A business valuation is a stand-alone evaluation of the value of a business. It considers the financial performance of the business, assets, market conditions, and potential earnings of the business in the future. This is what is known as a documented, professional opinion of value that can be utilized in various commercial and reporting purposes.

A valuation is usually needed by businesses in situations such as the acquisition or disposal of a business, reorganization, litigation, succession planning, finance raising, or to satisfy some reporting obligations. It can also be applied in internal decision making where owners would like to have an objective idea of what their business is worth.

Formal valuation A formal valuation is a detailed form of valuation that has been documented and is prepared by a professional who is qualified to prepare such a valuation. An indicative value is a less formal estimate, usually employed in internal planning, or in preliminary discussions. The rigor, documentation and professional accountability is varied between the two.

Valuing a business can be done in a number of ways which are usually common and they include methods such as basing it on earnings, assets or other similar transactions in the market. The best methodology will be determined by the nature of the business, the valuation purpose and the available information. Most of the time two and more approaches are used and the findings are counterbalanced.

Intangible assets are assets that help add value to a business and are not tangible like brand names, customer relationship, licences and intellectual property. They can frequently constitute a substantial part of the total value of a business, and may require to be formally valued to be reported, or transacted with or to resolve a dispute.

In case a business buys another business, the price paid has to be allocated to the identifiable assets and liabilities of the acquired business to be used in accounting. The valuation of those separate assets and liabilities of the business, including intangibles, are established by a PPA valuation. This is usually a norm after most acquisitions of a business.

Portfolio or fund valuation is the evaluation of the worth of a set of investments or assets that are owned by a fund or investment vehicle. Such valuations are often needed in reporting to investors, supporting governance processes, or in fulfillment of the needs of oversight bodies. They need to have a standardized and documented procedure used throughout all holdings.

Yes. Valuations are generally prepared to be used in legal cases such as shareholder disputes, family issues and in commercial litigation. In such situations, the valuation should be made to a high standard, documented and able to stand the test of scrutiny. We are involved in preparing dispute related valuations.

Business value can be significantly affected by market conditions. Interest rates, the performance of the sector, the demand of buyers and the general economic environment are all factors that determine the value of a business at any one time. A properly prepared valuation takes into consideration the prevailing market conditions and also portrays the environment the business is being run in.

No set rule exists but lots of companies find it advantageous to have a valuation every couple of years or upon a major event or significant turnover of ownership, a big transaction or a material change in the performance of the business. Frequent valuations also assist owners to keep up to date with what they have created.

Not necessarily. A valuation is a professional opinion of value made using available information and generally accepted methodology. The transaction price that has been actually achieved in a deal might not be the same; the price would be affected by the negotiating process, the motivation of the buyer, deal structure, and other business influences. A valuation offers a starting point that is informed but not a result.

The information needed will depend upon the nature and use of the valuation, but generally will consist of financial statements, the operations and assets of the business, details of its customers and contracts, and any pertinent ownership or legal records. At the beginning of every engagement, we give a concise list of information required.