Valuations

Corporate & Business Valuations

There are many reasons why a business valuation is performed. Some of the more common reasons that we have seen are for mergers and acquisitions, business sale or purchase, matrimonial dissolution, and business disputes.

Every business is unique to its particular industry, the experience of the management team, the operational setup, financial history and more. Hence the complexity of valuation will vary accordingly; there are no two same valuations.

A business valuation is generally performed to provide a fair market value on a business or entity. It can help in the negotiation of a business purchase and sale, secure credit loan, settle a legal dispute, fulfil taxation purposes, or even for management’s internal use. It gives all parties involved a detailed understanding of the worth of a business, which ultimately assists in strategic decision making.

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Our Process

Identify the valuation purpose, scope, parameter & requirements

Gather relevant documents & information from client, and through external sources

Determine valuation approach, methods, inputs, assumptions, & other parameters

Conduct valuation and compile findings into detailed report for explanation to client

Frequently Asked Questions

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01
What is Fair Market Value?

By definition, fair market value is the price (or highest price) at which a property (business) would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arms-length in an open and unrestricted market, when neither is under compulsion to buy or sell and when both have reasonable knowledge of the relevant facts.

02
What are Standards of value?

The appropriate standard of value must be identified in every valuation assignment in order to arrive at the correct conclusion. The four standards of value generally accepted in the business valuation community are Fair market value, Fair value, Investment value and Intrinsic value.

If you are unsure, our specialists will guide you to determine the appropriate value to be used.

03
What valuation standards are there to abide by?

There are several international valuation standards in place. We practise valuation according to the International Valuation Standards Council (IVSC), which is the standard adopted by the Institute of Valuers and Appraisers, Singapore.

04
How are you going to value my company?

Every business is unique; there is no definitive way to immediately prescribe a certain method. There are three main valuation approaches that are used to value businesses.

They are the income approach, market approach and cost approach. It is important that the valuer considers all approaches and chooses the most appropriate one for a respective business. There are cases where multiple approaches are required to be used, to provide a fair estimation of value.

05
What is the income approach and when is it best to use it?

In brief definitions, the income approach in valuation values a company based on the amount of income the company is expected to generate in the future. It looks at the future cash flows that could be generated by the company, it analyses the risk of realizing those cash flows and then discounts those back to come up with a present value of the company. There are two income-based approaches that are primarily used when valuing a business, the Capitalization of Cash Flow Method and the Discounted Cash Flow Method.

The income approach is best used when future cash flow forecasts can be reliably estimated. Certain key input such as capital expenditure and net working capital information is required, hence the income approach is advised to be used if they can be estimated with a reasonable degree of confidence.

06
What is the market approach and when is it best to use it?

The market approach values a company value by considering the market prices of comparable companies that have been sold recently or are still active in the market. Apart from looking at transacted prices alone, the value of a business can also be measured via a comparison of the features of the subject of valuation with those of reasonably comparable businesses such as financial ratios (multiples) like price to earning and EV/EBITDA.

The market approach is best used when the subject company has an identifiable earnings trend and the capability to generate earnings that can warrant a higher value as compared to that of its underlying net tangible assets.

07
What is the cost approach and when is it best to use it?

The cost approach values a business from a balance sheet perspective by simply netting the assets of the company on the balance sheet against the liabilities on the balance sheet, then adjust them accordingly.

The methods are often referred to as asset accumulation method, net asset value, adjusted net asset, adjusted book value or asset build up method. This method is used for asset-intensive businesses such as investment holdings and real estate companies.

08
What are some discounts to take note of when valuing companies?

In a valuation of ownership in a private company, there is the concept of discounts. If the purpose for valuation is to determine shareholder interest in a company, the valuer may need to consider discounts such as minority discounts, blockage discounts, key person discounts, shareholder level discounts and so on.

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