“Valuation: art, science or magic?”

This question is often raised when it comes to the issue of company valuation.

We can answer this question quite easily.

For us, corporate valuation is neither art, science nor magic – for us, it is simply a solid craft. And we have mastered our tools very successfully for over a decade.

In our valuation mandates, we combine auditor and capital market vision in the best possible way due to the many years of professional experience and the well-founded expertise of our experts – certainly one of the outstanding strengths of our valuation team. In addition, the wide-ranging industry expertise of our specialists ideally rounds off the service portfolio offered in company valuation.

Our expert opinion spectrum – driven by the occasion and purpose of each individual valuation case – in addition to the review and validation of already available valuation reports, ranges from simple price determinations using multiplier methods to complex discounted cash flow assessments in the context of comprehensive IDW S 1-opinions.

Depending on the occasion, we will represent you as an auditor, consultant or neutral expert for evaluation topics.

Together with you, we develop tailor-made assessments for your respective occasion on this basis, which always take your individual requirements into account.

Valuation cause

Corporate valuations are a simple necessity in the most diverse situations – especially in the context of M&A transactions, but also on tax, corporate and accounting law occasions.

In particular, the practice is familiar with the following valuation causes:

  • Company purchase / sale
  • Business combination / splitting up
  • Initial public offering (IPO)
  • Changes in shareholder relations
  • Company succession
  • Changes in the structure of a enterprise
  • Operational restructuring
  • Other corporate, tax or balance sheet requirements

 

Services in the field of company valuation

Valuations for company purchases/sales

When buying or selling a company, we provide you with a company valuation report that provides the right decision-making basis to answer the question of the maximum price that should be paid or at least achieved in a transaction.

The assessment process is subject to a future analysis – in addition to assessing the status quo and the opportunity-risk profile of the assessed object, the structural development of the relevant market and competitive environment must also be included in the value determination.

In particular, we offer the following services:

  • Carrying out due diligence reviews (if necessary as a data basis for the company valuation)
  • Preparation of market, industry and competition analyzes
  • Development and plausibility check of corporate planning
  • Determination of company values taking into account the relevant legal regulations and current case law according to all common valuation methods (auditing and analyst methods); The spectrum of possible formats for a company valuation ranges from simplistic valuations to comprehensive IDW S 1-reports, depending on the occasion and needs; In particular, we offer the following evaluation packages, which are based on the individual evaluation reason and purpose:
  • CORPORATE VALUATION – LEVEL 1: Use of simplified capitalized earnings, DCF or multiplier valuations for indicative (non-expert) valuation
  • CORPORATE VALUATION – LEVEL 2: comprehensive income value, DCF or multiplier evaluations for indicative (non-expert) value determination
  • CORPORATE VALUATION – LEVEL 3: full IDW S 1-appraisal for the determination of objective / subjective company values, taking into account the relevant legal regulations and current case law
  • Creation of scenario and sensitivity analyzes as well as the derivation of corresponding value ranges

This means that you are well prepared for contract and price negotiations when buying or selling a company.

Corporate law assessments

In the M&A area, company valuations are induced in addition to the acquisition / sale of certain stock corporation or conversion law transactions.

The following events are particularly relevant:

  • Conclusion of corporate contracts such as domination or profit transfer agreements
  • Business combination / demerger
  • Squeeze-out of minority shareholders
  • Stock exchange listing / withdrawal from the stock exchange (delisting)
  • Redemption of GmbH shares
  • Termination of membership in a partnership
  • Resignation or death of a co-partner and compensation for his heirs
  • tax-induced change in corporate structure

To determine an objectified company value, these occasions always require the preparation of IDW S 1-reports.

The preparation of such a detailed and comprehensive valuation report is necessary because the resulting company value is the basis for determining the exchange ratios or severance payments and compensation payments. Since this stipulation has to withstand a review by (court-appointed) auditors or expert experts (in court), the application of IDW S 1 is given even more emphasis.

Detached from the individual values of the parties involved, we determine correspondingly objectified company values in the role of neutral and independent appraiser.

In addition, we also act as (court-appointed) auditors or expert appraisers (in court) on company-law valuation occasions.

In particular, we offer the following services:

  • Carrying out due diligence reviews (if necessary as a data basis for the company valuation)
  • Preparation of market, industry and competition analyzes
  • Development and plausibility check of corporate planning
  • CORPORATE VALUATION – LEVEL 3: fully-fledged IDW S 1 appraisal to determine objectified company values, taking into account the relevant legal regulations and current case law
  • Creation of scenario and sensitivity analyzes as well as the derivation of corresponding value ranges

Fairness Opinion

In corporate transactions, decision-makers often ask the question of the appropriateness of the transaction price, for which in many cases it is advisable to obtain a fairness opinion in the sense of a “second opinion”.

For corporate bodies such as board members, supervisory boards, GmbH managing directors and shareholders, a fairness opinion documents that decision-makers have acted on the basis of appropriate information, proves their duty of care and thus serves to safeguard the decision-making process. In particular with regard to the duty of care under stock corporation law, the so-called “Business Judgment Rule” according to Section 93 (1) sentence 2 AktG, it is often necessary to secure strategic decisions with a fairness opinion.

