A professional assessment of the business.

The topic of business valuation is frequently discussed in corporate finance.

Business valuation is typically conducted when a company is looking to sell all or a portion of its operations or looking to merge with or acquire another company. The valuation of a business is the process of determining the current worth of a business, using objective measures, and evaluating all aspects of the business.

Seeking a professional assessment of the value of a business or company is a critical step. A well-prepared, balanced and independent valuation presents a complete picture of a business’ value.

How we help clients

Our professionals have delivered valuation opinions of businesses and assets across a broad range of industries including:

• Valuation for taxation purposes, including entering the tax consolidation regime, capital gains tax and stamp duty
• Valuations for Financial Reporting purposes
• Preparation of independent valuer’s reports
• Independent valuation for merger, acquisitions, disposals and pre-bid support
• Valuation for dispute resolution and expert determination
• Purchase price allocation
• Valuation for a pre-lending review process
• Valuations of intangible assets
• Executive options and employee share plans
• Succession and estate planning

HLB will gain the knowledge to quickly understand your operations, the key value drivers, competitive positioning and financial performance of the business to assist with your valuation requirements. We ensure that the valuations are compliant with relevant laws, regulations and professional standards.

Our approach

We consider the following:

• Business operations & structure
• Valuations methodologies
• Key-value drivers
• Financial forecasts & business plans
• Market analysis
• Tax implications
• Business cycle
• Growth prospects
• Key personal risk
• Levels of gearing
• Customer base
• Capital requirements

A global perspective

Our team also guides companies with global interests through our association with the HLB International network in over 153 countries around the world. We have access to the latest market reports, brokers’ reports and financial information on comparable companies around the world.

The Basics of Business Valuation

The topic of business valuation is frequently discussed in corporate finance. Business valuation is typically conducted when a company is looking to sell all or a portion of its operations or looking to merge with or acquire another company. The valuation of a business is the process of determining the current worth of a business, using objective measures, and evaluating all aspects of the business.

A business valuation might include an analysis of the company's management, its capital structure, its future earnings prospects or the market value of its assets. The tools used for valuation can vary among evaluators, businesses, and industries. Common approaches to business valuation include a review of financial statements, discounting cash flow models and similar company comparisons.

Special Considerations: Methods of Valuation

There are numerous ways a company can be valued. You'll learn about several of these methods below.

1. Market Capitalization

Market capitalization is the simplest method of business valuation. It is calculated by multiplying the company’s share price by its total number of shares outstanding

2. Times Revenue Method

Under the time’s revenue business valuation method, a stream of revenues generated over a certain period of time is applied to a multiplier which depends on the industry and economic environment. For example, a tech company may be valued at 3x revenue, while a service firm may be valued at 0.5x revenue

3. Earnings Multiplier

Instead of the times revenue method, the earnings multiplier may be used to get a more accurate picture of the real value of a company, since a company’s profits are a more reliable indicator of its financial success than sales revenue is. The earnings multiplier adjusts future profits against cash flow that could be invested at the current interest rate over the same period of time. In other words, it adjusts the current P/E ratio to account for current interest rates.

4. Discounted Cash Flow (DCF) Method

This method of business valuation is similar to the earnings multiplier. This method is based on projections of future cash flows, which are adjusted to get the current market value of the company. The main difference between the discounted cash flow method and the profit multiplier method is that it takes inflation into consideration to calculate the present value.

5. Book Value

This is the value of shareholders’ equity of a business as shown on the balance sheet statement. The book value is derived by subtracting the total liabilities of a company from its total assets.