A valuation can be triggered in many ways. In a business world that changes on a daily basis, you as an entrepreneur are regularly presented with opportunities, just as you are constantly faced with risks. Make the right choice and take advantage of our advisory expertise!
With the expertise of our team of advisers, we provide you with professional analyses for all areas relating to transaction advice as well as valuations performed in connection with the accounting or sale of individual assets. Contact us!
Company and company shares
Are you facing the challenge of finding THE value for your company?
We assist you in your specific valuation projects. Whether you are a buyer or a seller of a company - we advise and assist you in determining the value prior to the purchase or sale transaction and support you in the negotiations. We consider the tax implications in a multidisciplinary and transparent approach and, with our company law experts, make proposals on how to incorporate your ideas into the agreement.
In addition to determining the purchase price of companies and parts of companies, we are happy to advise you on other valuation purposes such as:
- Valuations on a change in shareholders
- Impairment assessment of contributions in kind
- Valuation on a reorganisation
- Valuation as part of preparing consolidated financial statements
- Determination of arbitration values
- Valuation of companies for inheritance/gift tax purposes
- Drafting of fairness opinions in accordance with IDW S 8
- Valuation of equity investments under HGB and IFRS accounting principles
We perform the valuation in accordance with recognised principles of modern valuation methods (IDW S 1 / discounted cash flow method) carrying out plausibility checks when using simplified methods such as the multiples method. In doing so, we limited the assessment to a scope appropriate for the valuation purpose. If required, we will support you in the process based on your needs. For more information, please refer below to Principles for the performance of business valuations in accordance with IDW S 1.
Is the entire company not to be valued, but only a separate asset? We provide the appropriate valuation solutions for both tangible and intangible assets!
Principles for the performance of business valuations in accordance with IDW S 1
Companies consist of tangible and intangible assets. Financial surpluses are generated through their interaction. The value of a company is therefore not determined by the values of the individual components of assets and liabilities, but by the interaction of all values.
The value relates on the one hand to operating assets and on the other hand - if there are any - to non-operating assets, which are to be valued separately.
Company valuations are performed using the capitalised earnings method or the discounted cash flow method. We apply the Standard 1 of the Institute of Public Auditors in Germany (IDW S1), which is customary in professional practice and recognised in the literature and case law: "Principles for the Performance of Business Valuations" (IDW S 1 as adopted in 2008 and amended on 4 July 2016).
Alternatively, there are several simplified valuation methods that can often provide an indication of the value of the company at a considerably lower cost. Here we can offer appropriate alternatives according to your wishes.
When determining the value of a company, the decisive factor is the income that will accrue over time to the entrepreneur in the future.
The net income of the company owners to be discounted for determining the value of a company results primarily from the owners' entitlement to distributions or withdrawals of the financial surpluses generated by the company less the contributions to be made by the owners. Contractual or financial restrictions on distributions or withdrawals must be taken into account.
Furthermore, other personal taxes of the company owner linked to the ownership of the company must be considered.
The net income of the company owner depends primarily on the company's ability to generate financial surpluses. A company valuation therefore requires a forecast of the company's future financial surpluses. The basis of valuation are only those financial surpluses of the company that are available to the owners as net income (inflow principle).
Special features may arise in the valuation of companies with low earnings. A company can be described as having low earnings if its return on capital is sustainably lower than the capitalisation rate.
The certified public accountant in his/her capacity as a neutral expert is required to be impartial. The principle of prudence, which must be applied in accounting under commercial law, reflects an unequal weighting of the - sometimes conflicting - interests of creditors (capital preservation through distribution lock-ups) and owners of companies (distribution of profits generated) in favour of creditor protection and must therefore not be taken into account in valuing businesses.
Uncertain future developments may not be included in the calculation of the value of the company in a way that unilaterally disadvantages one of the parties involved - that would be the seller or the shareholders that are to be paid out when making a "prudent estimate" of the future financial surpluses.
However, the irrelevance of the (accounting) principle of prudence does not mean that the investor is to be assumed to be risk neutral.
The value of a company determined by experts is regularly based on a large number of assumptions that may have a considerable influence on the valuation.
In a simplified company valuation, the scope of the mandate can be precisely specified in consultation with the client.
Finally, the value of a company (present value of future earnings) is determined by discounting the future financial surpluses to the valuation date.
If the company to be valued has an indefinite life, its value corresponds to the present value of the future financial surpluses from the operating assets plus the non-operating assets.
