This document discusses business valuation and provides an overview of different valuation approaches and methods. It explains that valuation is the process of determining the economic value of a business based on its past and expected future performance. There are three main approaches: income approach, asset approach, and market approach. The income approach values a business based on the income it generates, the asset approach values assets owned, and the market approach compares the business to similar public companies. The document also outlines some common uses of business valuation such as for M&A transactions, restructuring, dispute resolution, and liquidation.

1. Chartered Engineers |Govt. Registered Valuers
Experienced | Efficient | Trust Worthy
www.sapientservices.com

2.  Valuation is the process of determining the
economic value of a Business or company
 Valuation of the company reflect the
performance of the company both- its past
performance as well as expectation of its future
performance.
 Value of business can be arrived at by using
objective analysis , but the transaction is
finalized at the negotiated price at which seller
is willing to sell and buyer is willing to buy.
VALUATION

3. HOW IS
BUSINESS
VALUATION
DONE
INCOME BASED APPROACH
COST BASED APPROACH
MARKET APPROACH

4. VALUATION AND ITS FACTS
• VALUE VARIES WITH PERSON, PURPOSE & TIME
• Value has different meaning when its come to different person, place and time.
It is very subjective.
• PRICE IS NOT THE SAME AS VALUE
• Price of the business is not equal to the value of the business.
• TRANSACTION COCLUDES AT A NEGOTIATED PRICES
• Valuation prices are important to determine but depending on the seller and
market influences.

5. APPROACHES TO VALUATION
DDDDDDDD
INCOME BASED
METHOD
CAPITALIZATION OF
EARNING METHOD
DISCOUNTED
METHOD
ASSETS BASED
METHOD
BOOK VALUE
METHOD
LIQUIDATION
VALUE METHOD
REPLACEMENT
VALUE METHOD
MARKET BASED
METHOD
COMPARABLE
COMPANY MARKET
MULTIPLE METHOD
COMPARABLE TRANSACTION
MULTIPLE METHOD
MARKET
VALUE
METHOD

6. METHODS
INCOME BASED
METHOD
“Capitalization refer to the return on investment that is
expected by the investor for taking on the risk of operating
business, the higher the required return
The earning figure to be capitalized should reflect the true
nature of the business , such as last three years average,
current year or projected year excluding the impact of any
extraordinary items not expected to be accrue in future.”
 CAPITALIZATION
VALUE METHOD

7. METHODS
ASSETS BASED
METHOD
“The assets approach to business valuation is based on the
principle of subsitution. No rational investor will pay more
for the business assets than the cost of procuring assets of
similar economic utilities. The value of assets based
analysis of a business is equal to the sum of its parts.
In considering the assets based approach, the valuation
profession must consider whether the shareholder whose
interest is being valued would have any authority to access
the value of the assets directly” :-
• Net assets value/ book value method
• Liquidation value method
• Replacement value method

8. METHODS
MARKET BASED
METHOD “In this method, value is determined by comparing the assets
with the similar assets .
Comparing the company against its peer group companies
which are in the same industry of the same product line and
scale. This is also known as relative value method.”

9. WHY SHOULD YOU GO FOR VALUATION?
• Determining the consideration for acquisition / sale of
business or purchase of business.
• Determining the swap ratio for merger / demerger
• Corporate restructuring
• Sale / purchase of intangible assets including brands,
patents, copyrights etc.
• Determination of family owned business or assets in
case of family separation.
• Liquidation of company
• Voluntary assessment
• Dispute resolution
• Regulatory mandate

10. Accurate business valuation is one of the most important aspect of M&A as
Valuations
Like these will have a major impact on the price that a business will be sold for.
Valuation will assist the business owners in determining the value of their business
and even maximizing value when considering a sale, merger, acquisition, joint
venture or strategic partnership.
Restructuring is a corporate management term for the re-organizing the legal,
ownership, operational, or structure of the company for the purpose of making it
more profitable, and better organized for its present needs.
One of the major aspect of corporate restructuring deal is to determine the correct
value of the organization.
MERGERS AND
ACQUISITION
RESTRUCTURING

11. LIQUIDATION OF THE COMPANY
“Valuation of the company about to be liquidated gives a fair
picture of the proceeds that can be generated from the
liquidation. It is determining the total worth of the company’s
physical assets, when it goes out of the business or if it were to go
out of business.”

12. DISPUTE RESOLUTION
“Valuation are an increasingly important aspect of many commercial
disputes. Before deciding on how manage a dispute, it is a good idea
to understand:-”
• The Likelihood of a successful outcome
• The currency amount involved.

13. VALUER VIEWPOINT
• JUSTIFYING KEY ASSUMPTIONS AND BUSINESS MODEL
• EVALUATE THE CURRENT STAGE OF THE BUSINESS CYCLE
• MAKING SENSE OF THE FINANCIAL DATA
• CHOOSING THE RIGHT VALUATION MODEL
• MINIMISING THE IMPACT OF BIAS FROM VALUATION