Determining economic value
Why is determining the economic value important? The economic value represents what all future cash flows are worth as of the value date. This will offer insight into what the company or a project is worth for you. You will need a valuation in the following situations.
Selling your business
When exploring the possibilities to sell your business, one of the questions is: what is my business worth? We need to get a few things clear before answering this question. My added value is not only to prepare a valuation report, but mainly to give insight into the economic value of your company and how this value is created. It is quite likely that the business represents a different economic value to you than to a potential buyer. Who are these potential buyers and who do you want to sell your business to? And note that there is also a difference between economic value and price.
ACQUISITION TARGET
Your goal is a growing business. In addition to organic growth, it is also possible to grow your business through acquisitions. But what is the value of a business to be acquired? In this situation, it is important to determine what your plans are with this company and how you will integrate it into your own business. Your future expectations and perspective determine the economic value of the target. What are the alternatives, buy or build? How much are you willing to pay for the acquisition?
DISPUTES
When you and any of your business partners decide not to continue with each other and any of you intends to sell their shares of the company, the value of the company will have to be assessed. Disagreement over the value of the shares to be transferred will sometimes lead to emotional responses and an escalation of this conflict. A reliable and well-researched valuation report will provide both parties with the confidence to reach a solution. A dispute with another company may lead to damage and loss, for example when an agreement is terminated prematurely. In such a case I can add value as a Register Valuator, by making an independent assessment of the economic loss.
PRIVATE COMPOSITION
Dutch insolvency law includes the Court Approval of a Private Composition (Prevention of Insolvency) Act. Companies that are in trouble due to high liabilities, but have viable operations, may restructure their debts by means of a court-supervised private composition. The provisions of this Act also enable companies without sufficient continuity prospects to cease operations without liquidation.
During this process, you will enter into agreements with your creditors regarding any write-offs, cancellation or deferral of payment. Your creditors are divided into different classes. Not all creditors in a class have to agree to the proposed arrangements, but are bound by such arrangements by means of a compulsory composition.
This private composition must be reviewed and confirmed by the court. If any of the creditors do not agree to the proposal, the court will test, among other things, whether the value after restructuring is higher than the value without the restructuring, and what this means for the position of all the equity providers. In this process, I can add value by determining the economic value of the business.
VALUE MANAGEMENT
You are facing strategically important choices. Whether you want to sell your business, update your business model or determine which investment will yield the most return. Understanding your value drivers and how to increase the value of your business are important issues. I can help you gain the needed insight, starting from a clear-cut business analysis. You will then be able to make your own choices and add value, based on well-founded information.
Debt advisory
To realise your growth plans, external financing is often required. Whether it’s a business acquisition, significant investment or growth in working capital – with years of experience as a banker, I understand what it takes to conclude a credit agreement with the right conditions. By properly substantiating your plans, you will gain the necessary trust from the bank for a smoother and successful financing process.
