Understanding a company’s value can offer valuable insight into its real value and potential.
A company valuation is a crucial step for shareholders and business owners looking to understand the value of their business. You may have wondered “how much is my business worth?” or “is now the right time to sell?”. Whilst valuation reports can be used for many things apart from selling your business, it provides a clear picture of your business’s current value and helps in making informed decisions about its future.
Reasons for a Company Valuation
There are various scenarios in which a company valuation is essential. We have elaborated on some of the most typical reasons below:
- Succession Planning: Planning for the future involves understanding the value of your business to ensure a smooth transition.
- Exit Strategies: Whether you’re considering an exit route such as a trade sale, management buyout (MBO), or employee ownership trust (EOT), knowing your business’s value and understanding how the current market is performing is critical.
- Shareholder Disputes: Valuations are often required to resolve disputes or facilitate shareholder transfers.
- Financial Reporting: Accurate valuations are necessary for financial reporting and compliance.
- Raising Capital: Understanding your business’s worth and having a robust, up-to-date valuation report is often necessary on your route to securing funding or attracting investors.
Overview of an fds Company Valuation
At fds, we take pride in our thorough valuation reports. This can often be the initial phase for those embarking on their succession planning journey or seeking to raise funds. Whilst value is different from worth, a formal valuation will give you at least some clear parameters. This will, in turn, allow you to make a decision on what to do next.
Whilst our standard and sophisticated valuations differ slightly in terms of the level of information reviewed and evaluated, as standard, you can expect to see a general overview of your industry’s performance, relevant market deal information, a company analysis (including any hidden assets and financial accounts) and deal methodology.
Our thorough reports are, on average, 25+ pages and are supported by real-time transactions in your sector and the industry in general. The report will include a research-backed market analysis of deal appetite, prospects, and trends for your industry.
Standard valuation:
- This will provide you with an assessment of your business’s value at a specific point (usually your current year-end) using various methods typical for your sector.
- It will be based on real-time deals in your sector, with a brief market analysis of sector activity and a summary of relevant deals and multiples as achieved.
- We will provide a summary of your market sector.
Sophisticated valuation:
- In addition to the above, we will be able to provide you with an assessment of the business value at two specific points (usually your current year-end and a future date) by using a variety of methods typical for your sector.
- For the future valuation, we will also provide a commentary on changes we may recommend you consider to enhance the valuation further.
- Valuations will be based on real-time transactions in your sector, as well as the industry generally.
- This valuation will include a research-backed market analysis of deal appetite, prospects, and trends for your industry.
- For minority shareholding valuation issues, we will provide a discount justification if required.
The Valuation Process
Our valuation process may differ slightly depending on the size of the business, or if it’s a group of companies. However, the general process is highlighted below:
- Initial Consultation: We begin with a comprehensive consultation to understand your business’s unique attributes and your personal goals.
- Data Collection: We gather essential information, including financial accounts, management accounts, forecasted accounts, details of any one-off or discretionary costs and your company’s hidden assets and unique selling points.
- Valuation Analysis: Our team conducts a thorough analysis using multiple valuation methods, considering factors such as market share, hidden assets, customer base, management team, and more.
- Preparing the Report: We will use the information provided and the research carried out in-house to prepare a detailed valuation report supported by real-time market data and industry insights.
- Review and Discussion: We will review the report with you step-by-step, ensuring you understand the valuation and if it aligns with your strategic objectives. Following this, we often support clients with the next phase of their journey, whether that is embarking on succession planning options, raising finance or providing specialist advisory support depending on the matter at hand.
How fds Can Help
At fds, we pride ourselves on delivering comprehensive and accurate valuation reports. With over 36 years of experience and a 100% success rate with HMRC, our valuations are robust and credible.
Our reports encompass an in-depth analysis of your business, including hidden assets and financial accounts. We also conduct research-backed market analysis of deal appetite, prospects, and trends in your industry. Depending on the market you operate in and the type of business you have, we will consider various valuation methods typical for your sector, ensuring a realistic and accurate valuation.
Our extensive experience in company valuations ensures you are in capable hands. Contact us today to learn more about how we can help you with your company valuation needs.
