One of a Kind
One of the biggest challenges machinery and equipment (M&E) appraisers face is determining market values for unique machines. Clients often ask, “How do you assign a value to custom equipment?”
The typical appraisal process involves finding comparable sales or listings in the marketplace. But this approach isn’t feasible when there are no direct comparables, as is often the case with custom-engineered assembly cells, patented chemical processing systems, or shop-built machinery.
Fortunately, there are established methods for valuing such assets even without direct comparable sales.
The first step is to consider the appraisal scenario. Is the asset part of a going concern business, contributing to revenue generation? Or is it being sold piecemeal, such as in a liquidation scenario? The context is critical. A custom machine may hold significant value for one business that relies on it for operations, while being nearly worthless to another with no use for it.
Once the context is clear, the asset’s value can be approached through several methods:
We can estimate the cost to replace the machine. This represents the upper limit of its market value—no one would pay more for a used machine than the cost of a new replacement. The cost is adjustments for factors like age, wear and tear, and technological obsolescence to help determine a potential market value.
Even when direct comparisons aren’t available, reviewing sales of similar items can be insightful. For example, while most robotic welding cells are custom engineered, many have similar capacities and components. Examining sales of comparable systems can help establish market demand and a reasonable value range.
For highly customized systems, the value of individual components can offer another perspective. Take an industrial water treatment system: although the setup may be unique, its components are often mass-produced. Appraising the components and adding a premium for the convenience of assembly may provide another reasonable estimate of market value.
At Capitale Analytics, we thrive on tackling complex and challenging assignments. Our expertise in appraising custom and unique M&E assets allows us to deliver clear, accessible valuations that all stakeholders in a business transaction can understand.