Overview of Project
Our client is a $30 million privately held engineering and construction company that makes metal buildings in the commercial, industrial, and agriculture sectors. The company’s two owners were in a legal dispute over ownership, and Manchester was appointed by the court to help the court mediator settle the dispute.

The Challenge
The environment at the company was very litigious with a high level of mistrust between the owners and the company’s financial statements were in disarray. In addition, the owners had each charged a significant amount of personal expenses to the company during the previous five years, which obscured the factual financial performance of the company and made it impossible for the owners to reach an agreement.

The Engagement
Manchester’s professionals were appointed by the court and engaged to assess the financial performance of the client’s operations to determine the true operating performance of the company and approximate the value of its ongoing operations. Determining the real value of the business was imperative in order for the company to either sell to a third party or agree to a buy–out of one owner by the other.

The Solution
We met with each owner separately on many occasions to extensively interview them and prepare a list of personal expenses and vendor expenses used for personal purposes over the previous five years. Each owner provided a list of his own personal expenses and estimates of the other partner’s personal expenses.

Our professionals reviewed invoices, discussed some expenses directly with vendors with the company’s concurrence, and eventually reached agreement on personal expenses versus company expenses for each of the previous five years. We then re-built the company’s general ledger by eliminating the personal expenses. The reconstituted income statements were significantly less volatile than the previous statements and resulted in operating margins (percentage of revenues) that were remarkably consistent.

This exercise resulted in a true vision of the range of value of the ongoing operations that both owners were able to understand and accept, and that the court mediator was able to objectively use in negotiations with the opposing parties.

The Impact
With objective, re-constituted income statements reflecting the true value of the business, a satisfactory settlement between the two parties was reached, with one owner purchasing the equity interests of the other owner.