Company Valuation

Businesses do not have a price determined by the market. This is especially true in the case of small and medium-sized enterprises (SME), but applies as well to listed companies – as minority shares are traded on stock exchanges. Accordingly, a company valuation is required, for example, in the case of a business sale, a business acquisition, merger, borrowing transaction or shareholder or corporate disputes. Reforms to the laws governing inheritance taxes have opened upon an additional field for tax-related company valuations.

A high equity ratio on a company’s balance sheet represents a good basis for a high company value. However, it is not possible to derive the company value from this ratio. At best, equity levels on the balance sheet provide an impression of past business performance and provide indicators of the potential liquidation value. By contrast, the going concern value of a company is derived from the ability to generate profits and surplus liquidity in future. Accordingly, company valuation depends on forecasting to a very large degree.

Profits expected in future are derived from business planning. Positive performance in the past raises confidence levels in these plans. The capitalised earnings method and the discounted cash flow method are common tools used to assess an company’s future earnings potential. Multipliers may be used as approximate calculations for an initial price estimate. However, they are unsuited for the valuation process as a variety of aspects which affect value cannot be taken into account based on the process.

Our valuation professionals have some twenty years’ experience and know their business. A field which requires more than just familiarity with financial and valuation models. Our experience.