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A true test of accuracy and validity
of any valuation is the price at which a company would willingly
change hands in the marketplace. The valuation of a privately-owned company is both science and art. Since no two companies
are exactly alike even within the same industry, trade, or service,
there is no one formula or method that is all-inclusive. VR M&A
uses a comprehensive, multi-method approach that considers relevant
factors unique to a particular company, including company
history. longevity, future economic outlook, tangible asset
value, intangible asset value and industry ratios.
Also considered are factors such as historical
net cash flow, probability of continued profitability, risk competition,
technology changes, ownership transition training, owner non-compete
and consulting agreements, as well as working capital requirements.
There are many reasons to value a company. Whether it is for an
anticipated acquisition or divesture, a partnership buy-sell agreement,
stockholder concerns, marital dissolution, or estate planning,
a professional valuation makes a world of difference. Since there
are many reasons to value a company, there are many different
levels of valuation services. From a simple target value for selling
your company to a complex IRS-rated valuation, VR M&A can handle
the assignment internally or by working with independent third
parties.
Risk impacts value! Risk is defined as "the
degree of certainty or uncertainty as to realization of expected
future returns." Risk takes many forms in mid-size business: size
of company, depth of management, reliance on key personnel, company-specific concerns, industry
trends and, to a great extent, available
return on alternative investments (stock market, bonds, t-bills,
etc.)
There are three broad approaches to valuation:
Income, Market and Asset. Within each approach there may be many
different methods that must be considered. After careful consideration
of the relevant factors, a reconciliation of the related approaches
is performed to determine which approaches are most relevant to
the purpose of the appraisal assignment.
In its simplest form, a business is an income-producing
entity. The income approach places a value on the expected future
income while compensating for risk.
The Asset approach basically just places
a fair market value on the asset of the business. It is usually
used in liquidation or with companies that are intensive, but
have poor financial results.
The Market approach uses information based
on actual transactions of similar and relevant companies.
When you use VR M&A, you can rest assured
that the valuation process will be handled professionally and
confidentially.
THE BOTTOM LINE: THE VALUATION PROCESS
IS HANDLED PROFESSIONALLY AND CONFIDENTIALLY
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