Business Valuation Best Practices

Determining the value of a business is a complicated and dynamic process. But with an independent valuation carried out by financial and legal specialists, you can be sure your business is fairly priced.

In a 2008 letter to Berkshire Hathaway’s shareholders, the billionaire investor Warren Buffet famously wrote: “price is what you pay, value is what you get”. He was talking about the price of stocks, and while the quality, or in other words the value, of a stock doesn’t change several times a day, the price often does.

It's the same with business valuations, as well as other asset valuations. Whether it’s a large organisation or a small enterprise, a thriving business or a distressed asset, working out the market value is a blend of science and art.

In many cases, conclusions are arrived at through a combination of analysis, experience and professional judgement. Other professionals may take different positions on the value of a business or an asset, because there truly is no single indisputable value. Even so, it’s important for valuation experts to deliver a conclusion that is justifiable yet comprehensive.

Understandably, determining a valuation is a controversial and dynamic subject and that’s why it’s vital you seek independent financial and legal help. Buyers won’t want to overpay, but you don’t want to undersell either. How much an asset is worth and how much someone is willing to pay for it are very often not in alignment. That value is also fluid and varies due to many factors.

There are many forms of valuation advisory. From mergers and acquisitions to investment analysis, litigation, expert determination, and disputes. Different purposes of valuation require different approaches and methodologies.

For mergers and acquisitions or disposal, the parties involved require independent reviews to determine the worth of a subject, whether that’s a business, an asset, securities and shares or even intangibles such as intellectual property.

In litigations, the parties involved might be claiming for the value of losses suffered due to a breach of contract or minority oppression. Some cases could include parties needing to value a business affected by infringement or rights to a business or asset.

Businesses can benefit from a valuation even if they have no merger and acquisition plans. While going through a valuation process, you will gain better knowledge and insights of your business or asset and a better grasp of the indicative value of your business. It can even be a useful KPI or performance measurement allowing you to forward plan as well as compare your company’s value-worth year-on-year.

In our experience, business owners may sometimes find themselves sitting on a higher valuation of a business compared to what they had in mind, prompting the owners to seek additional financing or mergers and acquisitions’ initiatives to create more shareholder value.

Because valuations are as much based on the valuer’s experience as they are on facts, it’s important to appoint people you can count on. At Perun Consultants, our team is made up of regional and local experts, including subject matter specialists, who are trained in delivering integrated tailored advice and solutions. In every assignment, our team is assembled based on each person’s relevant experience and knowledge for the specific circumstances.

We also have extensive experience in valuing businesses in a variety of contexts, including mergers and acquisitions, litigation and disputes. We have countermeasures in place to manage the challenges to ensure the valuation result is fair for you.

Contact us today to find out more about how Perun Consultants can help you with business valuation matters.