Management Rights market overview
Published: 19 December 2011.
Contributed by Jake Clarke of Management Rights Sales
LISTING YOUR MANAGEMENT RIGHTS FOR SALE: Each and every management rights, beit holiday, corporate or permanent, have their own stand alone value. No across the board multiplier or years purchase factor should be utilised when factoring the true market value of a particular property.
Geographical location, size of business, quality of residence, agreements, nett profit, ease of operation and the ability to on sell the business at a future date are all important factors. The past 12 months have proven once and for all that all intending purchasers need to be commercially adjusted when exploring our unique industry, I personally see many management rights of high value change hands, the majority of these sell and settle mainly due to the approach taken by the vendor and purchaser all driven by the acting broker negotiating the various facets of each sale.
VALUATIONS: This has now become a touchy issue in some sales, valuers by nature are conservative, and we are seeing many examples of complete inconsistency and large variations in valuations based on their comparison to other settled contracts. No arguing, supply and demand are the normal deciding factor in the industry multiplier ‘years purchase factor’. We are seeing more and more sales that are highly negotiated between two willing parties; negotiation is on a confidential basis and based on various commercial rationale. If one of these sales is subject to a valuation, I strongly suggest that the vendor and the purchaser sign a confidentiality agreement with the Valuer prohibiting this valuation being used for any purpose other than the sale involved. The reason being is that too often these valuations are used as a comparable and more than often as the benchmark for the next occurring sale. I recently had seen a valuation report using a management rights sale that had not settled.
FINANCIERS: Beware of certain ‘honeymoon’ offers by the various banks including free valuations and remember nothing is free. We see management rights being sold by ‘receivers appointed’ these are generally the result of the ‘honeymoon’ ending in divorce. It seems the normal for financiers to ask for an updated accountants report every 12 months and followed by a fresh valuation. Some of the valuations I have been privy to are inconsistent with industry sales and are based on so called comparisons that are at times not giving a true picture of the settled sales that have occurred
SUMMATION: When selling, do so with dedication to your sellable management rights. Utilise confidentiality agreements, have your broker totally qualify that your buyer is just that - a buyer not an information gatherer. Purchasers do your homework and remember your negotiated contract of sale should be confidential between you and your appointed industry experts, borrow sufficient funds to enable you to have a high living standard. As a purchaser your aim is nurture your new acquisition into a resaleable asset based on what you intend to sell at your time of exit.
The market is moving forward, excellent prices are being achieved and the majority of industry associates are helping take the management rights industry to the next phase.
Jake Clarke
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The information contained in this web site is for general interest only, it is not intended as legal advice, nor are we qualified to provide such advice. Users should always seek professional advice from qualified solicitors.

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