Valuing a company and negotiating a price
Valuing a company is certainly the most critical stage of a transfer, both for the seller and the buyer. Many valuation methods exist, depending on the situation.
There are many different ways of estimating a company’s value. This section presents the most common calculation methods, along with their advantages and disadvantages depending on the situation. It also offers advice for successfully financing succession of a company.
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Capitalized earnings method: Calculating the value of a company
The capitalized earnings method consists of calculating the value of a company by discounting future profits with a capitalization rate adjusted to the determining date for the valuation.
Comparison value method: Calculating the value of a company
Determining the comparison value makes it possible to define the value of a company. This process consists of multiplying an operating index by a corresponding relative index (or multiplier).
Discounted cash flow method (DCF): Calculating the value of a company
This method estimates the company’s future capitalized value based on cash flow available after tax.
Due Diligence: a detailed company-assessment
Due Diligence is a detailed assessment of a company, prior to valuation and takeover by the successor.
EBIT method: Calculating the value of a company
This method calculates a company's value according to net earnings before interest and taxes.
Financing succession of a company: Basics
Company transfers that are not fully financed by equity generate finance requirements. Here is an overview of the most common scenarios.
Financing the succession of a company: Factors contributing to success
For the financing of succession of a company to proceed as smoothly as possible, a certain number of parameters need to be taken into account.
Intrinsic value method: Calculating the value of a company
The intrinsic value method is the simplest valuation method. It serves as the basis of the indirect goodwill valuation method to calculate the market value, to which capitalized earnings for the last two financial years are added.
Value of a company: which factors determine the value of a company?
The value of a company can vary hugely depending on internal and external parameters, but also from the point of view of the parties concerned.
