How to Value a Company?
The The valuation of a company measures the environment and everything that includes a business including fixed/current assets, liabilities, brand, personnel, technology, etc. In other words, valuing a company means analyzing the entire environment in terms of technical and economic issues.
Specifically, it is the economic capacity that a business has to generate flow or profits in the future, it must have in its projection a long-term growth and an expected return due to internal and external factors that reflect the operation, environment and virtues of the company itself.
Valuing a company usually requires the intervention of multidisciplinary groups, depending on the type of business, it can be listed mainly: financial, economists, actuaries, legal, fiscal and in some sectors technological and environmental experts.
There are 2 methods to value a company Which are usually the most popular:
- Discounted Cash Flows
The process of valuing a company can vary, but it usually begins with a due diligence and creation of profile, later a preliminary financial analysis is made, which will help to shape the development of an own and unique financial model according to the own needs that arose during the analysis of the previous points, later and once the financial model is concluded, interpretation is given of the results and conclusions.
The elements of a process business valuation can be divided into:
|Technical Elements||-Valuation method used|
-Method Limits and Normalization
-Identification of value generators (value drivers)
|Business Elements||-Sector Analysis|
-Risk Analysis (Internal and External)
|Negotiation Elements||– Value sharing|
– Value Ranges
How are Discounted Cash Flows (FCF) calculated?
The most popular and common technique to value companies and investment projects is with the discounted cash flow methodology, establishing free cash flows, which at the same time are discounted under the VPN which is considered the risk rate known as wacc(k).
How is Discounted Cash Flows calculated?
How is the NPV calculated?
What is the purpose of valuing a company?
Find ways and accurate ways to identify, measure the economic / operational relationship of a company based on current and future business conditions in a set of internal and external factors.
It has to be done an analysis of administrative, legal and financial, commercial, operational and market characteristics,
Through it, you can find the profile of products and services, as well as the market opportunities and limitations offered by the company itself, as well as its strengths and weaknesses.
The main factors are:
- By competitive positioning of the business within the sector
- Business operation characteristics
- Motivations of economic agents
The main purposes of valuing a business can be to:
Analysis of investments, acquisitions, placement of capital on the stock market, mergers, to evaluate and remunerate managers, compensation, dation in payment, reengineering, merger-absorption, company dissolution, administration and planning.
Benefits of valuing a company
Usually a business can have different values according to who values it, so the main benefit of doing a company valuation study is to have a partial parameter that is as impartial as possible, to make decisions in favor of investors, owners or beneficiaries.
The benefits of valuing a company fall and are born in the general purpose and objective of the interested parties, that can arise from the need to calculate the range of value that seek to be a reliable reference in a negotiation between parties, may also be subject to the objective of identifying opportunities to invest when making an assessment of indicators, or value drivers that may be of interest to the potential buyer, another purpose may be to identify the economic value on certain dates to buy at appreciation or depreciation in the capacity of "value creation."
The benefits of carrying out a company appraisal are diverse and provide very useful information for decision making:
- Provide the recent value of the company as a going concern for stock exchange.
- Specify a company value status
- Restatement of financial statements
- Financing or credit
- Buy and sell
The benefits of the Service that ANEPSA Guarantees when valuing a company are:
- Analysis of the general characteristics of the company
- Analysis and commercial characteristics
- Analysis of technical and operational characteristics
- Analysis and administrative-financial characteristics
- Going concern valuation methods
The added value in ANEPSA is:
- Experienced Staff
- Transfer of knowledge for the benefit of the administration of your company
- Timely service delivery
- specialized treatment
- Constant update about this service
- continuous attention
- Availability to move anywhere in the republic
At ANEPSA we are here to help you, contact us