Company Valuation is the general process of determining a company’s current worth, economic or fair value. It is usually conducted during the sale, merger or acquisition of a company (or even a part of it). Something that has become popular these days is to also value startups before investors decide to fund the company. Businesses usually seek the help of professional evaluators or M&A analysts to estimate the most reasonable value for their business. The valuation process is holistic in nature and includes an analysis of the company’s management, its capital structure, its future earnings prospects or the market value of its assets.
We work closely with clients to understand their needs and to develop bespoke valuation solutions to complex issues. We focus on understanding the business dynamics of the company and identifying the key value drivers of the sector in which it operates.
We have extensive experience in valuing companies and assets across a broad range of industry sectors. We draw on our extensive sector knowledge derived from both consultancy and executive management experience to identify the correct approach to provide insightful, reliable and robust valuation opinions for our clients’ needs.
Our client base comprises FTSE 100 companies, governments, lawyers and regulators as well as individuals and entrepreneurial businesses, and covers a wide range of sectors including Pharmaceutical, Financial Services, Energy & Utilities (including Water, Oil & Gas and Renewables), Healthcare, F&B, Real Estate, Technology, Media and Telecommunications.
People usually mistake valuation to be a process only needed during the sale or merger of a company but valuation has more uses than that. Following are some of the most common use cases
Valuation modeling is usually performed to value the pre and post merger company in order to evaluate the merger opportunity and ascertain whether the synergy causes an increase in value. Analysts also value the target company in order to make an offer for the purchase based on their valuation estimates among other factors.
Portfolio managers and individual investors that actively manage their portfolios and investments use various valuation techniques to continuously evaluate attractive opportunities.
Startups use valuation methods to estimate a value for their company which in turn is used while raising investment for their business from venture capitalists, angel investors and other private investors
The valuation needs of a company from a tax perspective are driven by tax compliance, deferral and minimization. Entities often require independent valuation services to avoid unnecessary tax repercussions
Valuation needs from a financial reporting perspective are primarily driven by the Generally Accepted Accounting Principles (GAAP) that the company has adopted (for eg, US GAAP or IFRS). Some of the most frequent valuation engagements performed for financial reporting purposes include fair value measurement and equity-based compensation.
In corporate restructurings, an independent valuation of a company is critical for guiding decision making especially when there are multiple stakeholders involved. A special case of the corporate restructuring includes a distressed company valuation.
While estimating/calculating the valuation of a company, it is important to arrive at a possible number by using more than one approach. This is done to provide confidence and reaffirm the accuracy of the valuation.
There are three approaches to valuation:
Converts future cash flows generated over the remaining useful life to a current value, through the application of a discount rate that reflects the time value of money and risk.
Compares the business in question to similar businesses in the industry that have available market data
Values a business as the sum of the values of its individual assets and liabilities.
Each of the above approaches have different valuation techniques within them. Our valuation analysts take more than one approach to valuation and use different techniques within those approaches to give our clients the best valuation estimate or even a range for reference. Our final product is not a mere excel sheet but a detailed report that clearly describes the company’s business model, industry, total market and the approach we followed to arrive at a particular valuation.
Few of the most widely used valuation techniques include
We will build a comprehensive valuation model for your company in Excel using 3-4 appropriate techniques and arrive at a reasonable range for an estimated value of your company. You can also opt to receive a detailed valuation report for a comprehensive account of the underlying assumptions, methodology and rationale adopted to arrive at the said valuation. You can view a sample of the valuation report here