Scenarios in which company valuation services required
November 07, 2022
Company valuation entails estimating the fair economic value of a company on the basis of several variables. Every business unit is assessed as part of the valuation process to determine its value as well as that of every department or subunit it may have. The valuation process requires a thorough examination of every aspect of the business including management, capital structure, the market value of the company's assets, and projected future profits. A company can be valued in a variety of ways – on the basis of its market cap, earnings multipliers, book value, etc.
Scenarios in which company valuation is needed
- To attract equity funds from PE/VC investors
- For regulatory requirements
- For bank loans
- To sell your business
- To buy a business
- Mergers and demergers
- To add new shareholders
Below is more information on a handful of the scenarios listed above:
- Strategic Planning - If, for instance, the balance sheet hasn't been tailored to take into account a variety of potential changes, a depreciation schedule may not accurately represent an asset's true value.
- Fundraising - You often need an independent and objective appraisal when negotiating with banks or any other potential investor. An official report of your company's value is frequently required in order for lenders to have faith in your business.
- Purchasing - Even though sellers and purchasers typically have varying opinions about how much a company is worth, the true business value of a company is what buyers are willing to pay. A good company valuation service provider would consider the state of the market, potential revenue, and other relevant factors to determine whether the investment you are aiming at is viable.
- Business Sale - You must make sure you receive the highest value when selling your firm or company to a third party. However, the asking price still needs to be appealing to prospective buyers.
- Exit Strategy - The value of a company is one of the most vital elements of an exit strategy. In order to understand where business owners need to be in terms of finances when it's time to exit, cash flow forecasts and an initial company value are crucial.
Below is a detailed discussion of the many methods used for company valuation.
- Market capitalization - Market capitalization is the most direct method of valuing a corporation. It is determined by multiplying the share price by the total number of shares outstanding.
- Time revenue - Times revenue business valuation method multiplies a stream of revenues produced over a predetermined period by a factor that is dependent on the sector and the general state of the economy. If a company operates in several industries, implementing this strategy might be challenging as choosing the multiplier can be difficult.
- Earning Multiplier - As opposed to the times revenue method, the earnings multiplier may be employed to obtain a more accurate representation of the true value of a firm as a company's profits are a more reliable indicator of its success than sales revenue. The approach is used to evaluate how its stock price stacks up against other companies in a related sector. It also shows how much money an investor must put up for each dollar the company earns.
- Discounted cash flow analysis - Discounted cash flow analysis (DCF) uses the idea of the time value of money to determine the value of a security, venture, company, or asset. The procedure entails estimating all potential cash flows and discounting them using the cost of capital to arrive at their present values (PVs). It is assumed that the future cash flows are worth their net present value (NPV).
- Book Value - The worth/value of the equity of a shareholder is represented by book value. A company's book value is its total assets minus intangible assets and liabilities.
- Liquidation Value - The liquidation value is the total amount of money that a company would receive today if all of its debts were paid off and all of its assets were sold.
Top Company Valuation Services Provider Firm in India
Company valuation is a vital feature that makes it easier to marshal data required to develop investment strategies and business plans. A Category 1 Merchant Banker, Resurgent India Ltd is one of the top firms which offers the best company valuation services. With the support of our skilled professionals (industry veterans) and a talent pool of 200+ individuals, we have assisted numerous businesses in arriving at the accurate company and asset valuations. Our company valuation services include a comprehensive analysis and critical evaluation of every significant aspect of a business. We also offer our services in the areas of debt, equity, business valuations, structured finance, and capital markets.