When a company decides to use a business valuation for acquisition model, it is important to conduct a thorough fiscal investigation. Typically, a company acquisition valuation relies on growth expectations, future cash flows and tangible cash assets on hand. While no model is perfect, to attain these figures for the business acquisition valuation you can either use asset-based, balance sheet, debt assumption or earnings and cash flow methods.
What makes this process of business valuation for acquisition so difficult is that every company is different and the marketplace, over which you have no control, is a prime determinant in valuation of a business. Therefore, there is no similar valuation with which to compare your potential acquisition. The most accurate measurement is to follow the methods used by others and not rely on one source for this information. Given the previous information, it is important to consider the following when you calculate a business valuation for acquisition:
1. Understand the methods used to calculate a business acquisition.
2. Choose the method to determine the potential valuation of acquisition.
3. Contact an independent business valuation for acquisition specialist.
Action Steps
The best contacts and resources to help you get it done
Evaluate the various methods on how to value a company acquisition
When your business purchases a tangible asset like a copier or computer, there is a set value and no valuation models are necessary. However, when you employ a valuation of an acquired business model, there are too many factors for there to be a set value. This is where the various valuation methods can help approximate business value.
I recommend: Register and take the online value of business acquisition course from the
New York Institute of Finance. Review the
most common methods to value of business acquired. Download the free podcasts available at
bvresources.com. Consider purchasing the various software packages from
MBA Ware, which can make the valuation process much easier.
Select the method to determine the business acquisition valuation
After a thorough review of every available valuation method, it is now time to select the most accurate model.
I recommend: Examine the many articles and publications on business valuation at
Valuationresources.com to help you choose a valuation method. Use the
valuation calculators to determine the valuation method.
Employ the services of an impartial firm to calculate a business acquisition
Because of the complicated nature of how to value a business acquisition, it is in the best interest of your company to use an outside firm to give you another valuation perspective.
I recommend: Call the acquisition specialists at
Empire State Consultants for independent business valuation. Contact the
HSSK business valuation group for a comparison to your business valuation figure.
Tips & Tactics
Helpful advice for making the most of this Guide
- Because no business operates in an economic vacuum, it is important to examine the profitability of the industry in which a potential business acquisition operates. The business acquisition may seem like a sound investment, but if it operates in an industry with diminishing opportunities, the business could a potential problem in the future.
The official source of Business Valuation: Business Acquisition is
the Business Valuation: Business Acquisition page at Business.com
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