The value of a business and its components should be a core consideration for any company at any stage of its business lifecycle. Knowing the worth of a specific asset, investment in a company or partnership, a potential target or competitor can create new business opportunities (internally or externally) and act as a key driver of corporate transactions.
Valuations are required for:
- Integrations, Tax planning and Internal reorganization (including IP transfers)
- Financial reporting (e.g., acquisition accounting, regular impairment testing, accounting of leases)
- Share incentive schemes (for accounting or tax purposes)
- Portfolio valuations (for accounting or investor purposes)
- Regulatory valuations (e.g., section 593, etc.)
- Sales or partial divestments
- Dispute resolution
- Business exit
Whether you plan on selling, acquiring a business/an asset or require the value of an asset for tax or accounting purposes, Evelyn Partners can help you during the valuation process. Knowing the value of a business or asset can give you the confidence you need to plan for the future and ensure your estimation is compliant with market practice.
Evelyn Partners has a team of experienced valuers across a wide range of expertise (commercial, tax, accounting, and litigations) who will guide you during the valuation process and provide you with a valuation analysis tailored to any stakeholders’ needs.
What is a business or asset valuation?
A business/asset valuation estimates the market value (or any other relevant valuation basis) of a business/asset and is based on a number of macro-economic, industry-related and asset-specific factors. There are multiple benefits to perform valuations, and it is worth considering them in advance particularly if you are planning a transaction or internal reorganisation.
Why valuations are important
Business valuations are important for many reasons and serve different purposes. Commercial valuations can help support an application to lenders or investors for finance or funding. They can also help businesses identify areas where company value can be increased and therefore can support future business’ developments. Valuations are also frequently required for accounting (e.g., IFRS 2, 3, 16 and IAS 36, etc.) or tax purposes (e.g., IHT, CGT, stamp duty, etc.).
In short, a valuation analysis is useful not only for judging the performance of a company but also for planning any future transactions/restructuring, helping you to weigh up any potential advantages or drawbacks, and ensuring compliance with tax and accounting standards.
Reasons to do a valuation
The purpose of a valuation can include:
- Regulatory annual Fair Value Measurement
- Tax requirements following the transfer of a company or assets
- Comparison of a business against peers or industry benchmarks (i.e., for management incentive plans)
- Enhancing credibility of in-house valuation analyses to help secure funding and investment
- Facilitating a transaction and helping establish the sale price for the buyer and seller (non-contentious and contentious basis)
- Forming part of your business exit strategy along with financial modelling
Methods of valuation
Industry practitioners use several main methods of business valuation, these include:
- Income approach: Discounted Cash Flow (DCF) analysis and other derived DCF methods. Management or external analysts forecast the unlevered free cash flows of the subject asset and discounts them at an appropriate return/discount rate (often the company’s Weighted Average Cost of Capital or “WACC”) to assess the present value of the asset. Projections are made over the economic useful life of the asset (or perpetuity if the business is a going concern) and the discount factors applied reflect interest rates and other key macro-economic assumptions (such as inflation).
- Market approach: multiples of earnings. This approach uses certain market-based multiples and is best used on businesses with records of profit generation. The multiple earnings approach often involves multiplying adjusted after-tax profit by an industry sector-related multiplier. Earnings Before Interest, Tax, Depreciation & Amortisation (EBITDA) is the most common financial metrics used in this approach. However, other multiples specific to industries (P/E ratio, price per beds/rooms, etc.) exist and are usually used as a cross-check to the primary valuation method.
- Net Asset basis valuations. Useful for holding companies with significant tangible assets or investments, and companies with limited earnings historically (e.g., restructuring). The net realisable value of all assets is estimated, and the associated liabilities are deducted. Adjustments to the net book value of the assets reflect their current market value (land, building or intellectual property).
- Entry Cost. An estimation of the predicted cost to set up a similar business. This includes the cost of recruiting and training staff, purchasing assets and developing a customer base.
- Industry Rules of thumb. The usage of an established formula for specific sectors. For example, a ‘sales or fees multiple’ approach is used to value businesses generating continuing revenue from an existing base of clients or another intangible asset (technology assets, trademarks or licences).
What valuation services does Evelyn Partners offer?
Evelyn Partners offers a wealth of valuation services. Whether as part of a transaction or just wanting to know what the value of an asset or business, we can help.
- Purchase Price Allocations (IFRS 3/FRS 102 / ASC805)
- Impairment testing and Intangible asset valuations
- Portfolio valuations
- Share option valuations (IFRS 2)
- Derivative and complex instrument valuations (IFRS 9)
- Right-to-use Assets and other lease assumptions (IFRS 16).
- HMRC approved share option scheme valuations (including EMI, CSOP and SIP)
- Inheritance tax valuations (including ten-year charges and estate valuations)
- Management incentive schemes (including growth shares and ratchet shares)
- Asset transfer, IP reorganisation and other corporate tax restructuring
- Employee ownership trusts
- Capital gains tax valuations (including base cost revaluations, earn outs and share disposals)
- Carried interests
- Negotiations with HM Revenue & Customs’ Shares and Assets Valuation (SAV)
Commercial and regulatory valuations
- Support for lenders
- Departing shareholders in private businesses
- Section 593 reports
- Transaction pricing and negotiation support (including on unsolicited offers)
- Market testing
- Articles valuations
- Fairness opinions.
