WHAT IS A BUSINESS WORTH
In almost all privately owned SME companies there comes a point when the value to be placed upon the business forms an essential ingredient in decision making for the major shareholders.
This can occur when planning its future sale or using the business to fund an acquisition or in the case of a proposed merger of equals, to assess the relative attributes and values of the two organisations.
Most advisers from the corporate finance world should be capable of producing a quick indication of a business’ worth based on the latest published financial information available but this does not provide the full picture and can seriously undervalue or overvalue an organisation that is either recovering from or about to experience a significant period of change.
At Pace the team has developed a sophisticated valuation model that examines the business market position, the commercial challenges that it faces through to a range of measures in assessing its financial standing. Theses factors are overlaid on other comparative data incorporating a number of practiced valuation methods which are weighted in ways that are tailored to suit the particular company. It is critical for acquisition targets to look at the impact post acquisition to
identify whether the benefits identified as part of the reasoning behind the business case are realistic and can be achieved to deliver true shareholder value.
All too often we have witnessed the costly aftermath of a flawed acquisition programme with some notable household names having to bear the brunt of shareholder wrath after a series of catastrophic failures, particularly when a vendor has exchanged his business for shares in the enlarged entity.
A well founded valuation technique can never be considered a panacea for eliminating risk but it can help to minimise it as well as provide a sound basis on which to plan your next move in whatever direction the business is headed.
For further information, please contact
Colin Mitchell at Pace Equity.
Email: colinmitchell@paceepquity.com
Tel: 01491 577889