Private Company Share Valuations
Whether it be as a pricing exercise prior to a commercial transaction, or for tax purposes, private company share valuations are a technical exercise in which we have built up much expertise.
When valuing such shares, the first priority is to determine the most appropriate calculation basis:
- A multiple of maintainable adjusted future earnings, using the P/E ratio most appropriate to the company sector, size and status.
- Based on the return on capital employed,
- Asset based,
- A combination of the above bases. It is very common to calculate a value based on a multiple of future earnings, adjusted for ‘extra’ net assets (eg freehold property and surplus working capital) held in the business.
Where appropriate, we will negotiate with the Shares Valuation Division of HMRC, on your behalf. This will be necessary with regard to the discount appropriate to your shareholding, as well as the basic underlying valuation itself.
When undertaking this service, the process is as follows:
- Holding an initial fact-find meeting, to understand the background, business and valuation requirements.
- Researching the business and industry sector data, including relevant indexes of what P/E ratio prices have been achieved in recent comparable sale transactions.
- Preparing a valuation report, including supporting assumptions and computations.
- Presenting this report to the Board.
When performing private company share valuations, we shall be mindful of your principle objectives. Whether they be minimising the tax on a transaction, obtaining best price for a commercial acquisition or general fairness, we shall advise accordingly. You will have peace of mind that the most appropriate valuation has been used.