Global economic situation constantly causes changes in values of tangible and intangible assets. Valuation services are intended to provide reliable information about the value of a given asset or entire enterprise.
Such services include:
- enterprise valuation,
- asset valuation,
- brand valuation,
- economic damage valuation.
Each and every valuation must be treated and handled on an individual basis. The general description of the valuation process consists of the following steps, but they might be modified and tailored to a particular client. However, the general advisory process consists of the following elements:
Stage I: Gathering necessary information from Client
- Sending a list of necessary data to provide a service (core information about the Company, financial statement, etc.)
- Opening meeting – discussing what the client needs to be included in the services and a preliminary work schedule
- Sending a project schedule and a list of required documents
Stage II: Preparing financial projections
- On the basis of documentation provided by the Client, MGW CCG will present financial projections essential for the valuation
- The forecasts will be prepared in an Excel file in a form of an active financial model and it will be accompanied by a description (a report).
Stage III: Valuation
- The right methodology will be selected depending on the subject of valuation (an enterprise, a brand, a financial asset), in accordance with standard principles.
Enterprise valuation is a process of determining the enterprise value with available valuation methods.
There are several enterprise valuation methods, and they are divided into the following categories:
- Asset-based approach
- Booking value method
- Adjusted net book value method
- Replacement value method
- Liquidation value method
- Income-based conventional approach
- Discounted future cash flows (DCF) method
- Discounted revenues
- Discounted dividends
- Income-based non-conventional approach
- Residual income value method
- Adjusted present value (APV)
- Discounted future cash flows (DCF) method, taking into account real options
- Non-profitable enterprise value method
- Direct comparison (multiple method)
- Market comparable transactions multipliers
In practice the valuation is most often done with three methods, which will give you an unbiased knowledge about the range of enterprise value, which is necessary to take any decisions related to enterprise development and external financing.
- Discounted cash flows analysis is a basic method used on the capital market. It enables you to estimate the value resulting from enterprise’s capability of generating free assets available for Investors and Lenders.
- Comparative method of enterprise valuation compares the enterprise value to other existing valuations of enterprises with similar line of business. The comparative group is publicly traded companies. For the valuation you use common market multipliers such as: EV/EBITDA, P/E, P/BV, P/S.
- The adjusted net book value method is connected directly to the booking value method and is basis on adjusting book values based on
The valuation may serve various purposes depending on what function it is supposed to fulfill. The basic valuation functions are:
- Advisory (decision-making) – providing information essential for planned capital transactions and managerial decisions.
- Argumentative – providing information about enterprise value that might give a leverage to one of the negotiating parties.
- Mediative – providing information about enterprise value in case of capital transactions where parties have different opinions about the value.
- Securing – providing information about enterprise value to establish security against negative effects of value disputes.
- Informative – providing information obtained in the course of valuation for the purpose of more effective business management.