The value of a company is based on its future Earnings. Therefore a a sound business plan is the basis of a good valuation. Especially the projections of sales and margins require a well founded understanding in the future prospects of the company. Experience and strategic vision play an important role in this.
Value is something different than price. For a buyer a company can be worth more than its stand alone value suggests. A well organised selling process can result is a higher selling price. A sound valuation is also a good starting point for one on one negotiations.
A good valuation also gives insight into possible synergies, which in turn can help to find the ‘ideal buyer’.
The valuation is also the basis for the information memorandum. A good information memorandum prevents surprises in a later due diligence process. Thus it reduces the risk that the transaction will be called off in a later phase or that the selling price will be reduced.
A clear understanding of the value of a company is of even more importance for a prospective buyer. First in order to determine an acceptable purchasing price. But also to get a clear picture of what to look for in a due diligence process. The valuation can also serve as the starting point for the post acquisition plan. This allows you to act swiftly and decisive after the transaction.