Valuation allows you to get to know the company’s profile and plan its objectives. This makes it possible to plan the next steps for the business and identify the best development opportunities.
Furthermore, calculating valuation is advantageous for understanding aspects that may make your company worth less than its competitors. Likewise, it allows you to recognize the characteristics that add value to your organization in the market.
Valuation also allows you to understand the growth philippines mobile database that your company may experience over the years and analyze market value negotiations in a fairer way.
Valuation in corporate mergers and acquisitions
Mergers and acquisitions (M&A) is a term that refers to a financial transaction aimed at buying, selling or merging companies. The objective of this type of operation is to obtain strategic advantages and increase profits.
While mergers are the joining of two or more companies, acquisitions occur when one company buys a majority stake in another. Thus, merging refers to the how to use preheader text to improve your email open rates collaboration between companies, while acquiring refers to the control of the acquired company.
In this scenario, valuation is one of the stages of the M&A process in a company to estimate the financial value of the target company of the transaction.
The model used for mergers and acquisitions also aims to identify alternatives for structuring the operation. It is then possible to verify the option that meets the objectives of the offer.
How to define valuation ?
A company’s valuation can be defined using different methods. Even though a quantitative model is used, it also involves a notion of subjectivity when defining propositions .
The most common method among investors is saultdata income-based valuation, also known as discounted cash flow . Two other methods are used: market-based (multiples or price) and asset-based (liquidation value or book value ).
How to calculate valuation ?
The most widely used valuation method , discounted cash flow, involves 4 steps:
- Define the evaluation factors, such as growth rates, investments, main costs, among others;
- Make an estimate of cash flow (amount received minus amount spent) for the next periods;
- Define the discount rate, based on the company’s risk and investment opportunities;
- Take into account the results in present value and add them up.