Category: Business valuation
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Third opinion for an investment đ¤
Business valuation is not only for M&A. Sometimes, we are engaged as an independent third party to review a project investment decision. When a company plans to invest a large amount of money into a new project, management may already have an internal forecast.Our role is to step in and ask the uncomfortable but necessary…
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Investing in a non-listed company
When a company invests in other companies, the investment itself matters in a business valuation â not just the core operations. In practice, we donât simply take the initial investment cost and stop there. During valuation, we assess how those invested companies are actually performing. Think of it as a mark-to-market concept: In many cases,…
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Cash projections that donât look comfortable.
When we validate a companyâs value using the Discounted Cash Flow (DCF) method,we usually forecast cash flows for the next 5 years. Sometimes, the projected cash balance looks⌠tight. This often happens because of things like: At first glance, it may look like the business âcannot surviveâ. This is where judgment matters. If: Then reviewing…
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A company is loss-making and has debt. Does it still have value?
This is a fragile situation.The company is losing money and has obligations to pay interest and loan instalments. But loss â zero value. Hereâs what we usually look at beyond the headline loss: If we ignore fixed costs for a moment, is the business profitable at the variable cost level?Fixed expenses donât automatically increase with…
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M&A can take years.And sometimes⌠the deal dies before it starts.
There are many cases whereCompany A wants to buy Company B.Company B also wants to be bought. But the documents are nowhere near audit-ready. More than one set of accounting books.Numbers donât reconcile.Key information depends on only one person. These are very common issues for small companies. So even if youâre not planning to sell…
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Legal, Accounting & FA (Financial Advisor): Why you need all 3 in M&A
Because Legal cannot value a business, Accounting cannot review contracts, and FA cannot audit financial statements. Thatâs why in an M&A (Merger & Acquisition), you need all 3 parties. After due diligence, if there are no hidden skeletons in the closet, the financials are audited, and the FA has completed the valuation, both buyer and…
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Why we usually need 3â5 years of historical performance in business valuation
Sometimes a companyâs performance looks like a wave âup one year, down the next. This doesnât always mean the business is unstable. It could be: Looking at several years helps us identify patterns, not just numbers. For example: Very often, we see cases where revenue remains strong, but net income drops sharply in certain years.When…
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Valuing a Business That Doesnât Last Forever
A client recently asked us to value a business â but it will only last for another 20 years. This is common for concession-based businesses (e.g. utilities, infrastructure, mining, ports). Valuing these businesses is very different from valuing a ânormalâ operating company. In most valuations, we assume the business will operate forever (the going-concern assumption),…
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How do you do a valuation when the ownerâs income is mixed with expenses?
âWe own the company, we also manage it.So sometimes we get paid via dividends⌠sometimes via expenses.â When valuing family businesses, this is actually very common. Owner compensation is often mixed into: So the financial statements donât always show the real operating cost of the business. As a consultant, what we usually do is ask…
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One of the small nightmares in business valuation: double-booked items.
This has never happened to me with listed companies that have strong audit processes. But with small companies?It doesnât happen often â but when it does, it definitely slows things down. When we do a business valuation, we need to understand everything:revenue, costs, investments â basically how all the numbers in the financial statements connect.…
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