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Why Specialist Valuations are Important

We have extensive experience of valuing shares in private companies from advising on Company sales and purchases, obtaining funding for expansion and planning for succession.

As a consequence, we are frequently asked to provide independent valuations of companies where a transaction between connected parties is contemplated.

In recent years, Revenue have started to look more closely at transactions between connected parties such as owners and their company, family members and shareholder buy-outs in closely controlled companies. This happens particularly where share buy-backs occurred and also where retirement or entrepreneurial relief was availed of by one of the exiting shareholders. Whilst these transactions are undertaken for bona fide reasons such as succession planning, Revenue are more concerned about maximising the tax yield. (See post below)

One of the key areas that Revenue will look at is how the transaction was valued and whether the transaction represented market value.

In these scenarios, market value is regarded as the price that an independent buyer would be prepared to pay for the company at the time the transaction occurred.

While in many connected party transactions the parties will act independently, each trying to maximise their position, Revenue will disregard this where they have been common shareholders in the same entity.

Many business owners who do look for a valuation go to their existing Accountants or Auditors, who specialise in Accounting and Auditing and are not familiar with valuations. We found that many of these valuations don’t factor in all of the relevant knowledge.

In one recent case, where the company owned a significant property, which would realise more for redevelopment for retail purposes, the company’s accountants valued the company factoring in the increase in the market value versus the book value in the accounts. However, they did not consider that the company would have to pay Capital Gains Tax at 33% on the increase in the value of the property above its market value and as a consequence, over valued the company by over €500,000.

In a second case, the company had 2 distinct share classes comprising voting shares and non-voting shares. While the voting shares had the right to determine what happened at the company’s AGMs they were only entitled to a return of the amount subscribed for them on a winding up or on a sale  of the company. The Auditors didn’t factor in the limits attaching to the rights and over valued the non-voting shares by €1.5 million and undervalued the Ordinary Shares by the corresponding amount. This left the beneficiaries of the share transfers open to a challenge by Revenue for underpaying CAT.

We also received a valuation report from a top 20 firm which was only 2 pages long. The valuer hadn’t set out why he adopted the particular approach that he had take and we would have concerns that in the future the valuation would be open to question based on what the property values were and this hadn’t been set out in the agreement.

It is essential that the valuer determines what local factors impact on the business and documents what is relevant at that point in time.

If you require assistance in company valuations, please do not hesitate to contact us.

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Revenue sets sights on value of private shares

Tax authorities are beefing up-know how to tackle undervaluations of ‘unquoted shares’ in Irish companies


Revenue is plotting a crackdown on shareholders of private companies who undervalue their stakes in tax returns

Revenue is plotting a crackdown on shareholders of private companies who undervalue their stakes in tax returns.

The rules on valuation apply to all unquoted companies – whether it is a large entity operating on a grey market, or a local sweetshop owned by a company.

Without an open market, one senior accounting industry source said valuing the shares is an art rather than an exact science.

The tax authority is now looking to establish a panel of experts to help it “enhance” its capabilities in assigning values to so-called “unquoted shares”, stakes held in unlisted companies.

“To assist in the full and proper application of the various taxation codes, particularly with regard to the market valuations of private companies, Revenue is seeking to enhance its valuation service in respect of all forms of unquoted shares,” it says in a tender document seeking expressions of interest.

“Revenue is forming a panel of suitably qualified share-valuers. Revenue will select valuers from this panel as required to provide Revenue with independent expert advice in relation to the valuation of unquoted shares,” the document says.

One area where valuations of shares in private companies matter is capital acquisitions tax; for example, when a person inherits a stake in a family business.

Submitting a value for those shares to the taxman is up to each individual, but Revenue has traditionally carried out audits to ensure valuations reflect reality.

It has said the audits are designed to “deter evasion and avoidance by detecting under-valuations and taking appropriate action”.

Multiple factors will be considered in valuations, including whether the shares are part of a majority or minority stake (a reflection of how much influence the shares will have), the profitability of a business, and its future prospects.

A Revenue spokesman said: “It is prudent that Revenue has access to independent valuers for various assets (such as property or shares), so that tax implications of those assets can be assessed correctly. For example, the sale of an asset will potentially raise a Capital Gains Tax liability based on the value of that asset. These panels have been in place for many years, and are refreshed annually.”

The spokesman said the valuers’ role will include providing evidence on Revenue’s behalf before courts and arbitration hearings.