Future financial surpluses cannot be forecast with certainty due to uncertainty about the future. A business commitment always entails risks and opportunities. Market participants are compensated for assuming this business uncertainty (business risk) by risk premiums; theory and practice agree that economic entities give greater weight to future risks than to future opportunities (risk aversion).
Taking this approach to risk into account, the uncertainty of future financial surpluses can in principle be included in the valuation either as a deduction from the expected value of the financial surpluses (certainty equivalent method, earnings discount method) or as a premium on the capitalisation rate (interest premium method, risk premium method). The interest premium method, which is generally applied in Germany and internationally, has the advantage that it can be based on empirically observable behaviour. It thus allows a market-oriented approach to be applied to the assessment of risk premiums. A distinction is not made between company-specific and general risks as there is not a clear definition.
It is recommended that either the capitalised earnings method or the discounted cash flow method be applied when drafting the IDW S 1 expert opinion based on the principles for the performance of business valuations.[HD3] The decision is often made in favour of the capitalised earnings method, which calculates the value of a company by discounting the financial surpluses accruing to the company owners in the future. These are derived from future earnings determined under commercial law taking into account an expected dividend or profit retention policy.
The value of the company is calculated and derived when preparing an expert opinion.
Simplified valuation methods include methods comparing industry-standard indicators or multiples methods. Although these methods in no way offer the certainty of a generally accepted company valuation, they are often considerably easier to use and nevertheless frequently provide at least an indication of value.
Valuation of intangible assets in accordance with IDW S 5: we can provide you with the principles for the valuation of intangible assets in our professional capacity as an independent expert, as an adviser, as an arbitrator or as part of the audit of financial statements. In particular, the following are regarded as intangible assets: trademarks, rights, licences, customer base, and patents.
As an independent expert, we determine a typified value for you from the perspective of a third party using a transparent methodology. If we deviate in some respects from the typified view, we will act as an adviser to you. When there is a conflict, we can provide you with a settlement value as an arbitrator, which adequately takes into account the subjective views of the parties concerned. As part of the audit of the financial statements, we will assess whether the method you used was selected and applied appropriately for the valuation purpose.
From a business perspective, the value of an asset is determined on the basis of the expected future financial benefit that the acquirer can derive from the asset. THE value is assessed differently from different perspectives.
The decision value reflects the subjective expectations regarding the future benefit to be derived from the asset. All options for action of the decision-maker are to be taken into account, regardless of the degree to which they can be substantiated. Marginal pricing results in a lower price limit from the seller's perspective and an upper price limit from the buyer's perspective, up to which it would be advantageous for the buyer to acquire an asset.
The liquidation value when a company goes out of business is calculated as the sum of the assets recognised at the selling prices less liabilities and settlement costs, taking into account the best possible realistic liquidation strategy in each individual case. The conditions prevailing in the market are decisive for the assets to be liquidated. Any selling costs incurred are to be deducted from the sale proceeds.
The price is the result of a specific market transaction. The market price is the price that balances a multitude of offers and demands of market participants. The market price may thus differ from a typified or individually determined value.
In principle, three valuation methods can be used for the valuation of intangible assets. These are the market approach, the income approach and the cost approach. Several valuation methods may be applied in each of these approaches.
In the market approach a market price is used primarily to value the asset for a specific valuation purpose, an approach that can only be applied if the observed market prices relate to sufficiently comparable assets. There must also be an active market.
The income approach assumes that the value of an intangible asset is derived from its ability to generate future economic benefits in the form of cash flows.
The cost-based approach includes the reproduction cost and replacement cost methods. When applying the cost approach, costs can be based on what is required to produce an exact duplicate of the asset (reproduction cost method). Alternatively, it is possible to use the cost of producing or acquiring an asset that generates equivalent economic benefits (replacement cost method).
The decision as to which value concept and which valuation method to use for the valuation of your intangible asset is therefore based on your valuation purpose. Please do not hesitate to contact us. We will find the right concept for you!
Arbitration and court opinions
Do you need a neutral third party to assist you in determining a value? We are happy to assist you with the valuation as an arbitrator or court expert if a neutral valuation based on typified principles is required. Both tangible and intangible assets as well as company valuations do not pose a problem for us.
The term "due diligence" refers to the investigation or exercise of care that a reasonable businessperson is normally expected to take before entering into an agreement with another party." It therefore describes a standard of conduct and not a more closely defined activity. When working as a team of certified public accountants, this approach is based exactly on the same value standards that we apply in our law firm.
