BENEFITS OF DOCUMENT
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A business valuation is a formal process to estimate the value of a business. Business valuation is one part art and one part science. It relies on the professional judgment of an analyst who assesses the nature of the business, its financial performance, local and national economic conditions, values of assets and related liabilities, capital structure composition plus any unique know-how or proprietary technology to arrive at an estimate of the value of the business.
A company needs to be valued if it is being bought, sold, or liquidated. Sometimes a company must provide a value of its assets or company as a whole to raise debt also. A valuation professional typically looks at the discounted cash flow (DCF), market valuation multiples, and comparable transactions.
Because every business is unique, there are no rule of thumb methods that will result in a reliable and defensible value. While a company valuation is an uncertain science, it is essential that a robust valuation is conducted that enables you or a client, the ability to negotiate effectively with your potential buyers for example.
This is a useful guide for M&A practitioners, CEOs, CFOs, venture capitalists, transaction advisory consultants and private equity fund managers which provides an overview of the major valuation concepts and issues. The following topics are covered:
• Valuation methods: DCF and market multiples approach
• Valuation drivers
• Forecasts
• Discount rate
• Calculating value
This guide together with the Integrated Valuation and Forecast Financial Statement Model, will enable you to perform a business valuation.
This guide emphasizes the importance of considering both non-operating assets and the cost of debt in valuations. It also highlights common mistakes such as unrealistic growth assumptions and the omission of liquidity discounts.
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Source: Best Practices in M&A (Mergers & Acquisitions), Valuation PowerPoint Slides: Business Valuation Training Guide PowerPoint (PPTX) Presentation, Corporate Finance 101
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