Company valuation in a transaction

Knowing the current value of your non-listed company can be advantageous, especially in financing endeavors, but also in impending acquisitions, employee participations, succession planning, or other transactions. Based on our experience, many companies only conduct their initial analyses and valuations when transactions or financing rounds are imminent. This lack of preparation, especially regarding strategic options and their consequences, often leads to less favorable negotiation outcomes. Negotiations could have gone better if participants had entered them without time constraints and with complete information.

Unternehmenswert bei einer Transaktion
Bewertung bei einer Finanzierung

Valuation in financing

During a financing round, you need to answer the following questions beforehand:

  • Type of Capital: Equity fundamentally differs in qualitative terms from debt (e.g., voting rights). Additionally, the financial impacts and, consequently, the effects on profitability and liquidity differ.
  • Capital Structure: Each financing form affects the capital structure, thereby influencing financial leverage and risk.
  • Tax Implications: Different types of financing lead to various tax obligations. The effects are sometimes indirect and accumulate over time. Proper planning is essential to understand and optimise these tax impacts better.

We are happy to advise you on various financing-related questions and illustrate the effects of different financing forms on your company. Often, these decisions can be pre-calculated using Excel-based financial models.

(Re)valuation of balance sheet positions

In financing or transactions, it is often necessary to revalue assets or liabilities. Revaluing balance sheet positions to market values helps determine the actual value of individual assets/liabilities. This becomes particularly necessary when market values significantly differ from book values or when certain valuable positions have not been accounted for, such as intangible assets (e.g., customer relationships, brands, patents, or proprietary developments).

As part of a Purchase Price Allocation (PPA), accounting standards explicitly require revaluing asset positions to determine goodwill.

(Neu-) Bewertung von Bilanzpositionen

Employee participation

Employee participation is a way of compensating employees and, in principle, a form of financing. It almost always requires a company valuation, as well as an evaluation of the participation program itself.

Other reasons why a valuation may be necessary are related to the application of accounting standards (IFRS 2).

Valuation methods

There are various methods to determine the value of a company. The choice of method depends on the situation, data availability, and the purpose of the valuation. If, for example, there are no market values (multiples) available, income-based methods (such as Discounted Cash Flow) or even asset-based methods may be used. Especially in the case of startups or companies with a short operating history, book values (adjusted for hidden reserves and deferred taxes), going concern values, or even liquidation values may be applied. Often, a combination of different methods is used.

It is essential to consider the hierarchy of valuation methods. Wherever possible, market values are used first. After that, income-based methods are more commonly employed, as these methods can also account for non-physical assets such as customer relationships, market position, management skills, or reputation. Purely asset-based methods typically lack such considerations.