Tag: Valuation
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💡 Should a company pay out all retained earnings before bringing in a strategic partner?
One of our clients is currently exploring an M&A deal with a strategic investor.Before the transaction, they’re considering paying out a large amount of retained earnings as dividends. Why?Because if it’s not paid before the deal, the new shareholders would also share that retained profit — even though it was earned before they joined. That…
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Why some DCFs have a “Terminal Value” — and some don’t.
When doing a valuation, we often see a terminal value added at the end of the DCF model.But not every company has one. Why? For companies that can be assumed to continue operating indefinitely — like manufacturers, trading firms, or service businesses — analysts usually project cash flows for 5 years, then assume a terminal…
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💡 Why is Book Value sometimes higher than Market Value?
We were recently asked by a client:“Why is the book value (shareholders’ equity in financial statements) higher than the market value (stock price × total shares)?” Let’s break it down. 1️⃣ Book Value Found on the balance sheet. Represents what shareholders would theoretically get if the company was liquidated (sell assets, pay debts). 2️⃣ Market…
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Why is PE Ratio so popular?
Even though the Price-to-Earnings (PE) ratio is not the most reliable way to value a business, it’s by far the most popular—especially for non-listed companies. Why?✅ It’s quick.✅ It’s easy.✅ You can do it yourself. Unlike the Discounted Cash Flow (DCF) method, which takes weeks (sometimes months) to build assumptions and projections, PE gives you…
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💡 Deals that Win vs. Deals that Fail
Why do some business deals close smoothly, while others fall apart? More often than not, it comes down to price. Terms and conditions? Usually negotiable. Price? Always sensitive. 👉 The buyer pushes for the lowest price to maximize future profit.👉 The seller aims for the highest price to maximize return. The deals that succeed are…
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💡 Why is share price higher than book value?
When we do a company valuation, we usually discount future cashflows back to today’s value. That’s why the price sometimes looks “high” — there’s a premium. The shareholders who sell get the cash today, without waiting 5 or 10 years for the value to accumulate. So in most cases, if the company is doing fine,…
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Using P/E Ratios to Estimate Your Company’s Value
When customers ask about valuing their company with the Price-to-Earnings (P/E) method, here’s how it works: Find comparable companies – We look at listed companies in the stock market that operate in the same or similar business as yours. Calculate their P/E ratios – P/E = Price per share ÷ Net income per share (EPS).…
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💡 Thought of the day: How non-listed companies can estimate their value
If you’re running a non-listed company and curious about its value, a simple starting point is the multiples method. 👉 Take listed companies with similar business operations.👉 Look at their P/E (price-to-earnings) and P/B (price-to-book) ratios.👉 Apply the average multiples to your own earnings or book value. This can give you a rough idea of…
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“Where do you see your company in 5 years?”
Sounds like a job interview question, right?But actually, it’s one of the most important questions in a business valuation too. When we prepare a valuation report, we don’t just pull numbers out of thin air. A big part of the assumptions comes directly from the management team — the insiders who know best what’s possible…
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So you want to sell your company?
One of the first questions we often get is: what’s the first step if you’re planning a share restructuring — selling some or all of your shares? The answer: set up a data room.It’s basically a shared folder that contains all the information investors, advisors, lawyers, and other parties need to review before making a…
