Business Valuations

Our professionals time are experts in Valuations, having done several jobs for different sizes and segments.

1. What good is a Business Valuations?

2. What is the importance of evaluating a company or business?

3. Which the fair value of a company?

4. What are the types of methodologies for evaluating companies?

5. Why DCF model is the most used for business valuation?

6. Why are successful entrepreneurs assess their companies regularly?


1. What good is a Business Valuation?

  • The Business Valuation (Valuación in Spanish) as well as being an important management tool, is required in several situations , such as :
  • To find out whether an investment is good ;
  • Purchase and sale of companies and businesses ;
  • Dissolution of companies , marital separation and change in corporate structure ;
  • Interest in buying , selling or transferring a shareholding or quotas ;
  • Formation of joint venture and business expansion ;
  • Benchmark for comparison of the same sector ;
  • Recognition of the investor on the GoodWill for amortization of Goodwill / Negative goodwill ;
  • Entering into business plans for presentations to : banks , private equity , angel capital , seed capital investors , academic projects etc ;
  • Forecast valuation of a business still in the design phase ;
  • Control and monitoring of the performance of strategic actions adopted ;
  • Estate Planning Dividend ( Pay out rates ) , etc.


2 . What is the importance of evaluating a company or business ?

We want to make you aware of how this calculation is important and growing today . After all, what is at stake is the value of the company you are buying or selling .

The economy is subject to the laws of the market, where increasingly everything is bought and everything is sold at the rate of such accelerated so that companies are no exception .

Increasingly one hears in Mergers and Acquisitions , total or partial , or simply the buying and selling of companies , being essential to know their value for better negotiation between the parties involved .

The context in which these transactions are processed is global, increasingly involving sellers and buyers of different nationalities , so there is the need of the practices and assessment methodologies become increasingly homogeneous and universal .

We have the best professionals in the market for assessment services companies (business valuations) .


3. Which the fair value of a company?

Contrary to what many may think, the fair value of a company is directly linked to the present and future benefits of cash it can generate and not by their physical and quantitative assets recorded for accounting. In other words, the fair value of a firm can not be determined by its wealth generated in the past, but for what it produces results today and it may generate in the future (projections).


4. What are the types of methodologies for evaluating companies?

There are several methodologies for evaluating companies, but the most used is the FCD-Discounted Cash Flow (in English, DCF - Discounted Cash Flow) model. Read below about other valuation methodologies used unless:

a) Business Valuation based on the Balance Sheet : Model Book Value , Adjusted Book Value Model , Model Liquidation Value and Model Substantial Value ;

b ) Business Valuation based on DRE - Income Statement : . template Value of Earnings (PER or P/L) , the Value of Dividends Model , Model of Multiple Sales , Other Multiple Models (EBITDA etc) ;

c ) Evaluation of Companies based in Goodwill (Goodwill) - besides considering the carrying amounts , generally esteemed an increase in value of intangible values ​​that do not appear in the Balance Sheet . Example : working procedures , teamwork , strategic location , buying a competitor , customer portfolio , strategic alliances , long-term contracts , leadership etc. . Models Classics, Amplified Model of the European Union , European Model of Financial Experts , Indirect Method , Model Purchase of Annual Earnings and Rate Model Relative Risk and Risk Free .

d ) based on Business Valuation Cash Flow: free cash flow , Cash Flow and Equity Capital Cash Flow. (most used model for buying and selling businesses)

e) Business Valuation based on Value Creation : Economic Value Added (EVA) , other models (CFROI , SVA , and AEVA REVA) .


5. Why DCF model is the most used for business valuation?

Among the evaluation methods adopted companies, the best known are: Discounted Cash Flow, Market Multiples and Asset Value. The FDC - discounted cash flow (in English, DCF - Discounted Cash Flow) is the most appropriate methodology and used by the market to determine the value of a company today. The benefits of this method are many, including: recognition of economic and financial data to calculate the Present Value (PV), economic scenarios designed in a macroeconomic environment, the potential capture of future cash benefits, use of company fundamentals and the risk-return rate adopted by the market, ie, the ability to measure the value of the company itself.


6. Why successful entrepreneurs assess their companies regularly?

Because the Value Drivers vary periodically and directly influence the value of the company. Know how much it helps the company the manager of the company to act quickly on the costs and planned investments, besides the evaluation be an important tool for making decisions on the day of successful businessman.

(Article written by Robin Ramos Hant - business broker, business consultant, investor and founder of portal brasilempresas.com business - the first Brazilian portal specializing in brokering Purchase Companies, Consulting and Business Valuation.)

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