Valuation support and financial modelling
Funding and transactions
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On demand
A valuation depends on what is being valued, the date, the purpose and the rights attached to the interest. A number used in a funding discussion may not meet the requirements of a statutory report or a different transaction.
TheTaxCo handles valuation assignments through the appropriately qualified experts, from gathering and reconciling the financial information to modelling, analysis, the required report and follow-up questions. We identify the valuation purpose and appoint the professional eligible to issue that report.
Define the valuation before building the model
We identify the business or asset, the security or ownership interest, the valuation date and the intended user. The scope records whether the exercise supports a proposed investment, transfer, restructuring, employee option arrangement or another purpose.
The subject matters. Valuing the operating business is different from valuing a particular class of shares. Preference rights, conversion terms, restrictions and other contractual features may affect the analysis. A fully diluted ownership schedule needs to explain which options and convertible instruments are included.
Where a valuation is required under the Companies Act, section 247 provides for a registered valuer meeting the applicable requirements. The purpose may also involve a different legal or regulatory valuation requirement. Membership of a professional body does not by itself settle eligibility for every valuation assignment. Companies Act, section 247
Prepare financial information that can be examined
Historical accounts are reconciled with the management information used in the model. We identify exceptional transactions, changes in accounting presentation, related-party items and other matters that affect comparison. Any adjustment needs a stated basis and evidence.
Forecast assumptions are connected to the business: sales volumes, prices, margins, staffing, capital expenditure and working capital. The assumptions should explain how the company reaches the forecast, including the capacity or funding required. A target supplied by management is identified as a target until its supporting drivers are examined.
The supporting pack can include the cap table, financial statements, debt and cash schedules, forecast model, relevant agreements and a question log for missing information. Sensitive information is shared through the access arrangements agreed for the assignment.
Understand the methods and their limits
An income approach may estimate value from future cash flows and the risks attached to them. A market approach compares relevant businesses or transactions, with attention to differences in size, growth, margins, risk and rights. An asset-based approach considers the relevant assets and liabilities and may be appropriate in particular circumstances.
The method is selected for the purpose and facts; it is not chosen merely to produce the desired number. A discounted cash-flow model is especially sensitive to assumptions about future performance, investment, discount rates and value beyond the explicit forecast period. Those assumptions should be visible to the reviewer.
Enterprise value generally concerns the operating business before the agreed adjustments for claims such as debt and cash. Equity value is the value attributable to equity after the relevant bridge. The exact treatment of debt-like items, surplus assets and other adjustments must be stated so that two different measures are not compared as though they were identical.
Illustrative distinction: an offer described as a value for the business may still require deductions for borrowings before the amount available to shareholders is determined. Transaction terms can define those adjustments differently, so the valuation workings and agreement must be read together.
Deliverables and professional responsibility
You receive a reconciled information pack, financial model, valuation analysis, sensitivity schedules and explanations of material assumptions. Where a formal report is required, the responsible eligible valuer determines the procedures, conclusions and report they can issue. Supporting calculations do not predetermine that opinion.
Our team coordinates the information, analysis and report through to completion, with the required eligible valuer responsible for the opinion. A report prepared for one purpose should not be reused for a different date, security or regulatory requirement without review.
Can you justify a value already agreed with an investor?
We can examine the assumptions and prepare the required information. A negotiated commercial price and an independent professional conclusion can differ. We cannot promise a report that supports a predetermined number regardless of evidence.
Can early-stage businesses be valued without a long profit history?
They can require an approach suited to the available evidence and uncertainty. The work may rely more heavily on scenario analysis and assumptions about future operations. The absence of historical profit does not justify unsupported forecasts.
How long does the work take?
It depends on the valuation purpose, complexity of rights, quality of accounts and forecasts, and the required professional review. We establish preparation milestones after seeing the information available and the recipient’s requirements.
For investment ownership calculations, see funding round support; for an option pool, see ESOP planning and structure. Email TheTaxCo, message us on WhatsApp or book a call. Share the valuation purpose, proposed date, entity and interest being valued, and who requires the report.