Valuation

A valuation is almost always part of an M&A transaction process. A valuation forms the basis of the negotiations and the pricing of the company in question. The valuation exercise can be executed on behalf of the acquirer or seller, in an arbitrage situation or as an expert opinion for the courts.

We base our valuations preferably on the Discounted Cash Flow (DCF)-method, meaning:

  • How much cash flow do you expect to be able to generate in the (near) future?
  • When are you able to generate a specific cash flow? (In other words one Euro generated this year, is worth more than an Euro generated in two years from now), and
  • What is the probability (chances and risks) that that Euro will actually be generated?

 

Value drivers

Acquirers and sellers rarely share the same expectations for the future. A professional exploration of each other's point of views provides an infinite insight into the quality of the forecast. The next step is then to determine the key value drivers and their impact (sensitivity-analysis) on the outcome of the valuation, in order to arrive at a sustainable valuation

Basis for pricing

The valuation exercise provides a basis for the pricing of a company and forms a starting point in the negotiations. The outcome of the negotiations however is also influenced by:

  • The number of interested candidates
  • Potential for synergetic benefits (additional earning capacity or risk reduction)
  • The credibility of the forecast in comparison with historic trends
  • The goodwill that is being paid (debt funding)
  • General market conditions (hype or recession)

Analysis

  1. Analysis of historic performance
  2. Forecast (stand alone)
  3. Investigate synergetic potential
  4. Key value drivers
  5. Scenario and sensitivity analysis
  6. DCF calculations
  7. Other valuation methods
  8. Advice

For more information please contact our specialists.