The most common question we are asked by clients is "What is the value of my business?".

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It is smart practice for SME  & Mid-Market business sellers and advisors to understand the science & art of corporate valuation. Corporate Finance & investment text books have set out detailed methods to determine the intrinsic value of a business.  It's a specialist field and acquirers will have teams of accountants and lawyers at hand to utilise these to seek an optimal return on their investment. 

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The most common methods in use when valuing privately owned businesses are:

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Discounted Cash Flow

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Whereby an investor determines the projected Free Cash Flows of a business, applies a discount rate (usually equivalent to Weighted Average Cost of Capital) and then totals the Discounted Cash Flows (including the Terminal Value) for the entire Holding Period to arrive at a Net Present Value.

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Multiple of normalised, sustainable Earnings

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This method typically utilises adjusted EBITDA as a proxy for pre-tax cashflows.  And then multiplies that by a number consistent with averages of known comparable company valuations in the sector.

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However, when it comes to determining the sale price of your business there's one small problem with these methods.

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They're wrong. Both of them.

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How so?

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The technical reasons for this have to do with the arbitrary (to the buyer) nature of holding periods, capital costs, adjustment items and earnings projections.  And no buyer will be volunteering extra value for commercial synergies or fair treatment of excess equity value if they don't have to. Nor defaulting to more favourable valuation techniques specific to your sector (Software-as-a-Service companies, for example, should be seeking revenue based valuations right now).

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Allowing the value of your business to be determined by buyer-centric, purely financial calculations will result in underselling your shareholding.

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Symmetry find this unacceptable. The truth is, your business's sale price will be maximised by firmly establishing the strategic value to an acquirer under their ownership.

 

So how do we that, to project & achieve market beating valuations for our clients? By tailoring a strategic sale & transaction plan specific to you & your business which delivers:

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a) Effective generation & leverage of a competitive bidding environment

b) Systematic negotiation of every technical point in our clients favour

 

With Symmetry on your side, you can really liberate the full value of your capital, as well as your time.

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Contact us today for a free, no obligation consultation to uncover the full value for your business.

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