Calculating the asking price for your marina business: what you need to know
In this article, Mark Lavery, Associate Director – Retail & Leisure, gives an overview on asking prices, what they are, and how they are calculated for marinas in the UK.
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What is an asking price?
From a seller’s point of view, the asking price reflects the level of financial consideration they may be prepared to sell their business for and is used to guide prospective purchasers towards a level of price. It is calculated based on a range of factors and variables concerning the business in question.
Why do we have asking prices, and what does it mean to a vendor and a buyer?
Typically, the asking price for a marina is created through an appraisal process and based on factors such as tenure, length of ownership, investment, financial performance and quality of earnings. Using a specialist leisure agent who can provide comparable evidence of other marina sales to use as a benchmark will give potential vendors an understanding of the current market and help inform them of the asking price that would be appropriate for their business. The vendor can use this to review their options and whether any pre-disposal actions are required before deciding to sell.
The asking price gives potential purchasers a guide as to the vendor’s expectations. In our experience, it is generally more effective to quote an asking price rather than listing a marina as ‘Offers Invited’ as it demonstrates a definitive price point from the outset. Of course, there will be times when an ‘Offers Invited’ approach will be most appropriate - for instance, when a business may not have been offered for sale for many years, or if the type of business could appeal to several different buyer groups or incorporate development opportunities.
How is an asking price calculated?
In the marina sector, there is an agreed methodology for calculating an asking price, which is the profits method. This method uses an appropriate multiplier number attached to the adjusted fair maintainable trading profit (FMT) of the business to demonstrate pricing parameters. Interrogating the accounts for the business, an EBITDA value (Earnings Before Interest, Taxes, Depreciation and Amortisation) is calculated. A multiple is then applied to this EBITDA value to show where the pricing range for the business may realistically sit. The range of multiples attached to marina values can differ considerably, which is evident when you look at the various sizes of marinas across the UK, along with their different offerings and locations.
What factors need to be considered?
All marinas are inevitably different, and a range of factors must be considered when preparing for sale. Key indicators for potential buyers would include the following:
- Third-party leases and concessions on site
- How long the marina has been under its current ownership and the reason for the sale
- Whether there is potential to grow the business…
To read the full article which was published in Marina World, click here.
To find out more about the marina market, or for a confidential chat about your business options, contact:
Mark Lavery, Associate Director | Retail & Leisure
T: +44 7526 175 850
E: Mark.Lavery@christie.com
Jon Patrick, Director | Head of Leisure & Development
T: +44 7831 263 529
E: Jon.Patrick@christie.com