Valuating the venture

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Valuating the venture

  1. 1. VALUATING THE VENTURE<br />
  2. 2. Importance…<br />Buying or selling a business,divisionor major asset.<br />Establishinging an employee stock option plan or profit sharing of employees.<br />Raising growth capital through stock warrants or convertible loans.<br />
  3. 3. Contd..<br />Determining inheritence tax liability(potential estate tax liability).<br />Giving a gift of stock to family members.<br />Structuring a buy/sell agreement with stockholders.<br />
  4. 4. Evaluation Of Selected Business<br />The business environment.<br />Profit , sales and operating ratio.<br />The business assets.<br />
  5. 5. Due Diligence<br />Why is business being sold?<br />What is the physical condition of the business?<br />How many key personnel wil remain?<br />
  6. 6. Contd..<br />What is the degree of competition?<br />What are the conditions of the lease?<br />Any special licences required?<br />
  7. 7. Contd..<br />What are the future trends of the business?<br />How much capital is needed to buy?<br />
  8. 8. Underlying Issues<br />Goals of buyer and seller.<br />Emotional bias.<br />Reasons for the acquisition.<br />
  9. 9. Analyzing The Business<br />Lack of management depth.<br />Undercapitalization<br />Insufficient controls<br />Divergent goals<br />
  10. 10. Other Factors To Consider<br />Avoiding start-up costs.<br />Accuracy of projections<br />Control factor<br />
  11. 11. Valuation Method<br />Adjusted tangible book value.<br />Price/earnings ratio method.<br />Discounted earnings method.<br />

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