Cispec logo

The context of the evaluation

Implementation of the evaluation varies according to

The target

Objectives: nature of the value sought

- The context of the evaluation

- Available financial data on the company and its market

- Vendor?

- Buyer?

- Utility value?

- Market value?

The steps of the evaluation :

Details of the context of the evaluation, who it is intended for, when, when it was carried out, what its objectives are, whether there have been previous evaluations...

Verify the absence of conflict of interest, competence and availability to carry out the assignment...

We advise you in the choice of the THE BEST LEGAL, FISCAL AND SOCIAL STATUS.

- Planning of works

- Collection and analysis of general data on the company and its environment

- Mission plan

After analysing the various data, highlighting the significant and relevant points

Identification of the company's strengths and weaknesses

You have a range of values for your company or the item being valued

The notion of Enterprise Value

▪ This is the economic value of an entity 

▪ If we compare to an accounting balance sheet, it is the asset, but in "economic" value 

▪ Several methods can be used as well as approaches 

▪ EV serves as the basis for all transactions and allows targets, companies, to be compared with each other 

▪ The EV is used as the basis for calculating the Market Value of Equity ("MVE") 

▪ A range of EVs is always calculated (never a single one), but the manager positions himself on a value included in this range

Enterprise Value (EV) VS Market Value of Equity (MVE)

Cispec The context of the evaluation

Discounted cash flows and multiple principles & methods: DCFs DCFs

- It is a determination of the EV on the basis of a business plan which is drawn up by the management

- This should enable forecast cash flows to be determined 

- On the basis of this document, the assessor carries out :

- A discounting of these flows by determining one or more rates 

- Determines several EVs by making "sensitivity tables" ▪ Takes a look at the different EVs

- Explains the limitations of the model 

- Proposes a range of values 

- Documents its entire approach in a report 

- Proposes alternative approaches

- It is a determination of the EV on the basis of a business plan which is drawn up by the management 

- Uncertainties related to the assumptions 

- EBITDA structure 

- The problem of terminal value 

- Determining a range of values 

- It is a method recognised by the wider investment community 

- Rational (EV is the cash flow from the investment) 

- Practised on a permanent basis 

- Assumptions generally documented 

Approaches in Start-ups

- Difficulties 

- Lack of positive results most of the time 

- Little history of financial statements 

- Often risky business models 

- Analysis possibilities 

- Reasoning based on positive EBITDA from the business plan (even if remote) 

- VC Approach 

- Multiple non-financial value drivers?

- Need to find positive comparables from the sector (use of databases) 

- Determine a multiple (or multiples) applied to an aggregate (e.g. turnover) to give a first value 

- Based on a target rate of return on investment (tables or objective), an EV at date (Pre-Money EV) is determined 

- This will allow several pieces of information to be determined (in particular, depending on the amount invested, the percentage held by Post Money) 

- Challenges: Target Rate of Return & Comparables (usually weighted by VC) 

- Advantage: Link to market data - No VT

Cispec White logo

Domicile your business


Cispec White logo

Domicile your business