When is an enterprise valuation carried out?

Estimation of the enterprise is the definition of the real market value of the assets and liabilities of the enterprise.

The latter include real estate, transportation and working equipment, stocks in warehouses, customer base, brand, personnel. In addition, the valuation of the enterprise is designed to determine the effectiveness of its activities, revenue, growth prospects and market analysis. As a rule, both tangible and intangible assets, business potential and investment profitability are valued.

The valuation of an enterprise determines precisely the market value of an enterprise with its obligations and rights. The procedure includes financial and organizational analysis of the company's activities.

Such an expert assessment is very relevant in our time, so more and more companies evaluate this service. The market for the purchase and sale of enterprises is developing very dynamically, accordingly, the need for a qualitative assessment is also increasing.

The peculiarity of the assessment of enterprises is a market nature. Therefore, when setting the cost, not only the costs of creating a similar enterprise are taken into account, but also factors that influence the market and the value of the object. Assessment of the market value of the enterprise is a marketing and financial tool that is used for various purposes. A competently carried out evaluation ensures the reliability of transactions, avoidance of risks, and the establishment of a business.

Objects that are included in the valuation of the enterprise include objects of residential and non-residential real estate, land plots, machinery and equipment, shares and securities, real and mandatory rights, etc.

Enterprise valuation: objectives

The enterprise is subject to assessment in the following cases:

• Its full or partial sale;
• Exit one or more participants from the community;
• Its restructuring (merger, spin-off, takeover, liquidation);
• Need to make a contribution to the statutory fund;
• Increasing the effectiveness of management;
• Need to get a loan secured by the assets of the company;
• Implementation of an investment project;
• Sale of property;
• Sale at auction in bankruptcy;
• Determining the creditworthiness of the company;
• Optimization of the price structure of property;
• Development of a business plan;
• Transfer of property rights;
• Implementation of management decisions.

Naturally, in addition to the above, there are other evaluation purposes, which may vary depending on the particular case.

The assessment may be interested in the owners or shareholders of the company, as well as its partners. Most often, the valuation of an enterprise is carried out for the purpose of selling it, so a potential buyer may require an estimate.

In addition, the valuation of the enterprise is necessary for determining the value of shares, securities, stakes in capital, as well as for the redemption of shares, appeal against the alienation decision and other similar cases. There is also such a thing as an estimate of the liquidation value of an enterprise, that is, a net cash amount that the owner can receive in case of liquidation of an enterprise and sale of assets.

The standard assessment report includes a detailed description of the company, financial diagnosis of the company, solvency assessment, industry and market analysis in general, a description of the methods used in the assessment, the calculation of the company's value taking into account the development potential, the results, their interpretation and conclusions.