A fair assessment of potential
Companies do not have a price that can be defined through the market. This particularly applies to small and medium-sized companies. A business appraisal is therefore required, for example when selling the company, buying a company, preparing a merger, taking out credit or being involved in company law disputes. Due to the inheritance tax reform, another important area of application has been opened up for tax law business appraisals.
We place great importance on tasks for current business appraisals, among other things because they are an auditor’s classic job. The complexity of the various recognized appraisal procedures means for us that a high degree of comprehensibility and plausibility for the client and the recipient has to be ensured with every appraisal issue.
A high equity ratio on the company balance sheet is a good prerequisite for a high enterprise value. However, it is not possible to derive the enterprise value from this. The balance sheet’s equity capital gives at best an impression of the business development in the past and provides information about a possible liquidation value. A company’s going concern value, on the other hand, is derived from its ability to generate profits and excess liquidity in the future. As a result, the business appraisal is largely focused on forecasts. The German income approach and discounted cash flow approach are the standard methods for assessing a company’s future profit potential. The multiplier method can be used as an approximate calculation for an initial price estimate.
These different assessment approaches show that business appraisals are a highly complex topic. As a partner to our clients though, it goes without saying that we also create transparency here and support the valuation in an understandable way.