Valuation is a matter that can be contentious and influenced by subjective opinions. Therefore, businesses require an independent assessment. Furthermore, recent changes in the global business environment demand that companies utilize professional valuation experts. In this article, RSM Vietnam will help businesses understand the benefits of valuation advisory services as well as contemporary valuation methods.
Table of contents:
What is Valuation?
Why do businesses need Valuation Advisory?
Valuation Methods
How can RSM's Valuation Advisory Services benefit your business?
Value can exist in various forms, whether it's tangible or intangible assets of a business, an investment, or intellectual property. In today's globalized economy, companies need the ability to assess whether the opportunities or transactions they are considering will increase or decrease the value of the business. This is why valuation is an essential part of the decision-making process for mergers and acquisitions, tax structuring, dispute resolutions, corporate restructuring, or financial reporting.
1. What is valuation?
Valuation is the process of analyzing and determining the current (or expected) value of an asset or a company. Various techniques are used to perform valuation. Factors involved in valuation include assessing the management of the business, the capital structure of the company, future income prospects, and the market value of the company's assets, among other data.
Fundamental analysis is often used in valuation, although other methods can also be employed, such as the Capital Asset Pricing Model (CAPM) or the Dividend Discount Model (DDM).
2. Why Do Businesses Need Valuation Advisory?
Valuation can be useful when an investor is trying to determine the fair value of a security, which is determined by what a willing buyer is willing to pay to a willing seller (assuming both parties participate voluntarily). When a securities transaction occurs on an exchange, the buyer and seller can establish the market value of a specific stock or bond.
However, unlike market value, the concept of intrinsic value refers to the value of a security based on future income or other characteristics of the company, unrelated to the market price of the security. This is why investors need to perform security valuation. Analysts conduct valuations to determine whether a company or asset is overvalued or undervalued by the market. And valuation advisory services have emerged to address this need for clients.
3. Valuation Methods
Absolute valuation models attempt to find the intrinsic or "true" value of an investment based on fundamental principles. Looking at simple fundamental principles means focusing on factors like dividends, cash flows, and growth rates for a company and not considering any other companies. Models falling under this category include dividend discount models, cash flow discount models, residual income models, and asset-based models.
On the other hand, relative valuation models work by comparing the company in question to other similar companies. These methods involve multiples and ratios, such as multiplying the price by earnings and comparing it to the multiples of similar companies.
4. How Can RSM's Valuation Advisory Services Benefit Your Business?
Given the importance of valuation for businesses, RSM Vietnam provides tailored valuation advisory services to meet specific client needs, including the following:
Mergers and Acquisition (M&A)
We assist with valuations for clients involved in M&A activities. With deep industry expertise, we not only consider specific industry or country characteristics but also delve into the strategic objectives of our clients for each transaction. Our extensive knowledge and understanding of client needs allow us to approach valuations from a business perspective.
Our M&A valuation services encompass:
Independent opinions/analysis of the value of your company or investment target.
Independent valuations of specific business units within a company.
Valuation advice and negotiation support.
Pre-acquisition price allocation.
Valuation of privately-held companies or financial instruments.
Financial reporting
Significant changes in financial reporting standards have created a need for specialized valuations that demonstrate an understanding of the impact of accounting standards in specific circumstances and commercial contexts in which the accounting standards are applied.
For example, the new reporting standards require companies, in some cases, to perform the valuation of intangible assets and recognize goodwill in their financial statements. This standard affects the financial reporting outcomes of companies, especially those engaged in M&A activities who may record significant amounts of goodwill in their financial statements.
We provide valuation advisory services to assist companies in determining the value of intangible assets and establishing reasonable values for financial assets and liabilities. Some of the services we offer include:
Purchase price allocation.
Assessment of assets/goodwill impairment.
Intangible asset valuation.
Financial asset and liability valuation.
Equity-based compensation valuation.
Independent transaction support for related parties.
Dispute Resolution
In the case of disputes, independent valuation can help resolve issues quickly. We provide reliable opinions and reports that can be used to support our clients' views and positions in disputes and litigation. We also offer expert witnesses in the valuation advisory field to support litigation.
Tax
Your company's tax structure and planning may require a valuation analysis over time, and it may necessitate filing with the tax authorities. We can assist your company in preparing a practical valuation analysis to support tax authority filing requirements. We also support your company in valuing intellectual property for tax incentive purposes.
As a global audit and consulting firm ranked 6th in the world, RSM believes that we can assist our clients in valuation-related matters. With our experience and expertise, we always strive to deliver the highest quality valuation advisory services to our clients.
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