Business valuation
Business valuation is the process of determining the most probable sale price or financial value of an entity by analysing its financial performance indicators, assets, income-generating potential, and risks.
Business valuation is a vital tool for company executives, investors, banks, and financial analysts. Based on an accurate business valuation and macroeconomic/industry forecasts, stakeholders can make informed strategic decisions, such as buying, selling, or restructuring a business, attracting investments, or planning growth trajectories. In many cases, valuation is legally required – for example, when transactions involve assets wholly or partially owned by the Russian Federation, its regions, or municipalities. Additionally, business valuation is essential for deciding on major transactions to prevent controversies.
- Preparation and data collection. Valuers gather all the necessary information relating to the business, including financial statements, operational data, customer and competitor insights, and other key factors impacting the company.
- Financial performance analysis. In-depth analysis of revenue, profit, cash flows, assets, and liabilities is conducted aimed at understanding the company’s current financial standing and growth potential.
- Industry and market analysis. Market conditions and industry trends are evaluated in order to assess the competitive environment, potential for growth, and sector-specific challenges.
- Selection of valuation approach. Based on data and objectives, a choice is made between comparable (benchmarking peers), income (discounted cash flow), or cost (asset-based) valuation methods.
- Forecasting future income and risk assessment. Future financial performance of the company is forecasted and potential risks are assessed. This helps to determine the company’s value and assess its resilience to adverse scenarios. The discount rate is also calculated as a risk measure of the valuated business.
- Value calculation. The entity’s value is computed using the analysed data and selected valuation method.
- Report preparation. Valuation findings are documented in a detailed report covering valuation methodology, data sources, calculations, results, and recommendations.
- Professional-standard valuation report.
- Macroeconomic and industry forecasts.
- Expert review of the valuation report by RSA (Russian Society of Appraisers) (if required).
Frequently Asked Questions
What is independent valuation most often required for?
Common cases include company sale/acquisition and strategic decision-making. Additionally, legislation provides for a number of cases when independent valuation is mandatory.
How long does the valuation procedure usually take?
Timelines depend on data availability. Generally, reports are finalised within three weeks of information receipt, though deadlines may be adjusted for urgent or highly complex cases.
What determines valuation quality?
We develop sophisticated financial models, leverage authoritative data sources, including those that are not publicly available. Therefore, FBK’s valuation reports ensure meticulous detail use and authoritative sources of data to deliver precise, data-driven valuations.
FBK leads in the 2024 RAEX revenue rankings of valuation groups and companies specialising in business and securities valuation.
