Company Valuations
Peloton Corporate is a renowned expert in the field of corporate valuations.
Our advice is sought by directors considering a capital raising, for financial reporting compliance (AASB2, AASB3, AASB136 etc), potential takeovers and Chapter 6 Corporations Act compliance, shareholder value advisory, tax (transfer pricing, demergers etc), remuneration benchmarking and other reasons.
What is the valuation needed for?
Whether the valuation is required for the purpose of determining the value of a minority or controlling interest in a listed or unlisted (private) company, Peloton Corporate can help.
Every company valuation is undertaken employing a systematic, five-step approach by a team which has undertaken over 1,000 valuations involving over $100b of equity interests.
The valuation considerations in company valuations are described in the diagram below.
Equity Value Assessment Schematic
Specific considerations in the private company context typically include:
- Key person risk
- The extent to which key commercial arrangements are reflected in legal agreements (e.g. salaries for key people)
- The expected likely term of any ongoing customer contracts
- Reliance on any related party intellectual property, facilities or personnel
- Evidence of funding to facilitate growth in the case of early-stage/start-up ventures
In order to determine the market value of a minority equity interest it is necessary to assess whether the implied lack of control over corporate governance (including strategy-setting, capital access and funding, board composition, payment of dividends etc) is likely to result in the value to the hypothetical third-party purchaser to be discounted from the pro rata share of net assets implied by the above schematic.
Typically small-company minority discounts range between 20% to 50% from the pro rata share of the market value of equity.
What if the value of a minority interest is required?
If the value of a minority interest is required and there is a consistent history and outlook for dividends then a dividend capitalisation approach may be available. Typically, a valuation of the underlying business(es) is required to which the net non-operating assets are added to arrive at the value of the company. Minority and other discounts may apply if the business is unlisted and a clear shareholder agreement is not available
In the presence of a typical shareholder agreement, this discount is often expressly eliminated.
Further information in relation to small business equity valuations, refer to our Insights page, “What is an equity valuation – and why is it so complicated?“