show how much they can vary and the importance of finding a valuation expert that reflects your goals.