Accounting for Alcohol – part 3, valuing a brewery for proposed nationalisation

This post #3 in my summary of a recent edited book.  Chapter 3 is written by Desmond Gibney and explores proposals to acquire the brewing sector by the British government during the First World War. Desmond draws on archival records of the Macardles brewery in Dundalk, Ireland.

One of the drivers for the government acquisition of the trade was the temperance movement, which combined with the need for men to fight the war brought the notion to the government.  A quote from Thomas Whitaker MP summarises the issue very well:

Drink is the greatest cause of inefficiency, waste, and loss of time, and
consequent under-use of plant and machinery, and an output considerably
less than the largest possible. Its production and sale wastes food, coal, and
labour, and occupies ships, docks, and railways which are badly needed for
vitally important purposes.

At the same time, the brewing sector was a powerful lobby, and if the trade were to be acquired and shut down,  compensation would be required. Desmond explores how valuations would be made, and reveals that a multiplier method would be used. This method would average profits from a number of years and then apply a multiplier would be applied. This method is still used to today, and today, like then, an issue was to ascertain the reliability of the accounting records used to calculate profit.  The directors of the Macardles brewery took the opportunity in 1915 to ascertain the real value of their assets in preparation for any negotiations with the government. The proposed scheme did not of course happen, but it is interesting to look back 100 years ago and see techniques used today in use then.