In results for 2018 published earlier this year, Revenue chairman Niall Cody said there had been “continued strong levels of timely, voluntary compliance by taxpayers”.

“The vast majority of individuals and businesses pay the right amount of tax, on time. We support voluntary compliance by making it as easy as possible, and we are focused on optimising our service to taxpayers,” Mr Cody said.

At the same time, Revenue completed 572,785 audit and compliance interventions that yielded €572.6m, settled 22 tax-avoidance cases yielding €5.7m and secured 17 criminal convictions for serious tax evasion and fraud in 2018, Mr Cody added.

Source: Irish Independent Gavin McLoughlin
March 21 2019 2:30 AM

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Optinergy blasts into €15m Cavan wind farm deal

We recently advised the on the acquisition of Snugborough Windfarm from the Wirefox Group as reported in The Times on 27 January 2019. The consideration was not disclosed.

A Co Cavan wind farm that was formerly owned by Seán Quinn Jr has been bought by a Cavan-based energy group in a deal worth about €15m.

Optinergy has acquired the 13.5MW Snugborough wind farm from Wirefox Capital, an investment group owned by the Belfast-based Eastwood family. Wirefox bought the wind farm in 2015 for less than €8m in the break-up of the former Quinn Group.

Based near Cavan town, Optinergy is run by Aiden Watters, a former executive with General Electric. The deal was backed with funding from Close Brothers Leasing, an asset finance group based in Manchester, according to Companies Office filings.

Optinergy did not respond to requests for comment last week.

Source: The Sunday Times Gavin Daly
January 27 2019, 12:01am,

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Cantwell Corporate Finance advises on the sale of an equity stake in L&M Keating Limited

We recently advised the Keating family on the sale of an equity stake in L&M Keating Limited, a specialist building and civil engineering firm based in Co. Clare with a turnover of over €60 million. The stake was acquired by CBD Capital who appointed Gordon O’Regan as the new Chief Executive Officer.

The transaction was featured in the Renatus bi-weekly M&A Newsletter and the Irish Independent as set out below.

Source: Renatus Bi weekly M&A Newsletter

Deal details: Dublin-based CBD Capital has acquired an equity stake in L&M Keating for an undisclosed sum. L&M Keating, a building and civil engineering company that specialises in marine construction, recorded revenues of €61.4m in 2016 (up 0.3% YoY). The founder of the Clare-based company Louis Keating will remain involved in the day-to-day business and another minority shareholder, Gordon O’Regan, has been appointed as the new chief executive.
Advisers: Paul Cantwell of Cantwell Corporate Finance acted for the Vendor. RDJ provided legal advice to the Vendor. Eversheds acted for the buyers.
Renatus comment:  CBD was set up by Liam Dowd and Jim Murphy who were founding partners of Jaguar Capital.

 

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Cantwell Corporate Finance advises Optinergy Limited on the acquistion of Lotus Energy Systems

Source: Irish Times Tue, Jul 26, 2016

Fifty new jobs have been announced as Optinergy, the Irish-owned service provider in windfarm operation and maintenance.

It follows Optinergy’s acquisition of the Wind O&M (Operation and Maintenance) division of LotusWorks, Lotus Energy Systems.

The newly expanded operation will create an additional 50 jobs over the next 5 years for engineers and advanced trades people in rural Ireland.

The acquisition will enhance Optinergy’s position as the largest wind independent service provider in the Irish market, delivering additional €5 million revenue for Optinergy over the next 5 years.

The company is heaquartered in Stradone, Co. Cavan with sub offices in Letterkenny, Sligo, Tullamore, Tralee and Skibbereen.

Optinergy specialises in the provision of O&M services to the wind industry, both on the island of Ireland and throughout Europe, and is part of the Galetech Energy Developments Group Ltd.

Optinergy works with companies in Ireland’s wind energy sector, including Brookfield, Bord Na Mona, Wind NI and many independently-owned wind farms and utilities.

Managing Director of Optinergy, Aiden Watters said the expansion further enhances Optinergy’s position as the largest independent O&M provider in Ireland.

“The jobs which we are announcing today are mainly for engineers and advanced trades people. To date, this work has often been carried out by international companies, coming to Ireland on a project by project basis. We are delighted to be building a business which can provide jobs locally, across Ireland, and can compete in an international market,” he said.