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Overview

In the dynamic landscape of commerce, understanding the worth of a business is a critical aspect of strategic decision-making. Business valuation, a process of determining the economic value of a company, plays a pivotal role in various scenarios, including mergers and acquisitions, financial reporting, and raising funding from investors.

At its core, business valuations involve assessing a company's assets, liabilities, and overall financial health to arrive at a fair and accurate estimate of its value. Valuations can take various forms, such as market-based approaches, income-based approaches, and asset-based approaches. Each method brings its unique perspective to the table, allowing for a comprehensive understanding of the company's value.

One of the primary reasons businesses seek valuation is during mergers and acquisitions. Buyers and sellers alike benefit from a clear understanding of the company's value, ensuring a fair and transparent transaction. Additionally, valuations are instrumental in securing financing or attracting investors, as financial institutions and potential backers often require a comprehensive understanding of the business's worth before committing their capital. Business valuations are also sought by companies for regulatory compliance.

Business valuations are not merely a financial exercise; they are a strategic necessity. In a world where information is power, business valuations provide the knowledge needed to make sound business decisions.

Scope of Services

01

Purchase Price Allocations

Purchase Price Allocations (PPA) are a critical aspect of mergers and acquisitions, involving the systematic allocation of the purchase price to acquired assets and liabilities. This accounting process is essential for accurately reflecting the fair value of acquired entities in the acquiring company's financial statements. We specialize in valuing intangible assets such as customer relationships, developed technology, patents, license agreements, trade names and trademarks, non-compete agreements, and assembled workforce, among others. We deploy specific valuation methods such as the multi-period excess earnings method (MPEEM), the relief-from-royalty method, the with-and-without method, and the cost savings method, among others, to value these intangible assets in accordance with guidelines provided by standard-setting bodies such as the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB).

02

409A (Stock-Based Compensation)

A 409A valuation, named after the Internal Revenue Code section, is crucial for privately-held companies issuing stock options to employees. This valuation determines the fair market value of the company's common stock, establishing a baseline for stock option pricing, and helps companies avoid potential penalties. A 409A valuation conducted by an independent appraiser provides a defensible and accurate assessment of a company's value, safeguarding both employers and employees in the complex realm of deferred equity compensation. We deploy methods such as the Black-Scholes Option Pricing Method (OPM), the Probabilty-Weighted Expected Return Method (PWERM), and the Current Value Method (CVM) to determine the fair market value of common stock as required under this standard.

03

Goodwill Impairment Tests

Goodwill impairment tests are vital assessments for companies with acquired assets, ensuring the accuracy of financial reporting. Typically conducted annually, these tests determine if the recorded goodwill on the balance sheet exceeds its fair value. If the fair value is lower, indicating potential impairment, the company must adjust the goodwill and recognize a loss. Companies perform these tests to reflect the economic realities of their acquired assets, maintaining transparency and aligning financial statements with market conditions. It's a crucial exercise for investors and stakeholders, offering insights into the ongoing health and value of a company's intangible assets.

Contact Us

Tenth Decile Financial Advisory Services

Bangalore, India

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