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Green Indoors

BUSINESS VALUATION

BUSINESS VALUATION SERVICES

The economic value of a business is driven by a multitude of factors and circumstances, and is broadly defined to be the total sum of all tangible and intangible elements associated with the business. Examples of tangible elements include monetary assets, property, inventory, and receivables whilst examples of intangible elements include brand name, goodwill, patents, and trademarks. 

There are three commonly used approaches used in business valuation: the income approach, the market approach and the cost approach. Within each of these approaches are various techniques applicable for determining the value of a business, its application dependent on the characteristics of the business being valued. Generally, value is determined using the income approaches by calculating the net present value of the cash flows generated by the business (eg. discounted cash flow); the market approaches determine value by comparing the subject company to comparable companies sharing comparable characteristics such as similar industry, size or geographical region; the cost approaches determine value by estimating the costs applicable to recreate a similar business or asset. A number of business valuation models can be constructed that utilize various methods under the three business valuation approaches. Some of the valuation methods under each approach are presented below:

INCOME
APPROACH
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  • Discounted Cash Flows

  • First Chicago

  • Capitalization of Excess Income

  • Capitalized Economic Income

Market
APPROACH
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  • Comparable Transactions

  • Guideline Public Company Method

  • Guideline Transaction Method

  • Dividend-Paying Capacity Method

COST
APPROACH
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  • Replacement Cost

  • Reproduction Cost

  • Summation (Underlying Asset)

  • Adjusted Net Asset Value

At Lim & Young,  business valuations are performed taking guidance from the International Valuation Standards (IVS) administered by the International Valuation Standards Council (IVSC) as well as The International Private Equity and Venture Capital Valuation (IPEV) guidelines administered by the IPEV Board. Companies will often turn to professional business valuers for an objective estimate of the value of the business. Some common functions that are supported by business valuations include:

  • Merger and acquisition exercises

  • Audit and Financial reporting

  • Strategic planning and business restructuring

  • Tax reporting and planning

  • Dispute mediation and litigation

  • Commercial due diligence

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