Financial Valuation

Companies or institutions usually go through several stages of growth and development since their inception and until the date of their liquidation or acquisition by other companies, and at each of these stages and for several other reasons, the company may need to know the real value of the company, in order to estimate the value of the acquisition deal, or to determine the share of each partners in the company, or to determine the value of the company for funding and financing requirements.
The main objective of the valuation service is to answer the most important questions that business owners have, “What is the value of my company at the present time?”, as the service seeks to determine the fair value of the company as it is on a specific date. It should be noted that the fair value of any company expresses the current value of the economic benefits expected from its assets or its tangible and intangible assets, and the valuation process is characterized as a mixture of art and science at the same time, as science is represented in the use of mathematical models, statistical data and information about the sales of comparable similar companies, while the art is present in a professional opinion, risk assessment, performance appreciation and expert opinion about the outlook of the business environment.
Our understanding of the importance of combining theoretical models with market reality is the main driver of our keenness to use our professional experience and accumulated market knowledge to determine the fair value of the company under study.

Purposes of the financial valuation:

If you need a partner, or sell part of your company, or merge with another company or liquidate, or sell your share in the company, or enter the financial market, or want to convert the company into a joint stock company, or want to know the size of your current company after the development work you have done after expanding the business and achieving an increasing market portion, or to request financing from loans or funding facilities. You need to evaluate your company (the fair value of the company), whether you are a startup or an already existing and well-established company, that has fixed assets, property rights, or shareholders, has a specific working capital, and has its own customers, inventory, suppliers, creditors, and so on.

The objectives of the financial valuation can be summarized as follows:

• Valuation of companies for the purpose of buying, selling, merging or acquiring.
• Valuating companies for the purpose of expansion and development.
• Valuating companies for the purpose of obtaining loans from local lending institutions and banks.
• Valuation of companies for the purpose of listing in the local financial markets.
• Valuation of companies for the purpose of credit rating.
• Valuating of companies for the purpose of determining the fair value of shareholders’ shares.
• Valuation for the purpose of carrying out the process of liquidating companies with the aim of selling them, or closing them completely.

Approved valuation methods:

• The profit multiplier valuation method and accounting financial indicators.
• The replacement value method of valuation.
• Adjusted book value valuation method.
• The residual value of the company method of valuation.
• The net book value of the company method of valuation.
• The net market value of the company method of valuation.
• Discounted cash flow valuation method (the most widely used and standard for valuation).

How to carry out the financial evaluation:

• Preparing a list that includes all the company’s external and internal assets, and taking care to include all information related to the company, whatever its nature.
• Determine one of the methods of valuating companies to start developing the stages that will be relied upon in the process of valuating the company.
• Conducting an in-depth financial analysis to measure the current situation of the company and identify the strengths and weaknesses of the company’s management.
• Understand the company’s financial position, the value of its capital, shareholders’ shares, and the details of the capital.
• Studying the legal status of the company through the assistance of a law expert, to ensure that legal regulations are applied to the company’s work.
• Finalizing all of the financial transactions that have been suspended or that have not yet been completed, especially in the event that the company is being valuated for sale.
• Provide the external shareholders, and clients with a brief report on the company’s status if necessary, especially if they have financial rights in the company’s debt.
• Developing forecasts and estimates for estimated revenues and estimated cash flow for at least 5 years from the date of conducting the valuation through the company’s management, reviewing and analyzing it to make the necessary adjustments to these estimates.
• Using the methods recognized in this field, namely, the discounted cash flows (DCF), the profitability multiple methods (P / E), the net fair book value, and the replacement value.
• Writing and drafting the company’s valuation report in accordance with the legal and financial rules designated for this type of report, and then handing it over officially to the management of the company, or to the new owners.