Independent company valuations, Australia-wide. Fixed fee from $1,495 + GST.

Company valuation or business valuation: what is the difference?

A business valuation values the operating business: its earnings, assets and the goodwill that sits on top of them. That figure is usually an enterprise value, the value of the business before anyone asks who is owed what.

A company valuation goes two steps further. First it bridges from enterprise value to equity value by taking account of debt, cash, surplus assets and loans to or from shareholders and related parties. Then it values the particular shares in question, which depends on the rights attached to them, the degree of control they carry, the constitution and any shareholder agreement, and how readily the parcel could be sold.

If you are selling or buying shares, admitting or buying out a shareholder, restructuring, or need a market value your accountant or the ATO will rely on, it is the equity or the share value you need, not the headline business value.

When a company valuation is needed

A sale or purchase of shares rather than assets; a shareholder joining, leaving or being bought out, including a buy-sell agreement that calls for a valuation; a restructure, rollover or related-party transfer where market value must be documented; a capital raising or investor entry; an employee share scheme; and succession or estate planning where shares pass between generations.

Shareholder disagreements are a frequent starting point. Where two shareholders each have a number in mind, an independent valuation with a fee fixed in advance gives both sides the same report to work from.

How the fee is set

The fee is set by the annual turnover of the company and by nothing else: $1,495 + GST under $2 million with a draft in 2 business days, $2,495 + GST from $2 million to $10 million with a draft in 3 business days, and $3,495 + GST above $10 million or for a start-up with the delivery date agreed before commencement. Each additional entity is $795 + GST and each historical valuation date $495 + GST. Delivery time starts once payment and all required information have been received.

Purpose, structure and how difficult the answer turns out to be do not move the fee, and it is confirmed in writing before any work starts.

Valuing a minority shareholding

A 25 per cent holding is rarely worth 25 per cent of the equity value. A minority holder usually cannot set dividend policy, appoint directors or force a sale, and there is no ready market for the parcel. The constitution and shareholder agreement may also fix a price mechanism, a pre-emptive right or a compulsory transfer that changes what the shares are worth to the holder. Each of these is examined against the documents, not assumed.

The report identifies the company and the shareholding valued, the valuation date, the purpose and the basis of value; reviews the financial record and normalises earnings with each adjustment explained; sets out the method, the enterprise value, the bridge to equity value line by line and the analysis of the particular parcel; and states the conclusion with its assumptions and limitations, signed by the valuer you have been speaking with.