The value of a company is determined by the expected financial results of the firm. The risk associated with these future results also needs to be taken into account. For a company’s risk, we look at the industry in which the company operates, its scale, management and many other factors. We know how to value all these factors.
Our methodologies for calculating the value of the shares are based on more than 25 years of experience with corporate valuation issues. We use international databases that we apply combined with the knowledge of concrete transactions in the market and their associated transaction multiples. In this way theory and practice are optimally combined.
Reason for business valuation
A business valuation is done for various reasons. It may be done in the context of a merger or acquisition, buy-out of co-shareholders, transfer of a company to an external party/within the family, conflicts between (family) shareholders or tax issues in business succession or the sale of shares. Depending on the reason for the valuation, we carry the valuation out with the most suitable method to calculate the value of a company. Sometimes we start with a simple business value calculation for a first impression. We then go deeper into the matter if desired. The method chosen for the valuation of the company also depends on the available information. A good analysis requires many detailed figures from both the past and forecasts for the future. We use different scenarios in our models.
What is the best method for a business valuation
One of the methods we use for business valuation is the discounted cash flow (DCF) method. Future free cash flows are discounted against a required return applicable to the company. The required return depends on various factors, such as the debt-to-equity ratio within the firm, current interest rates and the market in which the firm operates. The outcome of the DCF valuation provides an indicative value of the firm. For the indication, it is heavily dependent on the numbers used, the input. We support our customers in arriving at good inputs for the figures. We do this, for example, by filtering out incidental results of figures from the past, by critically questioning management forecasts and working with scenarios or sensitivities to e.g. growth or margin. The model thus provides sufficient starting points for a careful analysis.
We also compare our analyses with the transactions that we have supervised ourselves and that take place in the merger and acquisition market. In this we make a good comparison of the company with comparable companies in comparable (international) markets.
After all, we know better than anyone that a valuation is not equal to the final price of the company’s shares. This depends on many factors, including negotiations, which we are happy to assist with.
We make a valuation together with our client. Based on the personal explanation of the entrepreneur or the shareholders involved themselves. We want to understand the background of the numbers, therefore, we do not do a pure online valuation, as is seen more often. In addition to the outcome of the valuation, our method of operating also provides the entrepreneur and shareholders with good insights into which factors influence the value of the company and profitability.
We summarize our analyzes in a well-arranged report with an extensive explanation of our analyses and research.
Our vision on business valuation
Company valuations are more than just a maths exercise. Knowledge of markets , as well as, the determining factors of a company are important. We work thoroughly but certainly also personally.