Business valuation is the practice of determining the fair value of a business entity at a specific date. It involves a comprehensive analysis of the subject company’s financial statements, comparable transactions, market conditions, industry trends and ratios, and other relevant quantitative and qualitative information.
An accurate valuation is a vital tool for business owners to evaluate potential opportunities and opportunity costs as they strategize for future expansion and eventual transition. Additionally, it plays a pivotal role in ensuring transparency, fairness, and informed decision-making across diverse business contexts. It empowers stakeholders to make well-founded financial and strategic decisions.
Our valuation specialists are experienced in performing the valuation of business in a variety of industries as well as for a variety of purposes:
The primary method for income approach valuation is the Discounted Cash Flow (“DCF”) method. Under the DCF method, the value of a company (or enterprise) is determined by calculating the present value of its expected future free cash flows. These cash flows are discounted using a market-derived rate of return that reflects the risks associated with investing in businesses of comparable nature. By projecting and discounting future cash flows to their present value, the DCF method provides valuation that could capture the intrinsic value of companies, including those in innovative and developmental stages.
The market approach determines value by benchmarking the subject company (or enterprise) against comparable assets recently sold in the market. This process involves making necessary adjustments to account for any differences between the subject company (or enterprise) and those comparable companies. Within the realm of market approach business valuation, there are two widely utilized methods, namely Guideline Public Company Method and Guideline Transactions Method. The Guideline Public Company Method involves valuing a company (or enterprise) by comparing it to publicly traded companies that are similar in nature. This method uses financial metrics and ratios from public companies to estimate the value of the subject company (or enterprise). The Guideline Transactions Method involves valuing a company (or enterprise)business or asset by comparing it to recent transactions involving similar businesses or assets in the same industry.
The asset-based approach to valuation focuses on estimating the cost to recreate or replace the company's assets with new ones based on the prevailing market price of similar assets, taking into consideration the historical and current maintenance practices while also accounting for accumulated depreciation due to the asset's condition, age, usage or obsolescence. During the valuation process, the assets and liabilities of the company (or enterprise) are typically assessed at their fair value. Generally, this approach is employed when neither the income nor the market approaches are viable, such as in a liquidation scenario, because it does not account for the future economic benefits the company may generate.
We utilize our expertise, customized approach, data-driven analysis, accuracy, timely delivery, confidentiality, and commitment to client satisfaction to deliver high-quality valuation services with reasonable fees that meet your specific needs and objectives.