The following methodology demonstrates in a simplified manner the business valuation process using the cash flow method.
To calculate the operation value, we need to estimate EBITDA (the company’s operational cash flow) for the coming years, as well as investments, changes in working capital, and taxes on profits.
Once the operation value is calculated, we will deduct financial liabilities and fiscal and labor contingencies and add financial applications, for example. This will give us the company's valuation, or equity value.
The discounted cash flow method is the primary one used in our valuation report. Since we follow the CVM standard, we also include two additional methods: market multiples and asset-based valuation.
Each method serves a specific purpose. Contact us to learn more.
In the second phase of the project, after the valuation of your company, we assist our clients in mergers and acquisitions projects across various sectors. For a company sale process or shareholder dissolution, it is essential to carry out the valuation of the target company beforehand, ensuring consensus and understanding of the asset's value being negotiated.
The valuation will serve as a reference for sellers to assess offers received. It will not necessarily be used directly in the negotiation, as a subject of discussion regarding the company's value with the interested investor.
The basic steps for a negotiation are: (i) valuation; (ii) list of potential buyers with the ability to acquire the company; (iii) creation of a teaser; (iv) signing confidentiality agreements; (v) sending an information memorandum; (vi) receiving proposals; (vii) due diligence; and (viii) final contracts.