Due diligence serves to appropriately identify all essential characteristics of an asset to be purchased or sold. Both your subjective requirements as well as objective factors are vital for this. With the help of the knowledge gained, we can advise you as a buyer / seller in a purchase / sale process.
Preparation and support in sales scenarios
Do you want to sell your business? We are happy to provide you with a secure data room as a cloud solution for the forthcoming due diligence on the part of the buyer. We can handle both access rights management and cloud updates for you in a professional manner. Newly entered data is sent via push message to all parties to be informed. You always have full control and overview of the data packets provided.
Should a prior data analysis of the documents to be provided be necessary (keyword: vendor due diligence), we will actively assist you with our team and are proactive in pointing out potential problem areas.
Preparation and support in acquisition scenarios
Do you want to acquire a company and are looking for a competent partner who will provide you with comprehensive support in tax, legal and technical matters. With our M & A experience, we offer a wide range of support options to make your wish a reality.
As an advisory firm and a single point of contact we provide you with the complete solution for all issues. Both the tax and the legal side pose no problem for us. You will be guided in all areas by our strong team of advisers using a multidisciplinary approach. Typically, the target company should be assessed during the due diligence regarding the following aspects:
Due diligence is usually intended to achieve the following objectives, normally prior to entering into a transaction:
- Information gathering and verification
- Identification of the company’s strengths and weaknesses
- Analysis of the company's financial opportunities and risks
- Determining the value and thus the purchase price of the target company
- Identifying potential buyer risks
- Taking account of these risks when formulating the warranties in the purchase and sale agreement or withdrawing from the acquisition
- Documentation of the current status to preserve evidence and avoid disputes through the disclosure of relevant documents and information about the target company.
As the buyer of a company, you assume the (corporate) legal position of the seller and would thereby assume all economic, tax and environmental risks of the target company. You can only identify these risks and reduce them by means of a careful analysis of the target company, i.e., by means of due diligence. With our cross-industry expertise, we provide you with a high-quality team of advisers from across our practice areas for precisely this purpose.[HD1] [HD2] Contact us for your transaction support!
The purpose of legal due diligence is to review the entire corporate structure and to determine whether the target company has been properly established and whether its business activities are conducted in accordance with the applicable laws. Furthermore, you will be informed of the risks that might be transferred to you on the basis of existing contracts following the acquisition of the company. Last but not least, legal due diligence focuses on antitrust aspects. A review must also be carried out to determine whether and which interrelationships exist between any subsidiaries in different legal forms in order to be able to classify the business accordingly.
We pursue two objectives in tax due diligence: on the one hand, it serves to uncover potential liability risks and thereby to prevent you from suffering any disadvantages; on the other hand, it is the basis for a tax-optimised drafting of the purchase agreement. Here, the interests of both the seller and the buyer are protected. However, it is important for you as the buyer to know and be able to review as precisely as possible prior to the acquisition all tax burdens stemming from the company and related to the acquisition. This is the only way to determine what you consider the target company to be worth.
Financial due diligence is aimed at the opportunities and risks of your target company based on the accounting applied. In-depth analyses of balance sheets and income statements are an essential basis for assessing the value of the target company. You will only be able to make a serious assessment of future developments if the reporting over the past few years is thoroughly analysed. The assessment of the figures as well as the accounting policies applied are the focus of the analysis. Market conditions and the operating performance are also taken into account.
IT due diligence in a company acquisition focuses on determining the opportunities and risks that arise for you as the buyer from the company acquired and the IT infrastructure that comes with it. It is important to consider whether you will continue to use the IT of the acquired company or whether you will switch to your systems after the acquisition. The setting up of a completely new IT infrastructure can also be reviewed for you in this context.
When you acquire a company, the environmental issues of the target company also pass to you as the buyer. Any company that owns real estate may be at risk of legacy issues. Substantial liability risks may be hidden here for you as the buyer, which must be identified through environmental due diligence. However, the review procedures are not limited to the problem of contaminated sites, as environmental due diligence also includes questions regarding the obligation to obtain permits for plants in accordance with the provisions of environmental law, such as the Federal Immission Control Act (Bundes-Immissionsschutzgesetz, BImSchG). The importance of environmental due diligence can be measured not only by the high financial cost that can result from the remediation or disposal of contaminated areas, but also by the fact that you as the buyer assume in principle the target company’s criminal liability under environmental law. You therefore also assume the risk of criminal prosecution, e.g., because a plant does not have the necessary permit or the environment is polluted by objects belonging to the target company.