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Frequently Asked Questions

What is a Company Valuation?

A Company Valuation or Financial Valuation is a service aimed at providing a quantitative and objective enterprise valuation, by applying methods commonly accepted internationally. It may be requested by the company itself, by a partner or owner or by a future investor in the company, among others.
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Why do I need a valuation?

A valuation is useful on many occasions. The following are among the most common:

  • Total or partial sale of the company: How much should we ask for it?
  • Acquisition of a company: How much should I offer?
  • Capital increase: What issue premium should we set?
  • New partner joins the firm: What percentage of the company is reasonable for the money they are investing?
  • Partner leaves the firm: What should we offer for their stake?
  • Generation succession: How can I divide my wealth equally between my children?
  • Employee compensation with shares: How many shares should we offer them?

However, there are other situations that also require valuation:

  • General shareholders meeting: if the company mission is to increase value for its shareholders, what better way than to request an annual company valuation?
  • Investment analysis: How much is my company worth if we stay as we are and how much would it be worth if we make the investment we have in mind? Is the investment, therefore, worth it?
  • Merger between two or more companies: How much is each company worth? How would shares be distributed?
  • Interest: I have been with my business for 10 years, how much is all the effort I have put into the company worth?
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What can e-Valuation offer that other consultants do not?

e-Valuation is the leading company specializing in financial company valuations and financial consulting services. Furthermore, it is the only company on the market that provides valuation services online, thus making these services, which until now, were the privilege of only a few businesses, affordable for any company.
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Why are e-Valuation’s services more affordable?

e-Valuation has redesigned traditional company valuation processes in order to reduce valuation costs to the utmost, thereby allowing us to pass the savings on to clients. Client data collecting online is among the novelties in the valuation process, thus replacing the usual meetings and business trips with a faster, more convenient, and above all, more economical service that saves money and executives’ time.
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What valuation methodologies does e-Valuation use?

e-Valuation uses the methodologies most widely accepted and recognized by the market in carrying out its valuations. These are the following:

  1. Discounted Cash Flow
  2. Comparable Listed Company Multiples
  3. Comparable Private Transaction Multiples

For more information on each one of these methodologies, please refer to our Company Valuation Manual.

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Would a valuation report help me to get a bank loan for my company?

Generally, banks request historical financial statements for their solvency analysis, and when collateral is required, they rely on personal surety from the business owner or on the company’s tangible fixed assets. The company market value, if it were put up for sale, which is in fact, the information provided by a Valuation Report, is relevant in case the company plans to pledge its shares.

Also, e-Valuation's Valuation Reports incorporate company financial projections that are very useful for banks when approving long-term loans. Therefore, although the valuation results themselves may or may not be relevant for the bank, part of the Report’s contents could be.

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I’m the company founder, but I want to retire. My oldest son wants to keep the business, but then I want to give my daughter an equivalent amount in cash. What kind of valuation would be best for me?

Depending on the complexity of your business, it would be advisable to request a Complete Valuation (that also takes into account specifically the market value of real assets belonging to the company). This type of valuation offers you a full report that thoroughly justifies the conclusions it arrives at. This way, with a quality-price ratio that is unprecedented in the market, you can receive a Report that satisfies all parties concerned, provided that your business model does not require a Tailored Valuation.
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I own a business but I want to give it up. I would like to know if it’s worth putting it up for sale. What kind of valuation is most appropriate in my case?

In your case, it would be advisable to begin with an Initial Valuation, which would provide an initial valuation range for your company. If the results indicate that selling the company would be worthwhile, you could then request a Complete Valuation or a Tailored Valuation to present to possible buyers.
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A multinational company has made an offer to buy my company. In principle it seems reasonable, but I would like to ensure it is a fair market price. What kind of valuation should I request?

In your case, a Complete Valuation would probably be the best option, since by using three valuation methodologies that are checked against each other and taking into account the company’s future forecasts, if any, you will get a 50-55 page Valuation Report that will help you understand our conclusions and find any possible price deviation from the one you have been offered.
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I would like to merge my company with another from the competition. I need someone to calculate the percentage that each shareholder will have in the merged corporation. How thorough a valuation do we need?

A Complete Valuation at least would be recommendable, depending on the business specifics that must be considered for an accurate company valuation. Given that the two companies are similar it wouldn’t be essential to perform a Tailored Valuation, since appraising them with the same criteria would permit a fair shares exchange equation for both parties.
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I don’t know how much my business is worth, but I do know that buying the premises the company is in was the best decision we could have made. The area has gone up a lot in value, and just the property itself is very valuable. How do you take this into account when appraising a company?

Normally, valuation of any company’s productive assets, whether property or machinery, is implicitly factored in the business valuation, which is carried out using the Discounted Cash Flow method. After all, a company that has to pay rent for its facilities, for example, will have less free cash flow than another company that owns the premises and thus does not pay rent. As a result, the first company will be worth less than the second, and the difference is due to the property assets.

The problem is that, in companies in which real assets form a significant part of their worth, especially if they have increased in value, following this valuation theory strictly may penalize the valuation outcome. After all, an investment in a business doesn't have the same risk rate as an investment in property.

At e-Valora we offer a Complete Valuation or a Tailored Valuation for companies in this situation. Both types of valuation (although the latter in greater detail) create a simulation of what would happen if the productive business of the company were separated from the "property business," and the former paid market rental to the latter. Ultimately, the enterprise value would be the sum of the productive business value plus the business value of rent on the property.

This doesn’t mean that e-Valora carries out an appraisal of the company’s real estate. There are companies that specialize in that. Simply, and only in the two most sophisticated valuation models, we take this appraisal (or value estimate, when there is no appraisal) into account expressly when calculating a company's market value.

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There is an offer on my company and I requested a valuation from e-Valuation. When I showed it to the buyer, I was told that the company was not worth that much for them. How valid is the valuation carried out then?

Antonio Machado said it best, “any fool confuses value and price.” The financial valuations that e-Valuation carries out aim to be an objective value measure of a company. However, in the final price offered by a company, many other factors come into play.

An easy comparison to understand is that of buying or selling an apartment. Let’s consider the following example: a person has an apartment in which they have installed a top quality marble floor throughout the home. This cost a lot of money, and the owner thinks that his home is therefore worth more than one with a different type of flooring. However, a potential buyer viewing the apartment doesn’t like the marble floor and thinks the first thing they would do with it is install parquet flooring, assuming the cost themselves. Consequently, they offer less for this apartment than for one similar that already has parquet flooring. In this case, for the buyer and the seller the subjective price of the apartment is completely different. What a property valuation does is calculate the value of this apartment taking into account its condition, location, transportation access, etc, but without considering special renovations that everyone may not appreciate. This is the role that e-Valuation plays in the world of company valuations.

The validity of an e-Valuation valuation is, therefore, undeniable as a starting point in some negotiations. In the end, however, the price agreed upon shall be, as in any free market, a compromise between supply and demand.

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