More than before, valuation exercises are becoming common and a requirement for varied purposes including acquisitions, disposals, buyouts, restructuring, fundraising, financial reporting , statutory and legal. Feasibility study services of OBM can provide robust business models through providing you access to a team of financial valuators and modelers.
It is often determined by enterprise-specific factors and takes place, for instance, when internal restructuring is carried out or when decisions regarding new investments, disposal of assets or separate business units are made.
The need for valuation is also determined by external factors and may result from, for instance, the accounting standards adopted by an enterprise which require the valuation of intangible assets (such as the customer base or trademarks) to be carried out following the transaction (as part of the "purchase price allocation")
An acquirer allocates the purchase price to the assets acquired and liabilities assumed at fair value (FV) on the acquisition date (the first green bar in the chart to the left). Normally, the purchase price exceeds the FV of these assets and liabilities, resulting in goodwill (the second green bar in the chart to the left). Why would anyone pay more for something than it is supposedly worth? Perhaps because the acquirer expects to create value through synergies or better management, giving the target's sellers leverage to demand a premium for their business.
A purchase price allocation is typically needed in the transaction execution and integration stages of a transaction. It can be done on a preliminary basis during the financial due diligence phase to give an indication of assets and liabilities likely to be acquired, particularly intangible assets, together with their likely impact on future earnings. It can then be formalised after completion of the transaction which involves discussions with the company’s auditors to ensure that all financial impacts are quantified and agreed prior to the relevant review or audit date.
An impairment test measures whether a balance sheet item is worth the amount stated on the balance sheet. Impairment testing can be applied for both commercial (audit) accounts and tax accounts. The impairment test is carried out according to a complex methodology that necessitates specialised know-how. Moreover, strict accounting standards apply to implementation. Our employees lend you competent and committed support. We see it as our task to ensure that you are adequately prepared in good time and therefore recommend that the impairment test should be set up as a permanently installed process in the accounting system.
Financial modelling involves the process of forecasting the performance of businesses and assets, using relationships among a range of variables. This provides management with leading insight into the short term or even long term business environment. Our financial model review process is systematic and thorough and conducted by a team with strong capabilities in advanced modelling.