The developing and generating resources mark the value of a company or business. For this, it is necessary to analyze the multiple scenarios in which it can develop as well as the consequences and probabilities of each one of them. The identification of the most appropriate valorization methodology is the first step to start the process.
This is chosen according to the company characteristics, the capacity to generate cash flows, and the information available.
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- Another widely used is the Comparable Multiples method, which bases on financial and functional information of independent companies selected as comparable. Indicators with sales such as EBIT (Earnings Before Interest and Taxes), EBITDA (Earnings Before Interests, Tax, Depreciation, and Amortization), market capitalization, enterprise value, among others, are used to apply this methodology.
- The Discounted Cash Flow (DCF) method is used whenever there are operating companies with an accurate cash flow generation, which is the most widely accepted method in such cases.
- The Real Options methodology involves using the technical aspects related to the Real Options valuation on a company. Basically, it can be used when there is uncertainty about the business progress and gives an overview of the operational flexibility of an organization and its strategic value.
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| 1 | Analysis of the target company. |
| 2 | Selection of the most appropriate valuation method(s). |
| 3 | Development of valuation models. |
| 4 | Application of the results in the target company. |
| 5 | Selection of a valuation range. |
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