Case Study: Company Valuation Supporting Strategic Decision-Making in Singapore
Background on Company Valuation Case Study
The company is a Singapore-based private organization that was at a strategic crossroad in its development. The shareholders were considering a variety of strategic possibilities, such as possible investment, partial divestment, or extended succession planning, after a number of years of successful growth. Although the management was well aware of the operations of the business and the market position, there was no current optimistic valuation to carry out informed decision making.
Due to the significance of valuation with respect to the strategic direction and stakeholder alignment, the shareholders sought the services of shareholders in our Company Valuation Services in Singapore to deliver an independent and objective valuation of the company. The valuation was to be used as a reasonable level of reference to internal discussions, bargaining with prospective counterparties, and governance.
Issues and Challenges
The valuation engagement posed a number of issues that are normally faced in privately held companies. Although the business had a consistent track record of operating, the financial performance was affected by both the recurrent revenue streams and the projects which made the earnings and cash flows fluctuate. To evaluate the sustainability of earnings, it was necessary to carefully normalize and make a projection.
Moreover, the company was in a competitive and changing environment of the Singapore market. The potential and actual growth depended on the environment and the situation in the market, regulatory factors, and the efficiency of the company to efficiently scale its operations. The valuation assumptions of the growth rates, margins, and capital investment should have been realistic by portraying such dynamics.
The other difficulty was associated with the lack of easily visible market benchmarks. Being a privately held company, there was a paucity of transaction information that was directly comparable to the size and business model of the company. This enhanced the valuation methodology and professional judgment.
Lastly, the shareholders needed a transparent, defensible, and understandable result of the valuation by non-technical shareholders and stakeholders such as family members and external advisors.
Objectives
The main task of the engagement was to establish a financially reasonable and independent valuation of the company which may be used in the strategic planning and stakeholder dialogue.
In particular, the client wanted to:
- Create a valid valuation standard.
- Learn about important value drivers and risks.
- Negotiation with prospective investors or buyers.
- Promote shareholder alignment and governance.
- Communicate strategic and succession planning.
The valuation had to be able to strike a balance between technical rigor and relevance.
How We Helped
We have used a systematic and situation-sensitive valuation methodology, which is appropriate to the Singapore market and the nature of the company. Our analysis started with an in-depth analysis of the business model, competition and operating environment of the company.
We conducted a comprehensive analysis of past financial data to determine the quality of earnings, normalize performance and determine non-recurring items. This was the basis of the future cash flow analysis.
Triangulation of value was worked out by multiple valuation methodologies to build up strength. These were income-related methods which were based on the estimated cash flows, and market-based methods using similar companies and transactions wherever possible. All of these methods were properly adjusted to indicate the risk profile of the company, its future growth and capital structure.
Sensitivity analyses were also performed by us to demonstrate the effects of the alterations in the main assumptions, including growth rates and discount rates on the valuation results. This gave the shareholders a better idea on the valuation uncertainty and the downside risk.
We also kept the management and shareholders in close contact during the engagement, discussing valuation concepts and results in an easily comprehensible and practical manner. This made sure that there was agreement and informed deliberation.
Value Delivered
This involvement revealed the value of professional company valuation services in helping in the strategic decision-making in the current and dynamic business environment in Singapore. Our Company Valuation Singapore services were combined with technical rigor and practical insight to assist the client to minimize the uncertainty, enhance governance, and make informed decisions about the future of the company.
We offered a powerful base of disciplined capital planning, stakeholder alignment and value creation over the long-term in our work.