Why are periodic valuations essential for your business?

Valuations are essential for entrepreneurs who want to make strategic choices and gain insight into the value development of their company. Valuations can be performed in various ways, depending on the situation and the objectives of the company. Valuations are generally performed based on the Discounted Cash Flow (DCF) method, the Adjusted Present Value (APV) method or the enhanced profitability method, depending on the needs and characteristics of the company. The most common forms of periodic valuations are as follows:

Valuation upon acquisition

: At a business takeover It's crucial to accurately determine the target company's value. This helps buyers understand the company's value at the time of acquisition and whether the transaction is financially viable. It provides both the buyer and seller with insight into the company's strategic value and financial stability.

Valuation in case of conflicts

: In situations involving legal conflicts or internal disputes, an independent valuation can help achieve a fair resolution. Whether it concerns a disagreement about the company's value between shareholders or the division of assets in a divorce, valuation in case of conflicts provides an objective basis for decision making.

Second opinion of fairness

: A second opinion or fairness opinion is an independent assessment of the proposed transaction, often conducted by a third party to verify the value of a company or assets. This is often used in acquisition processes., mergers or at financing rounds, To ensure that the terms of the transaction are fair to all parties involved, a fairness opinion provides transparency and reduces the risk of legal complications or shareholder objections.

Value management

: Value management Value management is a strategy that allows companies to actively monitor and increase their value. This means that the company periodically determines the value of its business and steers towards the key value drivers. Value management is particularly useful for companies preparing for a sale, IPO, or other strategic transaction. It enables entrepreneurs to make strategic choices that optimize the value of their company, such as restructuring assets, reducing risks, or improving financial performance.

Impairment test

: The impairment test is a valuation performed to determine whether the carrying amount of assets exceeds their fair value. This test is performed when there are indications that the value of an asset may be impaired, such as due to changes in the market, economic conditions, or the company's performance. If the carrying amount is found to be higher than the market value or expected future cash flows, the asset's value is adjusted, which affects the company's financial reporting.

Purchase Price Allocation (PPA)

: The Purchase Price Allocation (PPA) It is applied after an acquisition or merger to allocate the purchase price of the company among the acquired assets and liabilities. This ensures that the value of intangible assets, such as brand equity, customer relationships, and intellectual property, is properly recorded. PPA is important for both the buyer and seller to understand the tax implications and accounting treatment of the acquisition price and to accurately reflect this in the financial statements.