Data Requirement for Business Valuation
This is the third post of a series on Business Valuation. In our previous post, we discussed the Methods Used in Business Valuation. Today, we discuss what are the types of data that are required in a valuation and their sources. Here are some of the information that are typically required from the company being valued. Read the post to learn why the author recommended types of data below. Let's get started!
Nature of transaction: The purpose for the valuation, and in an acquisition, whether a whole company up for sale or just a part of the business is? Are there any assets that will be kept by the current owners? Is this stocks or assets sale?
Industry information: industry trends and outlook, competitive market analysis, inflation, and other related demographic data. Some of the information can be retrieved from relevant industry associations and sources.
Company’s legal and commercial information: Historical ownership structure and legal type of the business, key long-term contracts, lease arrangements, licences and permits. Liens and litigations, if any.
Company’s financial information: These typically span three to five years of historical data, which includes the profit and loss statement, balance sheet, cash flow statement, taxes, and past audit reports. Both audited yearly reports and monthly management reporting will be required. Company financial forecasts will also be requested for, if available.
Operations: Information on key customers and suppliers, facilities, key assets, product information, goodwill (if any) intellectual property such as trademarks, patents, copyrights, goodwill.
Management and employees information: Key management profiles, organisation charts, payroll details (employee benefits, stock options, retirement plans etc.)
Besides company-related information discussed above, here are a few useful external sources.
Economic data: Singstat and the Monetary Authority of Singapore provides economics and demographic data for Singapore. Many government websites globally also provide similar information.
Public company information: Financial information providers like Bloomberg, Reuters, Hoovers provides multiples of publicly traded companies that are in the same industry and historical transactions. These will be useful in finding valuation multiple comparables and information required in determining the discount rate in a direct cash flow method.
Industry associations and publications: These provides news and trends about the industry.
In our following post in our Valuation Series, we will discuss some of the special considerations when valuing a private company.