Enterprise assessment – Do you know the Worth of your Company?
How does enterprise assessment work?
Proventis regularly carries through enterprise assessments within the scope of M&A transactions. Further occasions for an enterprise assessment may be the company going public (IPO), the retirement of a partner or the calculation of exchange relations within the scope of mergers.
The assessment methods deployed in the field and approved by the IDW (Institute of German Financial Auditors) are the Discounted Cash Flow method (DCF) and the Multiple method. Apart from that, Proventis uses the Real Option approach. We use simulations such as the so-called Monte Carlo simulation to justify exceptions based on mathematic calculations.
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Your added value
A meaningful enterprise assessment will significantly strengthen your negotiating position as a buyer or seller and will support you in enforcing a fair purchase price. The Proventis enterprise assessment and analysis is state-of-the-art. Access to up-to-date research data along with the experience gathered from many
transactions will support in retrieving a “neutral” company value.
Furthermore, Proventis will compile a rating indication applying all the common methods for you using up-to-date software tools and will show approaches for optimising your creditworthiness. This will make access to the debt capital market easier for you.
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Practical example using the Multiple method
1. Identifying
comparable
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2. Ascertaining
multiples
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3. Calculating the company value
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4. Calculating
equity capital
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Looking for comparable companies which are similar to the target company in terms of:
Checking on the availability of company data which can be used to calculate multiples |
Deduction of Multiples from the respective reference figure (turnover, EBITDA, EBIT and/or annual surplus) related to the company value
Multiples can be deduced from the data of listed companies (so-called peer groups) and the data from recent M&A transactions.
Corrections in terms of size, shares, etc. are not considered in this example. |
The company value is calculated from the respective Multiple, multiplied with the reference value (turnover, EBITDA, EBIT and/or annual surplus). |
In order to calculate the purchase price for the equity capital shares the net debts (NVF) are deducted.
Net debts are the interest bearing debts on the liabilities side (e.g. bank credits), minus the liquid assets (cash assets, cheques or assets stored on banks). |
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Compiling data from comparable companies
For this, the company value and EBIT are ascertained.
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The Multiple of the individual comparable companies is calculated by relating the EBIT to the company value (company value / EBIT).
In order to get a total Multiple the individual Multiples are used to calculate the Median from.
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The EBIT Multiple (4.5 in this example) calculated from the comparable Multiples is multiplied with the EBIT from your own company.
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For calculating the equity share value or the purchase price, respectively, the NFV (interest bearing debts minus liquid assets) need to be deducted; the NFV in this example are 2.75. The equity capital value is now calculated as follows:
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U1: 1.0 EBIT and 4 U value
U2: 2.0 EBIT and 10 U value
U3: 1.5 EBIT and 6 U value
U4: 5.0 EBIT and 25 U value |
U1 EBIT-Multiple: 4.0
U2 EBIT-Multiple: 5.0
U3 EBIT-Multiple: 4.0
U4 EBIT Multiple: 5.0 |
Own EBIT: 3.5m
Multiple: 4.5 |
Bank credit: 3m
Cash: 0.25m
NFV: 2.75m |
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Median EBIT Multiple: 4,5
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Company value: 15.75m
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Equity capital value:
13m
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Compiling data from comparable companies
For this, the company value and EBIT are ascertained.
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The Multiple of the individual comparable companies is calculated by relating the EBIT to the company value (company value / EBIT).
In order to get a total Multiple the individual Multiples are used to calculate the Median from.
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The EBIT Multiple (4.5 in this example) calculated from the comparable Multiples is multiplied with the EBIT from your own company.
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For calculating the equity share value or the purchase price, respectively, the NFV (interest bearing debts minus liquid assets) need to be deducted; the NFV in this example are 2.75.
The equity capital value is now calculated as follows:
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Judgement Engagement Results
