Value Creation – Assessment

First step on the journey to transfer a business is always a valuation. Valuating a company is a complex task. Many different methods such as the discounted cash flow method (DCF) or the enterprise value method (EV) as well as applying the income, asset and/or market approach are only a few to mention. At the end, it is the meeting of the mind of two parties that agree on a price to be paid for a company will be the result of a successful transaction.

Lehmann & Partner International have performed many business valuations and developed a 4 – step valuation process that not only leads to a value of the business itself but also points out areas for improvement. Business values can often be increased and can lead to twice the value and sometimes even more.

Our 4 – Step Valuation process:

1. Determination of the purpose of the valuation (family succession, selling to a third party, etc….)
2. Gathering all necessary financial information such as tax returns, P&L, and other.
3. Interviews to cover areas like:
   1. Financials
   2. Customers
   3. Process, Procedures
   4. Employees
   5. Company Culture
4. Valuation Results and Discussion

Valuation Discussion and Reality Check

The last step is the most important one it represents the current value and shows the probability to what price a company can be sold on the market. Only an experienced M&A adviser will be able to tell if a company can be sold below and or above value. It’s a waste of everyone’s time to take a company to market with unrealistic value expectations.

Lehmann & Partner International only objective is to give our clients a range of value that we feel confident of hitting with the odds in the 80%-90% range. If the gap between what you want for your business and what we can get you is above our range of value by too great a margin, we will advise not taking the company to market at this time. We will, instead, suggest ways to improve the business. In the USA only 20% of all companies that are on the market for sale are successful with a transition.  In order to conduct a comprehensive valuation we cover many business areas as shown below: 

So, what do we look for in a company to determine value?

• Customer base

• Products and services 

• Market share 

• Growth opportunities 

• Management and employees 

• Financials / Gross Margins

• Sales and recast EBITDA history and outlook 

• Ownership structure and motivation 

• Technology applied in the company 

• Facility and equipment

• Quality of earnings (Q of E).