At Baker Tilly we believe that knowledge has to be a purchased good, well-informed decision making is a practice that we live and share, that is why we invite you to discover the exciting world of M&A.
1. Introduction
The valuation of a company is the process of determining its current economic value. This process is essential both for buying and selling companies and for making internal strategic decisions. Valuation allows owners and potential investors to better understand the market value of the company, facilitating informed negotiations and strategic investment decisions.
2. Basic Concepts
Understanding basic valuation concepts is fundamental to applying the methods correctly. Concepts such as terminal value, which represents the projected future value of the company, cost of capital, which reflects the cost of financing the company, and discount adjustments, which adjust the value for risks and timing factors, are essential for accurate valuation. Knowing and applying these concepts allows for a deeper understanding of how the value of a company is calculated and what factors can influence this value.
3. Methods
There are several valuation methods that can be used depending on the type of company and the information available. The most common methods include the income approach, which values the company based oni its future cash flows, the market approach, which compares the company to similar companies in the market, and the asset approach, which values the company based on its tangible and intangible assets. Each method has its own advantages and considerations, and the choice of the appropriate method depends on the nature of the company and the objectives of the valuation.
4. Most frequent errors
Identifying and avoiding common mistakes, such as overestimating future projections, failing to consider specific business risks, or using inappropriate valuation methods, is crucial to ensure accurate valuations and informed decisions. Valuation errors can distort the perception of a company's value, leading to inappropriate purchase or sale prices and wrong strategic decisions.
Request for information
If you want to buy or sell a company, or need more information about our services, do not hesitate to contact us through the form.
Or if you prefer, call us at:
+34 946 42 41 42