A valuation is an independent and objective opinion on the fair market value of a potential acquisition, disposal or existing investment. This information is imperative to ensure that sufficient returns can be generated from the investment decision, in order to further enhance shareholder value. Independent and objective insights are required to accurately determine the fair value of an entity or project, ensuring that no biases or overly optimistic assumptions have been built into the valuation.
Skilled, trusted advisors who support investment decision processes
Investors or business owners require a formal, independent valuation to provide or assess the reasonable and fair value of the business, or a portion thereof in the event of a sale, acquisition, merger opportunity or investment portfolio review. As an independent third party, Step Advisory brings a team of informed financial professionals to the table as well as a scientific approach to valuations. We provide a trusted output that can be confidently used in your decision-making process.
Regardless of whether you are on the buy or sell side, we support you in determining a reasonable and fair valuation, considering the financial performance of the entity, market forces affecting growth and qualitative factors influencing value. Through our extensive experience of performing valuations across a wide variety of industries, we are well placed to fulfill the need for an independent and skilled advisor.
Fair value determination is key to a successful deal
If you are considering acquiring, disposing, or reviewing an investment opportunity, a valuation is imperative to determine the inherent value in the subject to ascertain whether the asking price is a reflection of fair value. Having a clear view of the fair value of an investment is key in driving negotiations and the deal-making process.
A market price that accurately reflects the intrinsic and relative value of the business should be determined. A valuation is the best method to fairly represent the intrinsic value of the business, particularly one that incorporates business insights, as well as historic and forecast financial information, and which is sense checked against available and comparable market information. It is critical that all business and market factors are considered in a decision-making process in order to determine the subject entities worth.
The Step Advisory team has experience in completing valuation for organisations of various sizes, ranging from small businesses to multibillion-rand transactions involving JSE-listed entities. We are well placed to assist you by providing an accurate determination of value.
Our two approaches to undertaking valuations:
INCOME APPROACH
This approach involves the completion of a fundamental analysis which solves for the market value of a business using the expected future values to be generated. We make use of a forecast cash-flow analysis that is based on internal operations and also considers the macro-economic environment to establish an appropriate weighted average cost of capital discount rate. This rate is then applied in a discounted cash-flow model, resulting in the determination of a range of intrinsic values.
MARKET APPROACH
Our experts determine the relative value of a business by comparing the business under review to comparable, publicly traded entities in the same or similar industries. Additionally, comparable transaction multiples applicable and available from precedent transactions are considered.
WE EXTRACT PERTINENT INFORMATION THROUGH:
- Conducting interviews with key management to understand the business, its results and forecast to be used in performing the valuation.
- Analysing historic and forecast management information. This enables us to assess the veracity of the forecast and estimated growth rates.
- Reviewing prior budgets which we compare to budgeted results against historic actual results. This allows us to ascertain how the business has historically tracked to prior budgets.
How can we help your business?
Our experts perform reconciliations between the income and market valuation approaches, stress-tested against the assumptions and estimations determined from the additional sources of business information. This drives our assessment of the valuation and the determination of a sound conclusion to support your investment decision making.
In the event that you have already completed a valuation, but require an independent third party to assist in reviewing the work performed to date, we can step in to ensure:
- The valuation methodology used is appropriate for the valuation and has been correctly and consistently applied.
- The underlying assumptions are supported by relevant documentation and have been accurately input into the net present value models.
- The calculations feeding into the valuation (for example, cost allocations and capital expense allocations) have been accurately performed and that the logic used in performing such calculations is appropriate.
- The discount rates used in the valuation are accurate.
- The overall valuation results appear reasonable and have taken into consideration all relevant information.