Business Valuation
BUSINESS VALUATION USING ACCEPTED METHODS.
CVPro includes the methods and approaches necessary to prepare a supportable
valuation. Valuation is examined from several perspectives using professionally
accepted valuation methods.
The valuation guidance and approaches were designed in collaboration with
PPC’s Guide to Business Valuation, edited by Dr. Shannon Pratt and other
highly regarded valuation experts.
CVPro provides a thoughtful and logical guide through
the valuation process. You can examine a company’s value using over 25
different methods in order to arrive at a supportable conclusion of value. You
select the valuation method(s) that are appropriate and want to include in your
valuation report or appraisal.
Asset Valuation Methods:
- Net Asset Value
- Liquidation Value
Income Valuation Methods:
- Capitalization of Earnings
- Discounted Future Earnings
- Discounted Cash Flow
- When determining discount and capitalization rates, you have the option to
use either the Build-Up method or the Capital Asset Pricing Model (CAPM) method.
If you are valuing the company on a debt-free basis, you can convert the discount
and capitalization rates to their debt-free equivalents based on the company’s
weighted average cost of capital.
- In valuing the company’s historic and/or future earnings, you can use
any of the following: Normalized Net Income, EBT, EBIT, EBITDA, Net Cash Flow
and Free Cash Flow.
Market and Comparable Company Valuation Methods:
- Price to Earnings using Done Deals/Completed Transactions database (uses
Net Income), Pratt’s Stats (uses Net Income and EBT), Mergerstat database
(uses Net Income) and/or a User defined option.
- Price to Revenue using Done Deals/Completed Transactions database, Pratt’s
Stats (using both Equity Price & Deal Price), BIZCOMPS database and/or a
User defined option.
- Price to Cash Flow from Operations (using Done Deals/Completed Transactions).
- Price to Gross Cash Flow using Pratt’s Stats and/or a User defined
option.
- Price to Discretionary Earnings using Pratt’s Stats and/or BIZCOMPS.
- Price to Dividends (User defined).
- Price to Net Asset Value.
- Price to Total Assets (using Done Deals/Completed Transactions)
- Price to Equity using Done Deals/Completed Transactions, User defined on
Book Value, User defined on Net Asset Value, Deal Price to EBIT (using Pratt’s
Stats) and/or Deal Price to EBITDA (using Pratt’s Stats).
Other Valuation Methods:
- Capitalization of Excess Earnings.
- Multiple of Discretionary Earnings.
- Preferred Stock valuation based upon the market yield of preferred stock
from comparable companies.
- CVPro gives you the option to apply Control Premiums,
Minority Discounts, and Marketability Discounts as well as the ability to value
partial interests.
- Control Premiums, Minority Discounts, and Marketability Discounts can be
applied to each individual valuation method or in the valuation conclusions.
- A valuation summary lists each method used and the respective value, which
can be weighted and averaged to arrive at a total equity value.
Supportable and Reasonable Valuation:
- An “economic reality test” of your conclusion of value is included.
You set hypothetical purchase terms including the amount of equity and the required
return, and the amount and payment terms of up to four levels of acquisition
debt. A “real time monitor” gives you instant feedback.
- Key measures of operating performance and Return on Investment performance
for the hypothetical transaction terms are provided as part of the economic reality
test.
- Also included are flexible Rules of Thumb that allow you to use any combination
of multiples of earnings, assets, and user-defined multiples to determine the
reasonableness of the values indicated by the other methods
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