When shareholders start to make firm plans about their eventual exit, it is always advisable to obtain a valuation of their company as one of the first steps in the process. Even if an exit might be several years away, understanding how much a business is worth now and having a clear understanding of the factors underlying the value will maximise the chances of achieving the best possible outcome.
For most business owners their company is their most valuable asset. We believe it is vital for business owners to know what their company is worth and why, so they can:
- Make better informed business decisions;
- Take early action to optimise value; and
- Plan-ahead for their eventual retirement
Insight into a company’s value well in advance of a future company sale provides time to act, to influence and optimise the value as far as external factors allow. Understanding the factors draining a company’s value and taking early action to deal with them can help to improve its value as well as making it more saleable and therefore more attractive to potential buyers in the future. Shareholders may not realise that the saleability of a business can be as important as its valuation.
Obtaining an updated company valuation every few years enables shareholders to understand and monitor the impact of recent business developments on their company’s value and saleability, ultimately helping them to make a fully informed decision regarding the timing of their exit.
An independent share valuation is also essential to a business owner when a transaction is potentially imminent, for example to:
- Benchmark an unsolicited offer received for the company;
- Structure a management buy-out;
- Extend share ownership to additional shareholders
- Buy-back shares from a minority shareholder;
- Decide whether to seek a trade buyer
Share valuations are highly subjective and ultimately a company is only worth what a buyer is willing and able to pay for it, its true value only ever being established on sale. However, obtaining a dealmaker’s opinion on a realistic valuation and the company’s saleability will facilitate a better outcome and will almost certainly stimulate discussion amongst the directors and shareholders.
Whether a company sale is envisaged imminently or not for many years, the merits of obtaining an independent, professional company valuation cannot be overstated. A share valuation provides shareholders and directors with an objective view of their business and can be a valuable tool in shaping business strategy.