For Companies.
Company Valuations for Corporate Clients
In the case of an unlisted company, shareholders and other decision-makers often give little thought to the value of their company, or an emotionally-driven company value is used.
However, having a sound understanding of a realistic company valuation can be useful for many reasons. We can determine the right valuation for you.
Why is a robust up-to-date company valuation useful for companies?
A well-derived business valuation is extremely useful for companies for several reasons:
- Strategic Decision Making: An accurate company valuation helps management and other executives with strategic planning. It provides insight into the true value of the business and enables the making of informed decisions about growth strategies, investments, mergers, acquisitions or the sale of assets (including participations).
- Financial Planning: A company valuation is a crucial factor in the development of financial plans. It can help to set realistic targets for sales, profitability and return on capital employed.
- Capital Raising: When a company requires additional capital injections, whether through equity or debt, an accurate valuation is essential. Investors and lenders often rely on company valuations to assess risks and opportunities associated with providing funds to a business. Lenders use company shares as collateral, the value of which they need to understand.
- Transparency and Trust: A transparent and accurate valuation contributes to a company’s credibility. It shows stakeholders, including investors, customers and employees, that the company is on a sound footing and manages its financial affairs responsibly.
- Employee Motivation: If employees know that their company has a solid market value, this can increase their motivation. It can also help with the implementation of performance-related remuneration structures and employee share ownership schemes (including the awarding of actual or virtual shares).
- Tax and Legal Matters: Business valuations are also important for tax purposes and legal matters. They can play a role in determining inheritance and gift taxes, and can even be relevant in litigation or regulatory compliance processes.
- Negotiations and Transactions: In mergers, acquisitions or the sale of businesses, an accurate valuation is critical for obvious reasons. It forms the basis for negotiations and determines a fair sale price. Knowing the valuation of your own company also means understanding your existing M&A options.
- Risk Management: A business valuation can also help to identify and assess risks. This can help to develop risk management strategies and to ensure the long-term success of the company.
To summarise, a valid business valuation is a valuable tool for a company’s shareholders and management to make informed business decisions, gain and maintain stakeholder confidence, set and achieve financial goals, and transparently assess the financial health and stability of a company.
Practical use cases
A business valuation can be useful in a variety of situations and contexts. Here are some examples of applications in which the DTRAG team has already been involved:
- Selling the Business: When an entrepreneur wants to sell their business, a business valuation is required to set the sale price and conduct negotiations with potential buyers.
- Buying a Business: Potential buyers use business valuations to determine the fair market value of a business before deciding whether or not to buy it.
- Inheritance and Succession Planning: When transferring businesses to heirs or planning for succession, a business valuation is required to determine the value of the business for tax and inheritance planning purposes.
- Mergers and Acquisitions: Companies looking to complete mergers or acquisitions use business valuations to determine the value of the target company and determine the allocation of post-transaction shareholdings or the purchase price.
- Equity Valuation: Companies planning to issue shares on the stock market need a company valuation to determine the issue price for their shares.
- Equity Partnerships: Investors, whether venture capital firms or private equity investors, perform business valuations to determine whether they should invest in a particular company.
- Debt Financing: Banks and lenders use company valuations to determine how much capital they can provide to a company in the form of loans or credits.
- Internal Decision-Making: Companies use business valuations for internal decision making to develop strategic plans, prioritise investments and assess the profitability of different business units (including exploring M&A options).
- Tax and Compliance: For tax purposes, an accurate business valuation is required to determine and fulfil inheritance taxes, gift taxes and other tax obligations.
- Litigation and Arbitration: In legal disputes or arbitration proceedings, a business valuation may be required to assess financial damages or resolve disputes over the value of a business.
- Valuation of Joint Ventures: Companies wishing to enter into joint ventures use business valuations to determine each partner’s contribution to the joint venture.
- Management or Employee Profit-sharing Plans: companies use business valuations to establish the basis for employee profit-sharing plans in which employees share in the company’s success.
These use cases illustrate that business valuations can play a critical role in a variety of business and financial situations to determine the value of a company and make informed decisions.
Contact Us
Should you be interested in finding out more about our company valuation offering or our other services, please contact us anytime on kontakt@dtrag.de. We are looking forward to meeting you.