When setting objectives, these must be measurable. Currently, the most comprehensive and widely accepted indicator in finance is value creation.
How does value influence a sale?
A profitable company accumulates value throughout its lifetime. And when it is transferred, the value created is shared between the buyer and seller. Therefore, it is advisable for each party to know how much of this value they are willing to transfer to the other party.
What factors determine value?
The most common approach is to perform a top-down analysis. This involves analysing macro factors (interest rates, exchange rates, economic growth), sector-specific drivers (climatic, demographic, regulatory) and company-specific drivers (market share, competitive differences, business model and value proposition).
How should a company seek advice?
The valuation technique is simple, but contextualising it is complex. We therefore recommend that you seek advice from specialised experts, who will bring objectivity, transparency, independence, rigour and credibility to the valuation.