- Matrimonial, shareholder, partnership and commercial disputes.
What are the benefits of involving Evelyn Partners with your valuation requirements?
We offer expert guidance across a multitude of sectors, size of businesses and valuation purposes. Our partners have each more than 20 years of experience in the UK and internationally. We can be trusted to give you the help you need during the overall valuation process, and we understand the importance of business valuations to you and other stakeholders involved.
We have a reputation for building excellent relationships with referrers (including accounting firms conflicted to perform valuation work). This means we work with an extensive range of clients including:
- Corporates (listed and privately owned companies)
- Private equity and Sovereign investment funds
- Governments and other public bodies
- Lawyers and the courts.
You get direct access to Partners and Directors with specialist sector knowledge and valuation expertise (tax, accounting and regulatory purposes) and a strong track record in advising individuals and businesses. You will also be able to use other in-house specialist teams as required, including corporate and personal tax, accounting advisory and forensic services.
Our valuation analyses are efficient and priced to fit a large range of clients (from small to listed businesses), providing the highest standards of service quality with an appropriate market price tag proportionate to the assignment.
We have excellent client/adviser relationships and regularly communicate with our peers and competitors to align our work with international best practice. We also have expertise in written and oral evidence in court, which can help ensure the best outcome in contentious cases, where necessary.
Integrated services leveraging multiple purposes
All our valuations are prepared “holistically” so they can fit within a comprehensive overall tax advice or accounting wrapper. Our joined-up services give you direct access to in-house expert teams (tax, forensics/internal audit, due diligence and M&A).
What makes Evelyn Partners unique?
We are in the top 6 UK accountancy firms, as ranked by Accountancy Age. (Source: Accountancy Age, 2021)
We are a founding member of CLA Global, and as part of this leading worldwide network of independent firms, we provide a truly international experience.
We regularly provide expert commentary on burning issues in the national and trade press.
We are actively involved in leading trade and industry bodies that shape the changes affecting your business.
Our 30-strong valuation team in the UK has experience in all valuation areas (tax, accounting, and commercial purposes). We assist FTSE companies, privately owned smaller businesses, startups, as well as a vast number of private equity firms and family offices. Our team also works in partnership with other specialist valuers (real estate, capital equipment) and is able to deliver valuations covering all asset classes.
Get in touch
When you decide to get a valuation of a business or an asset, you need to know you can trust the providers of that service. You also need a unique mix of experience, flexibility, efficiency and cost-effectiveness. Evelyn Partners has all this and more. For more information, do not hesitate to contact us today.
Frequently asked questions about valuation services
How do you know when it is time to value shares in your business?
Every business’ story is unique but there are several ways to assess when a valuation is needed. You might find you have outgrown your business, are in the process of transmitting your shares to a family member, establishing a new management incentive plan or contemplating a diversification of your assets. Alternatively, the business may look at a series of acquisitions financed by a mix of capital increases and debt. If it is the latter, you may also need someone to assess the impact of synergies on the value of your company and help you in the overall process of acquisition. A corporate event (acquisition, divestment, transmission, corporate reorganization) will usually trigger a valuation requirement for multiple purposes (tax, commercial and accounting).
Can you value an unprofitable business?
Yes, valuations of businesses are not just based on historic or short-term profit. Some businesses can take time to get established, reach maturity and most would have expectations to become profitable in the future. To value such assets, several methods are available (EV/Revenues based on adjusted revenues, multiple-stages DCF and Venture Capitalist method). Alternatively, estimating a liquidation value of the business may be the most appropriate approach to assess its market value.
How do I value my company?
The value of a business depends on the financial performance of the company but also external factors such as industry-specific trends or macro-economic inputs (inflation rates, currency risks, etc.). The value of a business will reflect concrete elements such as real estate or financial assets but it should also include “abstract” elements such as unrecognised IP or the Company’s goodwill. Evelyn Partners can recommend the type of valuation that works best for your needs.
Can I use an internal valuation for different purposes?
Several bases of valuation co-exist in practice (Market Value, Fair Value, OMV, etc.) and are applied for specific purposes (Commercial, Tax, Accounting, regulatory, etc.). Although all bases of valuation share similar principles, they are not identical and can be challenged at later stages. Therefore, Evelyn Partners can provide detailed guidance to ensure the analysis prepared is compliant and aligned with market practice for your specific requirements.
Does the business valuation need to meet certain industry or regulatory standards?
Yes, there are criteria within certain industries (Private Equity, Real estate) that needs to be followed when it comes to the valuation of an investment. For tax purposes, the approach should be aligned with that expected by tax authorities. Certain valuation analyses prepared for accounting purposes have to follow specific accounting standards and therefore the methodologies applied to value assets usually follow market practice for each asset class.