Valuation of a company can be a tough and controversial challenge. Business owners will want to maximise their value when going into any fund-raising or transaction situation. At the same time, it is necessary to have a realistic and objective view of potential value, and to understand the likely perspectives of one’s likely counterparties.
We use a variety of valuation methods, as appropriate to the circumstance. Whilst a core starting point is the use of standard techniques (such as discounted cash flow analysis and comparable transactions), much of our work aims to go beyond this in order to provide better insight and more accuracy. We aim to identify value drivers and management levers, as well as other relevant issues to create a holistic and rational valuation approach which also takes into account, the long-term macro-economic context, the industry context and trends, and the context of the specific business, including its management team, its funding phase, and so on. We also identify strategic risks/uncertainties and scenarios. Thus, the quantitative aspect of our work typically also uses risk-adjusted cash flow approaches (sometimes called rNPV, decision trees, and/or Monte Carlo simulation).
In a typical valuation process, we review the company’s business, its strategy, market and competitive environment, as well as the business plan, and other company documentation. We collect other data relevant to a valuation (e.g. comparables) and generally create a bespoke valuation financial model. We conduct telephone or in-person interviews with management and other key staff members, as well as potentially with industry experts, customers, analysts or other potentially relevant stakeholders (subject to need, access and confidentiality requirements). Part-way through the process we will conduct an on-site workshop with key management to review the work to date; finally a Valuation Report based on all accumulated information and inputs is presented. This summaries the critical factors that affect the company’s value, and provides a valuation and range specific to different contexts and scenarios (e.g. to inform management decisions in many contexts, including fund-raising, corporate transactions, licensing or joint venture deals, incentive structures and so on.)