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Business Valuation

Business Valuation

Introduction

Every business owner considers getting a business valuation at the time he or she decides to sell the business, but every business needs to have an up-to-date business valuation on hand at all times in the case that something happens to a major shareholder, an opportunity to sell or merge arise; or when adding a new shareholder or investor, contemplating an exit strategy, qualifying for a loan, or expanding a business. This list is non-exhaustive.

A business valuation is a complex financial analysis that should be undertaken consistently, and if possible every year. One of the reasons business valuation is such a complicated issue is because there are many acceptable valuation methods, and there is no "one-size-fits-all" valuation approach. The following are considerations that may be taken into account when valuing your business based on a fair market valuation approach:

  • Nature and history of business
  • Outlook of the economy and the specific industry
  • Financial condition of the business and its book value
  • Earnings capacity of the business
  • Nature and value of intangible assets of the business such as goodwill
  • Relative size of the business interest to be valued and any prior sales
  • Market price of actively traded shares of corporations in similar business
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Our Approach

Senior level attention - Our clients enjoy a relationship with the management team who are able to deliver in-depth insights by relying on our expertise and vast experience in technology companies.

Focus - Our entire business is focused on understanding the everyday challenges in technology companies, and the opportunities in the industry. Our team of analysts have worked on valuing our own portfolio companies and companies at the early to growth stage across technology verticals- IT, biomedical, IoT and advanced materials.

Dedicated resources - An analyst is assigned to each client and will work with the Vice President during the course of the valuation process. Once the analyst has completed his/her analysis and has arrived at a preliminary conclusion, the valuation is reviewed by the Vice President. The valuation is then reviewed with and approved by the Managing Director.

Turnaround time - A business valuation worth relying on requires thorough and careful analysis by our team and will take some time. Among other things, the time required will depend on the purpose of the valuation as well as the availability of information. Generally, once we have received all the requested information and documentations, a reasonable expectation for delivery of the report is between 30 and 45 working days. Engagements requiring a quicker turn-around can be arranged.

Our Methodology

The three approaches to valuation (income, market and asset) will be considered for every assignment. Under each approach, a number of methods are available which can be used to determine the value of a business. A number of fair market valuation methods under each approach will be used. The business value then is determined by reconciling the results obtained from the selected methods where a weight is assigned to the result of each valuation method.

Asset approach - An asset-based approach such as the adjusted book value is typically used with businesses that have substantial tangible assets, usually in the form of inventory and equipment.

Income approach - The income approach use prior and projected earnings to estimate company value based on income potential. This type of valuation is most appropriate for business with consistently strong earnings. Income approach may include capitalization of earnings method, excess of earnings method, discounted cash flow method, and multiple of discretionary earnings method.

Market approach - Market-value approaches to business valuation are based on the prices of similar or comparable businesses that have recently been sold, or comparatively publicly traded company transactions.

Our Process

Gather financial, company and industry data - Our team will gather the data necessary to complete the assignment, including information provided by our client, data on the industry, any relevant economic information, and information from the financial markets. A checklist of the documents required for the valuation will be emailed to the client. Our team may conduct interviews with key management concerning past, present, and prospective operating results and performance of our client and the impact on the value of the business to a hypothetical third-party investor or buyer.

Adjusting the historical financial statements - Since business owners have considerable discretion in how they use the business assets as well as what income and expenses they recognize, the historical financial statements may need to be recast or adjusted.

Analyze data, tangible and intangible factors - Our team will conduct the research of the relevant industry, economic and capital market data required to apply the appropriate approaches to the fair market valuation in the context of the business or business interest being valued. We will analyse our client’s financial forecast and assumptions and/or develop a forecast and resolve questions that arise regarding financials, adjustments, operations and projections.

Valuation - Our team will consider possible valuation methods and select the most likely to yield meaningful value indications, and apply appropriate discounts to the selected methods. We will reconcile all valuation method results and decide how much influence each should have in the final conclusion, and test the reasonableness of the value conclusion.

Report - We will provide verbal and/or written reports explaining the valuation process, research performed, the valuation methods employed, assumptions made, and opinion of value to express an unambiguous, independent, third party opinion as to the value of a business or business interest.