Businesss Valuation and Financial Due Diligence

BUSINESSS VALUATION AND FINANCIAL DUE DILIGENCE

BUSINESS VALUATION
FINANCIAL DUE DILIGENCE

BUSINESS VALUATION

Many business owners assume that business valuation is only necessary when selling but actually, this is not the case. There are many advantages of conducting current valuation of your business. Business valuation is essential for business enhancement, exit or succession planning, pre-sale planning, determines the price of the company’s share they have to give away to an investor in exchange for money and etc. If you intended to acquire another business, business valuation is important to ensure the selling price is at fair value.

WHAT DOES BUSINESS VALUATION SERVICES INCLUDE?

Determine the fair value on the said company using either income, or market or cost approach;
Obtaining a fair value on the assets such as investments in subsidiaries for the purpose of Financial Reporting.

BENEFITS OF OUTSOURCING BUSINESS VALUATION SERVICES TO YTK.

Better understanding of your business’ assets
Broader understanding of your Company’s resale value
Higher bargaining power during mergers & acquisitions
Able to make strategic decision and planning for future.

CASE STUDY

Scenario	We are tasked to provide a valuation on the clinic by the owner, who is interested to sell to a potential buyer in the same industry.
YTK action	We use the income approach as a primary approach for valuing the target company. Given the circumstances surrounding the valuation, we requested the financial statements for the last three years, the ledgers and other relevant accounting and tax documents from the target companies. Once the said documents are received, we procced to conduct an analysis on the business model, its revenues, costs and cash flows associated to the target company. We also researched on the industry and understand the performance of the industry in the last three years. This research allows us to estimate the future growth of the business and gather inputs for the computation of the cost of capital. Based on the information gathered above, we built up the model and projected a three-years future cash-flow statement. During the process, we have to confirm our understanding and assumptions with the owner. Finally determine the fair value for the business.
Benefits to client	Client is able to negotiate the deal more effectively as he is able to derive the minimum selling price for his business.

Scenario

We are tasked to provide a valuation on the clinic by the owner, who is interested to sell to a potential buyer in the same industry.

YTK action

We use the income approach as a primary approach for valuing the target company. Given the circumstances surrounding the valuation, we requested the financial statements for the last three years, the ledgers and other relevant accounting and tax documents from the target companies. Once the said documents are received, we procced to conduct an analysis on the business model, its revenues, costs and cash flows associated to the target company.

We also researched on the industry and understand the performance of the industry in the last three years. This research allows us to estimate the future growth of the business and gather inputs for the computation of the cost of capital.

Based on the information gathered above, we built up the model and projected a three-years future cash-flow statement. During the process, we have to confirm our understanding and assumptions with the owner. Finally determine the fair value for the business.

Benefits to client

Client is able to negotiate the deal more effectively as he is able to derive the minimum selling price for his business.

FINANCIAL DUE DILIGENCE

The decision to make investment or merger and an acquisition can yield promising returns and cost savings. Potential significant risks should be highlighted so that sound decisions regarding the transaction can be made. This assessment process requires an extensive and thorough due diligence to help determine if the acquisition is viable. We can conduct financial due diligence on your target Company to help you identify transaction value drivers, improve deal structures and mitigate risks.

WHAT DOES FINANCIAL DUE DILIGENCE SERVICES INCLUDE?WHAT DOES CORPORATE TAX ADVISORY SERVICES INCLUDE?

Analysis of financial situation including interpretation of cash flow and profit and loss
Verification on the existence and completeness of the assets
Identify potential bad debts
Identification of unrecorded tax liabilities
Identification of related party transaction.

BENEFITS OF OUTSOURCING FINANCIAL DUE DILIGENCE SERVICES TO YTK.

You are able to understand and assess financial position of the Company, uncover hidden or unrecorded liabilities, forecast the future cash flow of the targeted Companies, and thus making better investing decision.

CASE STUDY

Scenario	Buyer is interested to buy up a Wellness and Beauty Group and require us to perform due diligence on the target companies to ensure that target companies are operating in a healthy and legal manner.
YTK action	During the planning stage, we identified a few areas that are material and need to focus. For the Statement of Financial Position, we focus on the existence of the inventory and fixed assets as well as its related cost. As for the Financial Performance, we focused on the cut-off of the revenue and its related party transactions. Other areas that we focused during the due diligence exercise are the adequacy of financial internal control and the integrity of the financial statements. We conducted stock count and fixed assets sighting on several days. We took pictures of the fixed asset and trace it to the cost reflected in the financial statements. Assets are spread across outlets and we need the target companies’ employee to guide us to identify the correct assets. We analyse the financial performance through variance analysis and ratio analysis. This allow us to investigate the discrpency of huge fluctuation between the years. We compared performance of the outlets between different years and identify the trend for each outlet in the financial period. We also assist the buyer to identify the top ten sales by amount, by customers and by outlets. This allows the buyer to understand on the outlets. Once we obtained the findings, we documented down into the report and presented our findings to the buyer.
Benefits to client	Buyer is able to identify the problems areas and require the seller to rectify these problems before buying the company from them. This prevent the Buyer from incurring future losses.

Scenario

Buyer is interested to buy up a Wellness and Beauty Group and require us to perform due diligence on the target companies to ensure that target companies are operating in a healthy and legal manner.

YTK action

During the planning stage, we identified a few areas that are material and need to focus. For the Statement of Financial Position, we focus on the existence of the inventory and fixed assets as well as its related cost. As for the Financial Performance, we focused on the cut-off of the revenue and its related party transactions. Other areas that we focused during the due diligence exercise are the adequacy of financial internal control and the integrity of the financial statements.

We conducted stock count and fixed assets sighting on several days. We took pictures of the fixed asset and trace it to the cost reflected in the financial statements. Assets are spread across outlets and we need the target companies’ employee to guide us to identify the correct assets.

We analyse the financial performance through variance analysis and ratio analysis. This allow us to investigate the discrpency of huge fluctuation between the years. We compared performance of the outlets between different years and identify the trend for each outlet in the financial period. We also assist the buyer to identify the top ten sales by amount, by customers and by outlets. This allows the buyer to understand on the outlets.

Once we obtained the findings, we documented down into the report and presented our findings to the buyer.

Benefits to client

Buyer is able to identify the problems areas and require the seller to rectify these problems before buying the company from them. This prevent the Buyer from incurring future losses.