The business valuation in mergers and acquisitions process aims to put a dollar amount on a business by accounting for several factors and aspects of its operation. Two companies within the same niche that have the same market size may differ in valuation when you consider other aspects of business operation.

While valuing a business, appraisers tend to look at factors such as the stage of the company’s lifecycle, business history and reputation, growth, marketplace competition as well as the cost for the buyer to build a similar business from scratch.

In addition to assisting with complex business valuation and acquisition transactions and negotiations, our M&A team also provides experienced advice across a range of related corporate finance services, including merger services and economic advisory.

Mergers and acquisitions are similar but have a few major differences. Mergers combine two separate businesses into a single new legal entity.

When valuing a company as a going concern, there are three main valuation techniques used by industry practitioners: (1) DCF analysis, (2) comparable company analysis, and (3) precedent transactions.

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RSM's business Mergers and Acquisitions (M&A) advisory service blends experience, professionalism and capability to offer you seamless solutions for complex business acquisition or divestment transactions across all industries and sectors. Our hands-on approach, with partners being genuinely involved in the delivering of M&A services, differentiates us. We are experienced, accessible and flexible, we say what we mean and do not sit on the fence. This gives credibility with both our clients and their stakeholders.

A buyer will want to consider all aspects of your business. Diligence can take as little as one month or a lot longer - it is all dependant on your ability to access key business data. 

Most private M&A transactions are undertaken on a debt free, cash free basis.

This means that the final agreed purchase price is the value of the business plus any cash and less any debt and debt-like items at the date of completion.   
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The value of a business on a debt free, cash free basis is also known as the Enterprise Value and ensures that the business is valued independently of its capital structure. After the appropriate adjustments for net debt (or net cash) and working capital, the amount the vendor actually receives represents the Equity Value.

Checklists will be used in due diligence when analysing a company. Any checklist will include specific matters that need to be addressed and considered to ensure the following are considered:

Financial performance and underlying trends in financial performance

• Quality of earnings 
• Quality of assets 
• Working capital and net debt  
• Debt-like items 
• Unrecorded liabilities 

Due diligence can take many different forms depending on what is required. The scope and extent of a due diligence exercise will depend on the nature and size of a potential transaction. However due diligence often comprises of: 

• Financial due diligence 
• Legal due diligence 
• Commercial due diligence 
• IT / Cyber due diligence 
• Tax due diligence 
• Environmental due diligence