What drives the value of your company?
Although accountants and academics state that there are many technical ways of valuing businesses, the reality is that value is determined by how much someone else is prepared to pay for it. Experience from our deals tell us that different acquirers are prepared to pay different prices for the same business, thus creating competitive tension.
Please find a sample to the right:
What is the formula to value a company?
The industry accepted formula for assessing a business’s value is based on the formula below:
Reconstituted Net Profit x (Sector Multiple) + SURPLUS NET ASSETSReconstituted Net Profit = add backs(e.g. Depreciation, one off bad debts, factoring/finance).
Sector Multiple- derived from sector/buyer appetite, deal history and value drivers in your business (e.g. contracts, work in progress, strength brands, customer base etc).
Surplus Net Assets - cash in bank, property, recently purchased assets and any other assets that are in the company which are not required to sustain the current revenue and profit.
It is important to note that while the above formula will give you an indicative base value the motives of a purchaser and a tightly controlled competitive buyer process will drive the value of your business.
Selecting the most appropriate M&A specialist is key to maximising your company’s value.Saleability
It appears from the information provided that your business is in a saleable and active sector, with a number of recent acquisitions having been identified through ATS (Acquirer Tracker System).
* Please note that this is only an indicative value as there are many other factors which would need to be taken into account to provide an accurate valuation for sale or
exit purposes. The valuation of a company requires experience and expertise. The business valuation shown is for guidance only and you should obtain specific advice
before taking or refraining from any action.
