Corporate valuations - An art or science?

Counting the numbers: Corporate valuation is a sensitive business PIC: CORPORATEVALUATIONS.COM
Counting the numbers: Corporate valuation is a sensitive business PIC: CORPORATEVALUATIONS.COM

If you are a business owner who has entered into a shareholder's agreement, I am sure you have come across clauses and statements which refer to 'fair market value', 'willing buyer and willing seller', 'discounts', 'premiums', 'minority stake', 'majority stake' and 'determination by independent auditor'.

These terms are often included in clauses which govern options, sale or transfer of shares, or other shareholder exit mechanisms, and are used to determine the valuation of the business or a block of shares.

For many this begs the question, what is a fair market value and who is responsible for undertaking the valuation, especially if an independent valuation is required. I have seen many shareholders’ agreements which puts the onus on the shareholders to appoint the company’s auditor to undertake the valuation of the respective shareholders’ equity. The role of an auditor is to express an independent opinion on the fairness and reasonableness of the company’s financial statements.

Editor's Comment
Happy Independence!

We are 56 years old and what do we have to show for it? Looking at where Botswana started and where it is today, there are a lot of developments, but whether the developments match the number of years we have enjoyed as a country is a topic for another day.The fact that cannot be denied is we have seen major developments, but we are still lacking in several pertinent areas.Our beautiful country imports almost everything. We import fuel, food,...

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