Equipment Appraisal Blog | Understanding Machinery Appraisals

Construction Equipment Appraisal Can Boost Business Sales Price

Posted by Equipment Appraisal Services on Mon, Aug 24, 2015 @ 08:00 AM

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When selling a construction business, some owners are confused by the need for a construction equipment appraisal. They wonder why they can’t take the equipment purchase price, subtract any accumulated depreciation, and use that as the equipment value. While this may seem like an expeditious approach, it doesn’t always yield the best results when providing a machinery valuation to potential buyers.

Most business owners purchased their construction equipment at various times and in various conditions, building an inventory of cranes, backhoes, forklifts and other used machinery and equipment over the years. Some pieces of equipment may have been used more heavily than others, but were maintained well enough that they still have plenty of useful life left in them. When the business is sold, the owners want to receive the highest sales price possible. Buyers, on the other hand, want to pay the lowest price possible.

That is why it is necessary to bring in an accredited equipment appraiser to assess equipment values whenever a business sale is considered. Equipment appraisers that have received the Accredited Senior Appraiser (ASA) or Accredited Member (AM) designations in Machinery and Technical Specialties (MTS) from the American Society of Appraisers (ASA), and can provide needed support information that could help substantiate an asking price. The benefits of a professional machine appraisal include:

  • Appraised Value is Often Higher than Depreciated Value: The depreciated value of a machine is a useful calculation, often for tax purposes, but it doesn’t necessarily reflect the actual value of a particular piece of equipment. An appraiser can take into account maintenance, wear and tear, potential sales price on the open market, and estimated remaining lifetime earning potential among other factors to arrive at an equipment appraisal.
  • Buyers Appreciate Sellers Who Can Help Make Their Lives Easier: Since the sale price of a construction business is often quite substantial, there is usually some type of bank financing involved in the purchase. Any lenders will want the buyer to provide a machinery and equipment appraisal for collateral purposes and to justify the loan amount. Once the sale is complete, the buyer will need to set up its own asset and depreciation accounts, and will also need this information.
  • International Sales Open a Wider Market: Perhaps the business has grown to a point where it could attract the attention of an international conglomerate, which could raise the sales price substantially. International buyers, however, will need to see proof that the price they are paying is comparable to what it would take them to establish their own foothold in the market. The often rely on a machine appraiser to help them understand valuations and opportunities in international markets.

A construction equipment appraisal from an equipment appraiser is definitely a plus when selling a business. Equipment Appraisal Services is a nationwide provider of certified machinery and equipment appraisals for business sales, insurance recovery claims, divorce and partnership dissolutions, gifting and donation justifications, estate settlements, allocation of assets, property tax appeals, mergers and acquisitions, financial reporting, and risk management.

Tags: construction equipment appraisal, equipment appraiser