Tag: Consult
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Debt Restructuring 🚨 Warning sign… or survival strategy?
Sometimes, the hardest part of reviewing a company is seeing how much financial pressure it has gone through. We recently evaluated a company with a history of losses and a significant amount of bank debt. Under normal circumstances, the repayment burden would have severely strained its cash flow. But instead of defaulting, the company negotiated…
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Why using P/E alone might be misleading
A recent client tried to estimate their company’s value by applying the P/E ratio of similar listed companies.While PE is one of the most popular methods being used , it’s not a recommended one for this company. Here is why. Two companies can be in the same industry…and still be completely different businesses. Different: And…
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Why we still need a management interview (even when we already have all the documents)
When doing a business valuation, yes — we have an information request list (IRL).Yes — we collect solid documents.Yes — we look at audited financial statements. But documents only tell us what happened.They don’t tell us why. For example:• Why did revenue drop last year?• Why did interest expense suddenly spike?• Was it a one-off…
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Why a Business Valuation is like a Health Checkup
We were recently hired to value a company. No deal.No buyer.No IPO plan. So why do it? Because the management wanted to see their business from an outsider’s perspective. A valuation without an active transaction is actually very powerful. It forces you to ask: In many cases, the number is not the most important part.…
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“Our land is worth much more than book value.”
During an M&A pitch, management often tells us this. Totally fair point.But here’s the thing 👇 For business valuation, book value is usually not the issue. When we value a going concern, we mainly use DCF.That means the value comes from future cash flows, not how cheap or expensive the land looks on the balance…
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Why inventory on the balance sheet affects a company’s value
Inventory is not just a number sitting on the balance sheet.It directly affects future cash flow. When we analyze inventory, we look at days in inventory — because this tells us how long cash is tied up before turning into sales. We also look back at historical inventory levels.If some years are unusually high or…
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Why we always ask clients to group revenue sources
When we forecast a company’s performance, we don’t just apply “sales grow xx%”. Each revenue stream behaves differently. Different growth drivers.Different cost structures.Different risks. So instead of projecting total revenue as one line, we break it down: …and forecast both revenue and cost for each item, based on: This gives a much more realistic forecast…
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How to value a project-based company
Some companies don’t sell products every day.They earn money project by project. Think of real estate developers, EPC contractors, infrastructure projects, etc. So valuing them is very different from valuing a normal operating business. When we value a project-based company, we usually focus on 3 key things: 1️⃣ BacklogsBacklogs represent projects already secured but not…
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Third opinion for an investment 🤔
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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Cash projections that don’t look comfortable.
When we validate a company’s 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 “cannot survive”. This is where judgment matters. If: Then reviewing…
ORNA Company Limited 