Fair Valuation of Indian Operations of a Global Transportation and Shipping Company for acquisition

Our client (Client) was the fourth largest container transportation and shipping company headquartered in France. They were in the process of making an open offer for acquiring a global logistics and supply chain company based out of Switzerland (Logistics Company) to strengthen its position as the leading worldwide maritime transport and logistics group. As part of the Client’s strategic reorganization, there was also a plan to transfer the Client’s logistics business to the Logistics Company once the open offer was successful. For this purpose, the Client had appointed an independent financial consulting firm (Adviser) for the valuation of its logistics business spread across the globe.

Our approach was bifurcated into three phases:

Phase I - Understanding the Business and Industry Dynamics (Research)

We held discussions with the management of the Indian Operations, the Client, and the Adviser while analyzing the business model of the Indian Operations. This gave us valuable insights on future business plans of the Indian Operations and their service offerings.

We referred to proprietary databases and research reports for an in-depth understanding on the Indian logistics sector. We then adopted a top-down approach in order to understand the future outlook of the logistics industry.

Phase II - Evaluation of Methodologies

We started by evaluating the various valuation approaches, namely the Asset Approach, Income Approach, and Market Approach. Since the Client prepared a global logistics business plan based on geography, company specific business plans were not available. As a reasonable bifurcation between the global company’s and Indian Operation’s business plan for each of the Indian Companies was not possible, the discounted cash flow method was ruled out.

There were recent transactions involving the Indian Operations company as well as that of a comparable listed peer’s in India. Taking the specific facts regarding the Indian Operations into account, we identified PORT and CCM under Market Approach to value the Indian Companies.

Phase III- Valuation Conclusion

With the CCM valuation using the EV to EBIT multiple and PORT valuation, we presented our findings to the Client and Adviser in the form of a valuation report detailing our valuation approach, process and valuation conclusion.

To produce a sound conclusion, we used both the CCM and PORT methods to value the closely-held Indian Operations of the Client. Since there was a recent, orderly transaction which took place within a span of one year from the Valuation Date, it represents the fair value of the Indian Operations.

Nexdigm coordinated and supported the Adviser in arriving at the global transaction price of the overall logistics business of the Client. Nexdigm developed a positive rapport with the Adviser while delivering a complex assignment involving several firms across the globe.