The Coca-Cola bottling company was a large regional Coca-Cola bottler. The Company had the exclusive right to bottle and sell Coca-Cola in its metropolitan area and in many surrounding towns.
An 8% owner of the Company, who was a great-grandchild of the founder, did not share the same reverence of being a Coca-Cola bottler as his siblings and cousins. He desired that the Company be run to maximize cash distributions (a manner in which the Company was not being run at that time). He consequently desired to sell his interest.
The buy/sell agreement required both the selling shareholder and other shareholders to hire a valuation professional. The valuations were to be exchanged, and, if the professionals were unable to agree, a third appraiser would be hired. That result would be averaged with the closest valuation for a final price. The seller hired DCF and the other 11 shareholders hired a national valuation firm.
We conducted our disciplined process for valuing the interest for a sale. This value was based on the premise that the Company would be sold to a strategic buyer, as the Company was located between three large bottling companies, two of which were publicly-traded.
The national valuation firm came up with an $85 million valuation, but its valuation did not considered the value of the Company if it were sold (it did not consider the an “investment value” the value to a strategic buyer). Our valuation was $165 million, a price that reflected the market value of the Company in a sale – as a buyer would have been able to improve the operations significantly. The national valuation firm conceded that our valuation was correct, and the 8% owner was bought out based on our $165 million appraised value. Recognizing the untapped value potential of the Company from our appraisal, the remaining shareholders sold the company to a strategic buyer 18 months later for $172 million.