When is a Business Valuation Needed?
Business valuation is an integral part of all companies because it allows them to get a complete picture of the financial health of the business.
An independent business valuation conducted by experts, such as accounting firms in Singapore, is beneficial for gaining insight into the actual value of a company.
The specific benefits of business valuation can greatly vary from situation to situation. In this article, we will explore the most common situations in which business valuation is required. So, keep reading to learn all about them.
Transfer Pricing
Business valuation for transfer pricing is one of the primary reasons for conducting a comprehensive financial evaluation.
Simply put, transfer pricing refers to the practice of one subsidiary of an organization providing products, services, or intangible property to another subsidiary of the same organization.
It helps the organization with strategic planning and make sure it is utilizing all of the available resources to maximize business efficiency.
Relevant tax authorities also have guidelines related to transfer pricing, so these guidelines are typically considered during the business valuation process to ensure accurate results.
Business Restructuring
It is common for organizations to go through extensive changes over the years. A complete business or legal restructuring might be required to optimize business efficiency and save on operational expenditure.
A comprehensive business valuation is necessary before undertaking any significant restructuring to ensure the company can successfully and optimally restructure itself. It is also valuable in qualifying for relevant tax benefits during the restructuring process.
Litigation
While every business does its best to ensure maximum legal transparency and avoid litigation, the chances of getting sued or facing legal challenges cannot be avoided.
As a result, it is common for companies to require a business valuation so that they can give an accurate value in litigation and negotiate with the involved parties accordingly.
Having the financial numbers backed up by expert testimony can do wonders for a business in legal proceedings.
Moreover, it establishes a great sense of transparency and fairness. This is the reason why it is critical for companies to rely on reliable experts, such as accounting firms in Singapore, for thorough and fair business valuation.
Agreements
Buy/sell agreements are a regular part of most businesses, especially large ones. These agreements and business deals are typically made on the basis of a company’s worth and fair market value.
In such a situation, an independent business valuation is often required to avoid any future disputes and come to a fair price.
Failure to provide a fair market value in legal agreements can lead to significant issues with business partners and other involved parties. Therefore, it is recommended that a business engage professional business valuation services from the very initial stage.
Mergers and Acquisitions
Large-scale companies and multinational enterprises often have to deal with mergers and acquisitions. Financial transparency is critical in these procedures to successfully complete them and avoid legal disputes at a later stage.
Maximum financial transparency and fairness can be attained with the assistance of professional accounting firms in Singapore that can conduct business valuations and determine the fair value of a company being acquired or merged.
Business Sale
If you are planning to sell your company, you’ll definitely have to go through the business valuation process to determine the fair value of the business and make a clear strategy to maximize profits.
It is also important to note that the sale of a business can be triggered in many situations, such as the death of the business owner or divorce, in which a certain part of the business might be going to the spouse or partner.
Regardless of the situation, whether it involves selling the entire business or a portion of it, seeking assistance from accounting firms in Singapore for the business valuation process is crucial to obtain a fair and transparent value for the business.
Funding
Businesses often need to raise funds periodically. In such situations, banks, venture capitalists, angel investors, and other stakeholders expect maximum financial transparency before investing in the business.
Therefore, conducting a business valuation is likely to be necessary for a business before it approaches investors and seeks funding.
In conclusion
The bottom line is that business valuation is an essential component of any business. At some point, a company is likely to require a business valuation.
The key to achieving a transparent and fair business valuation is to rely on experts, such as accounting firms in Singapore, to ensure that an accurate business value is determined at the conclusion of the process.
