Making sure the assumptions are solid
Valuation is about the future - and the future is uncertain. Therefore, the most important thing is to make sure that the assumptions behind it are solid.
In general, there are 3 elements that, combined, result into the valuation - and that therefore you should check in order to make sure the valuation is solid:
- Methods used: Equidam uses the 5 most common valuation methods - you can learn more about them in our Valuation methodology section of this help center, or in this document. They are compliant with the IPEV (International Private Equity Valuation) Guidelines, and most investors should be acquainted with them.
- Valuation parameters (e.g. multiples, discount rates, etc.): Equidam accurately curates authoritative data sources and, compared to any manual research, can leverage on significant amount of data - that we constantly work to expand. Data sources vary based on the parameter in question, and you can read more on them at this link. In case you would like to adjust these parameters, you can do so in the Advanced Settings tab.
- Your inputs: your answers to the Questionnaire tab and your financial projections (in the Financials tab) significantly influence your valuation. If you need assistance with them, our team will be happy to help you or to review them! Please don't hesitate to get in touch with us in this case.
Fair valuation vs market valuation
The second important point to be taken into account when considering if a valuation is solid is the difference between:
Fair valuation, the one the company enters the negotiation with because it is deemed to be a fair representation of the value, and
Market valuation, the agreed valuation, resulting from negotiations.
Equidam results into a fair valuation, which you can use to start the negotiations.
Knowing the fair valuation allows you to consciously choose how far you want to go from the ideal case scenario.
It should be up to be challenged and discussed, in a very transparent way, with the investors/buyers. Indeed, we created the valuation report to help the negotiation and discuss valuation in a transparent way. In this way, you can be sure that the deal you close is fair for both parties.