Valuation is often one of the most important factor in a business or company share sale. If you price your business or company way too high, your business may not sell. If you place it too low, you are short changing yourself.
The uses of valuation can be split into 3 major categories – transaction based valuations, regulatory and administrative and disputes resolution.
The diagram below summarizes the uses of valuation in each category.
Professional valuation is often used to help investors and sellers estimate the prices that they should buy or sell company shares or businesses. Shareholders and business owners will often want independent advice on how to price their shares or business as these are often one of their most valuable assets. A good valuer can often help a seller improve the transaction price that buyers pay in the end.
For buyers, they obviously don’t wish to over pay. Being too generous will harm future returns but being too conservative will probably mean the deal won’t go through. A professional valuer will be able to help an investor or buyer critically assess the fair value of an asset or business.
Regulatory & Administrative
Financial reporting and tax reporting requirements often require independent valuations on certain transactions, assets or liabilities.
Buyers of companies and businesses often need to perform Purchase Price Allocation in order to meet financial reporting requirements.
Companies that has exotic financial instruments such as convertible preference shares, warrants and options often will need independent valuers to assist them in estimating the fair value of these financial instruments.
Tax authorities may also require certain assets to be valued by independent valuers as it may affect taxable amount.
When there are disputes between more than one party regarding the right price to transact, it is often feasible to appoint an independent valuer to estimate the fair price that parties should transact. Sometimes each disputing party may appoint his own valuation expert to help justify the price that the dispute should be settled at.
We have the experience in litigation and dispute negotiation support by providing professional and high quality valuation advice.