Valuation of a company

Profitable companies with more assets than debts represent a value, however the saying "Many know the price, few know the value" suggests the valuation of a company is not a simple calculation.

How is the value of a company calculated?

There are various methods of valuation. A company valuation is subjective and can therefore lead to major discussions: what value does a company that is acquired or sold represent? What is the value of any minority interest? How should value be determined in the event of disputes between shareholders? What is the strategic (added) value?
Moreover, once valued, the valuation does not necessarily constitute the selling price. This price is heavily dependent on other factors, including the prevailing market conditions (supply and demand), the strategic added value of the company for the buyer and the value represented by the company name.

Why have a valuation performed?

Are you planning to acquire or sell a company? In either case, a company valuation is essential for the transaction process. However, a good valuation is not only important in the case of a company takeover. A valuation can be required for example for the following:

  • Divorces;
  • Family or shareholder disputes;
  • Demonstration of value growth;
  • Implementation of employee participation schemes.

The correct valuation of your company

Are you looking for advice and an expert valuation? Please feel free to contact us. Our financial experts will be happy to assist you with the valuation or takeover of your business.

Calculate the value of the business

Calculating the value of a company can be important for several reasons. A good valuation is essential not only in the event of a takeover, but also in the event of any legal disputes. The following methods can be used to determine the value of a company:

Net asset value

The net asset value of a company is calculated as follows: Net asset value = current value of all assets - liabilities This is the equity in the company. The important difference compared to a company’s book value is that the net asset value is based on the current value of assets. The book value is based on the purchase value. However, there is a potential disadvantage to calculating the value of a company based on its net asset value. It is a snapshot. It does not take into consideration a company’s future profitability. As a result, this method may only be relevant for companies with a minimum return on investment.

Capitalised value

The calculation of a company’s capitalised value is based on the company’s historical and most recent profitability. Its performance historically is leading, but the availability of substantial capital is also valued. This is based on the future continuation of the business in a similar form as historically, with corresponding financial results.

Discounted cash flow

Under the discounted cash flow (DCF) method, we endeavour to assess the future cash flows and especially the cash that can be freely extracted from the company without affecting the company’s earning capacity. Our specialists calculate the value of the company by converting the free cash flows into cash value. Whereas the net asset value looks at the prevailing value of assets, the discounted cash flow also looks at the value in the future.

What future, financial results is the company capable of? The expected annual cash flows and cost of capital employed are required to calculate the DCF value. The difference between the DCF value and the net asset value is also referred to as 'goodwill'.

Calculate a company’s value

Do you need a reliable and appropriate valuation of your company? Our financial experts are happy to help you. Please do not hesitate to contact us.


Questions?

I’d be happy to help you. Please feel free to contact me.

Mark Eenink
Director
[email protected]
+31570-660890
Ik help u graag verder