1, Business valuation according to the asset approach
We only offer this for
A, Solopreneurs (companies with only one employee)
B, Holding companies
C, Companies that solely owns commercial property. A separate commercial property valuation will be subcontracted by us.
2, Uncomplicated business valuation without consulting
A business valuation is typically but not always uncomplicated, when the business has been around for a few years, and the profitability is somewhat steady and aligned, between the fiscal years. The the financal statements (US) or final year end accounts (UK) must also be in order. The valuation methods used, are the asset approach in combination with the income approach.
3, Complicated valuation with consulting
Here, there are no limitations of how complicated the valuation can be, and unlimited consulting is included, but the consultation is limited to the valuation. Companies who do not have their financial statements in order and companies that are involved in lawsuits, do fall under this category.
4, Tech valuation
Valuation of tech companies, such as Saas (software as a service), digital platforms and other digital companies. E-commerce are often, but not always, defined as a traditional company. Tech company, can also refer to medtech companies and other industries.
What we do not offer
A, We do not offer valuations of restaurants and smaller stores etc, according to the market approach. However, we do offer our services to larger companies in these industries, with what according to us is the correct methodology, ie, several valuation methods combined, and normalized financial statements.
B, We do not offer valuations of pre revenue companies, and we do not offer valuations for fundraising purposes.
The three most common forms of due diligence are the following:
1, Legal due diligence is about reviewing the company’s contracts and any liability. The larger the company, the larger need for legal due diligence.
2, Financial due diligence is about confirming that the company’s finances are what they are claimed to be.This is the most common form of due diligence, which is always done regardless of the size of the company.
3, Technical due diligence is about inspecting the condition, of the company’s assets. It can be anything from IT systems to excavators. We consider this category to be important and that it should be given adequate priority.
The above is and should be considered standard for all transactions. Under extraordinary circumstances, the down below forms of due diligence can also be required.
(4), Commercial due diligence is about market research etc. We rarely consider this to be relevant for traditional companies, as the quality of the data often is good enough to base deceisions on. However, there may be exceptions such as when it comes tech startups.
(5), Forensic accounting, is basically the same as financial due diligence, but with more focus on criminal elements, such as money laundering etc.
Mergers and acquisitions is a relatively broad concept. Usually, one refers to a slightly larger company, which buys up its competitors, and then integrates their operations into the acquiring company. Business valuation and due diligence are included in the broader concept of M&A.
The M&A processes often lead to relatively fast and steep increases in profitability, because one can pick the best processes and components from both companies. In addition to that, you can also get economies of scale that also contribute to increased profitability.
Mergers and acquisitions may also refer to a vertical acquisition, ie a customer or supplier to the acquiring company. This can also be profitable, as you can later control a larger part of the value chain. However, the increase in profitability is seldom as high or rapid as when acquiring competitors. Of course, M&A also includes a separation and an integration, of which the integration is where most failures occur. Finding increased profitability in horizontal acquisitions often goes relatively well, although of course there are different variations of “good”. This is often the simpler part of the M&A process.
On the other hand, when two companies are to be integrated, dissatisfaction often arises among the staff, especially when introducing “big company policies “. Despite the fact that productivity among staff often decreases with the introduction of “large company policies”, the profitability often still increases. This is due to the low-hanging fruit with M&A, which becomes the most obivous when it comes to horizontal acquisitions (competitors).
M&A does not necessarily refer to larger companies, but even smaller companies can acquire competitors, customers or suppliers. However, M&A advisors are a more common choice of terminology for larger companies, while business brokers are a more common word choice for smaller companies. An M&A advisor often acts in a similar way as a business broker, but with more focus on the financial and legal aspects. M&A advisors often also have more of an overall responsibility. A business broker’s task is usually only to market and sell smaller companies.
Business valuation is the process of determining the most likely value of the business, in a transaction, where both parties are equally motivated to transact. A qualified valuation of a business should be according to the concept of intrinsic value and include an unbiased normalization of the financial statements. The final calculation of a business appraisal is fairly simple and quick, which is typically what you only get, when ordering an online valuation, without an on-site visit. The process of normalizing the financial statements along with weighing in the different valuation methods against each other, is what requires the most amount of time and competence, by the business valuator. The normalization of the financial statements is typically what affects the valuation the most. A company valuation should only be considered as reliable when it is properly independent and unbiased.
The most common methods for valuing a company are; the market approach, the income approach and the asset approach. They all have their strengths and weaknesses, and their own subcategories. No valuation method is complete enough, to solely be used to value a company.
The market approach doesn’t properly weigh in the profitability or assets of the company, which arguably are the most central aspects when valuing a business. Therefore, most valuations according to the market approach, are not of intrinsic value.
The income approach doesn’t take the assets that the company owns, into account. Therefore, companies with lots of assets get deceptive valuations.
The asset approach doesn’t take the profitability into account. Therefore, profitable businesses get deceptive valuations.
Want to go with a cheaper option or even do the valuation yourself? Nothing is stopping you, but...
You may lose the lawsuit, due to the valuation failing to be waterproof.
You may never settle the conflict, hurting the relationship with your counterpart.
You may get deceived while entering or exiting your partnership.
Tell us about your needs of business valuation
We don’t work with start-ups or fundraising. Our price range is roughly half of what the big four charges.