Business and Asset Valuation

Business and Asset Valuation

Irrespective of whether you are considering buying or selling your business, the two principles that are relevant to any company throughout the world are a good company and a good price. A good price is the valuation of the company or the company’s assets.  Therefore, you must always know how much your business is truly worth. Furthermore, not only it is required by relevant financial reporting standards to provide a fair valuation of the company, given the recent market sentiment, it is recommended that you conduct an independent valuation at least once a year.

From the perspective of business or asset acquisition or disposal, the valuation of the targeted business is the basis for determining the purchase consideration that the seller offers to the buyer in acquiring the targeted business, and the price of which the buyer is willing to accept. There are multiple approaches to valuing a business, and depending on the basis and assumption of each valuation method, the valuation result may vary widely. For example, a valuation method that is based on the targeted business will be sold at a bankruptcy price which yields a very different outcome as opposed to the valuation of a profitable business. Furthermore, a business with a focus on the strength of its intellectual property such as patents, trademarks, and company brands may yield higher value even though the company may be unprofitable. In short, the adoption of different valuation methods may produce extreme results. Our prior experience suggests a better method is the combination of several valuation methods since most businesses cannot be measured accurately and reliably with only a single method. For instance, the use of discounted cash flow may not be applicable for high-growth businesses with minimal cash flows. Likewise, the company may pour the majority of its available cash into research and development of new product lines, and intellectual properties, but it has minimal or no market share, in which case, using a discounted cash flow valuation basis to value the business may produce results that do not reflect the true value of the targeted business.

Our team has accumulated an extensive amount of experience in assisting both the acquirer and the acquiree to establish appropriate valuation methods. Our valuation services generally comprise the following:

• Businesses and asset valuation;
• Valuation to comply with relevant financial reporting standards;
• Our team works close closely and maintains close communication with the key stakeholders such as the board of directors, senior executives, key management, and audit committee of the company. Through establishing this close relationship and communication, our financial and advisory solutions will encompass the elements of business strategy, structure, management, operations of the company, and other relevant business considerations and objectives. Our services will further extend to providing recommendations, additional resources, or even implementing solutions upon reaching agreement with relevant key stakeholders;
• Through sensitivity analysis, it is our practice to produce several results, ranging lowest valuations to the highest value through different valuation methods.