Business and Share Valuations
Determination of the appropriate methodology for valuing a business or a parcel of shares is dependent on the standard of value to be adopted and the nature of the business assets owned.
The standard of value adopted may be fair market value, investment value or strategic value. Consideration must be given to exactly what it is the valuation is trying to reflect. For example, the value for a minority shareholder is different to that for a majority owner, due to the premium associated with control. Similarly, acquirers fall into a number of different categories, all of which will attribute a different value to a business - a pure financial purchaser simply wants the future earnings of the business; a competitor may be able to achieve economies of scale by combining two businesses and reducing costs; and a strategic buyer will value a company according to what it could do to its product/service offering and the resultant effect on future revenues.
Depending on the circumstances, a valuation may be based on:
- Discounted Cash Flows
An assessment of the future income generating capacity of the business based on an estimate of the present value of future forecast cash flows.
- Market Multiples
Application of an earnings multiple to the business based on an analysis of market transactions of comparable businesses.
- Net Assets
An assessment of the liquidation value of the business assets.
More sophisticated techniques, such as Real Options Analysis, are sometimes required where the standard approaches cannot properly consider the future stream of financial benefits. Typically, this will occur in the valuation of businesses operating in the technology, research and development, exploration and other similar sectors.
We have valued businesses operating in many different industry sectors, including manufacturing, retail, technology, financial services, export, property development, investment and agribusiness. These valuations have been undertaken for a variety of purposes, including capital raising, divestment, joint venture, corporate governance, regulatory requirement and the provision of expert opinion.