The following events in particular require that a fairness opinion be obtained on a regular basis:

  • Company purchase / sale
  • Business combination / demerger
  • Conclusion of corporate contracts such as domination or profit transfer agreements
  • Stock exchange listing / withdrawal from the stock exchange (delisting)
  • Squeeze-out of minority shareholders
  • Tax-induced change in corporate structure
  • Purchase and sale of company shares or significant assets (e.g. sale-and-lease-back transactions)
  • Related Party Transactions
  • Restructuring measures
  • Public purchase and takeover bids
  • Financing decisions
  • Legal disputes
  • Purchase price adjustments, earn-outs

In particular, we offer the following services:

  • Creation of an opinion letter (this is the actual fairness opinion) in accordance with IDW S 8, which comments on the financial adequacy of the transaction price
  • Creation of a valuation memorandum containing additional information on which the opinion letter is based (is not intended for publication; only serves the client as evidence of the decision made)
  • Optionally, the creation of a factual memorandum, which includes all confidential information and documents and thus documents all received and processed documents and information (is not intended for publication; only serves the client as evidence of the decision made)

Reviews for tax purposes

In the practice of German tax law, a number of value standards and legal evaluation reasons often result in evaluations. The reforms in tax law have also increased the number of reasons for valuation. Tax law refers to the valuation standards of the IDW, the Valuation Act (BewG) and other common valuation methods.

The following occasions in particular require evaluations:

  • Inheritance and gift tax law, especially valuation of shares and business assets
  • Tax-related corporate restructuring
  • Valuations in connection with the use of tax losses and interest carryforwards according to § 8c KStG
  • Exit taxation
  • Intra-group transfer of holdings / intangible assets with a foreign element
  • Valuation of investments on the occasion of a tax audit
  • Cross-border relocation of functions (Section 1 (3), p. 9 ff. AStG)
  • Determination of transfer prices and their documentation
  • Tax arrangements

The value derivation in the context of an expert opinion offers the taxpayer secure documentation for the free assessment of evidence by the tax authorities.

Evaluations according to the IDW standards serve on the one hand to objectify and document the facts. On the other hand, the tax authorities cannot negate the evidential value of IDW-compliant valuation reports or valuations based on the simplified income approach.

We are happy to support you with tax valuation as a neutral expert by preparing valuation reports for companies, individual assets and corporate functions. The specific requirements of the tax authorities, especially with regard to the documentation of transactions, are always taken into account by us. This minimizes the risk of potential tax back payments through future value adjustments and safeguards your business decision accordingly.

Reviews for arbitration reports

We are also happy to provide you with assessments in the context of mediation situations or in judicial or extrajudicial arbitration reports.

In such cases, we support you, taking into account the subjective values of the conflicting parties involved, by suggesting an agreement value as a mediator or by determining this in the context of an arbitration report.

Purchase Price Allocation

Regardless of the accounting standards to be applied, the purchase price paid in the context of a company acquisition is to be allocated to the assets and liabilities acquired by means of purchase price allocation (PPA) in the consolidated financial statements. Differences exist according to IFRS, US-GAAP or HGB with regard to the corresponding requirements.

When acquiring partnerships, a PPA is always required for tax purposes, regardless of whether the acquisition is made through an asset or share deal.

Significant accounting consequences usually result from the newly arising depreciation potential, which may result in newly identified intangible assets and – in the case of accounting in accordance with HGB – any goodwill and its corresponding effects on the company’s future income statement.

In particular, we offer the following services:

  • Structuring and planning of the PPA
  • Identification of assets
  • Selection of the evaluation method(s)
  • Determination of the relevant parameters
  • Valuation and documentation of the PPA in accordance with IFRS or HGB

Beta factors and cost of capital for your valuation

In the context of discounted cash flow evaluations, the determination of the cost of capital is a necessary prerequisite in order to be able to discount the relevant cash flows.

IDW S 1 – the standard used by auditors in Germany to carry out company valuations – refers to the Capital Asset Pricing Model (CAPM or Tax-CAPM), in which the cost of equity is made up of a base interest rate, a beta factor and a market risk premium.

The beta factor is a measure of the risk of the company to be valued by considering the fluctuations in return of the company on the basis of a linear regression relative to the fluctuations in return in the market.

This works normally for listed companies without any problems. For unlisted companies, however, a detour via the determination and relative return measurement of a group of listed comparable companies (peer group) is necessary. In addition, the financing risk of the company to be valued must be taken into account when determining the beta factor using the so-called “unlever” and “relevance”.

In particular, we offer the following services:

  • Identification of a suitable peer group for the company to be assessed
  • Determination of beta factors and all other CAPM parameters (base interest rate, market risk premium) on a specific date (based on this)
  • Determination of the cost of capital (equity and debt costs, WACC)
  • Creation of the relevant parts of the report for your valuation case

We prepare all data in a clear and easy-to-understand manner so that optimal traceability is guaranteed. In particular, we always take into account the relevant jurisprudence and conformity with IDW S 1 when collecting data.

Certified Auditor
CVA, IFRS-Specialist/CINA
Partner

Certified Tax Advisor
Master of Laws in Corporate Restructuring
(LL.M. corp. restruc.)
Partner