We've Perfected Our Methodology to Yield More Accurate Appraisals.
No detail is overlooked in a Hilco appraisal because we follow a regimented process, refined and perfected over time. We begin by assembling an appraisal team. Members are selected based on their experience with the types of assets being appraised. The team then follows these five steps:
Step 1: Data gathering as part of due diligence.
When an appraisal involves inventory, Hilco begins by developing a profile of the company. Team members interview key managers and staff to develop a complete business profile, which can include:
- sales, margin and cost analysis, overall and by store or facility;
- business history and future outlook for the company and its industry;
- customer and vendor histories;
- licensing and lease agreements;
- marketing programs and results;
- inventory performance analysis; and,
- physical information on each store, warehouse and/or plant.
Should the appraisal involve inventory, machinery, equipment or any other asset type, Hilco's appraisers will look at the company's particular industry as well as the macro and micro economic factors affecting it. The team draws upon current information from an extensive array of data sources such as local, state and national governmental agencies, trade associations, vendors, and trade publications. They also consult with industry experts. In the final analysis, Hilco's appraisers focus on understanding how market forces and economic conditions will affect asset values.
Step 2: The on-site visit and physical inspection.
Virtually all asset appraisals include a comprehensive on-site inspection of the assets being appraised, whether they be inventory, machinery or equipment. Our appraisers look at the age and condition of the assets, evaluate obsolescence, and consider all other factors which could affect marketable value:
- In retail environments - how well the inventory is balanced regarding selection and depth, whether the inventory properly targets intended customers, and how effectively the goods are merchandised;
- In a manufacturing or process plant - the observable general conditions and capabilities of machinery and equipment, as well as make, model, serial numbers, age and special requirements for removal and/or installation.
- In a distribution setting - how factors such as order cancellation rates, year-over-year future order rates, reworks and inventory storage affect the business;
The team typically makes a pictorial record of the assets, either by video or photography, to facilitate the sharing of information with other Hilco experts as part of an appraisal peer review process.
Step 3: Data analysis helps pinpoint true market value.
In this critical step, we apply one or more analytical methods to calculate asset value. Depending on requirements, we may use value-in-use (value to owner) or value-in-exchange (value to the marketplace) analysis. We may also apply forced liquidation or orderly liquidation analysis to determine asset value as if a liquidation were to occur. In the case of inventory, we often apply quintile analysis in which recovery values are assigned to categories of goods based on the five discounting stages of a typical liquidation.
Step 4: Comparative analysis adds reliability to the appraisal.
If hindsight is 20/20, then looking at recent liquidations and auctions of assets similar to those being appraised provides a clearer vision of real marketable value. Hilco has conducted liquidations and auctions exceeding $25 billion in value and covering virtually every asset type. We have seen it all! As such, it is relatively easy to benchmark values based on recent actual sales.
Step 5: A peer review precedes the final appraisal.
Following a compilation and analysis of all data, the team develops an appraisal draft in conformity with the Uniform Standards of Professional Appraisal Practice (USPAP). The team then submits its appraisal document to a group of senior level appraisers, who conduct a peer review. The mission is to challenge all assumptions, confirm the validity of data and approve the final appraisal document, which is then presented to the client. Appraisals can be delivered in printed form, electronically via the internet or on CD-ROM.