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1. Valuation; why, when, by whom!
1.1. Buyers and sellers of companies
Evidently buying or selling a company implies agreement on value
whether by negotiation or by calculation. Excluding rules of thumb, it
normally makes negotiating sense for buyer and seller calculating an
economically feasible value.
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1.2. Investors on the stock exchange
It also makes sense to define a long term stock investment strategy
more on facts and figures and less on sentiment. Investors on the stock exchange perform better with quantitative assessments than just
following sentiments, daily changing moods and simple ratios. The dotcom and the credit crisis have shown now two times this century how naive and dangerous sentiment and simple comparison of ratios are.
Comparing the price of a share with the fundamental value of that share,
opens unique opportunities in a long term investment strategy.
Shares having the highest value relative to the stock price, determine the optimum moment to buy.
Shares with the lowest value relative to the stock price, indicate to sell.
For further explanation concerning the special research licence needed to buy the required data, see the site Fundamental Investment Research
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1.3. Tax advisors
From a company point of view a need for valuation usually arises in
case of company restructuring. This regardless of reasons for
restructuring. (tax driven or not, national or international).
From a personal point of view a need for valuation exists in
transition moments of life such as death (succession fees), divorce,
emigration.
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1.4. Valuation for value-based management
Determining company goals with share/stake holder value as a principle
became popular recently both in literature and in company practice.
Defining strategy is virtually impossible without forecasts and
comparisons.
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1.5. Conflicting shareholders
In the early days humanity settled opposing property claims with axe,
sword and gun fighting. Today, opposing personal and business value
claims are settled inside or outside court, whether by negotiation or
by arbitration. Sometimes legal rules are applicable. Objective,
impartial and quantitative tools on valuation are vital to decide how
to split interests.
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1.6. Small and Medium Sized Companies
In small and medium sized companies, mostly family driven, impartial
and quantitative valuation may prevent opposing interests and thus
supports continuity.
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1.7. Advisors and consultants
Accountants, auditors, company lawyers, organisation -advisors,
M & A consultants do need a thorough knowledge of all perceptions
and tools used with valuations.
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2.
Software on valuation is indispensable!
2.1. Time consuming valuations made fast and without errors
In valuation two time-consuming elements exist:
1. Forecasts 2. (Present) value calculations.
Sub. 1. Forecasts
The most time consuming part in forecasting is selecting principal
starting points that determine valuation outcomes. Normally this is a
profit and loss account (P&L), a balance sheet and many other
assumptions that determine the outcome of a valuation process. These
latter assumptions in valuation are called value drives.
- When these three elements are all crystal clear and quite
fixed, straightforward application in a spreadsheet model might be a
practical solution. You should only be aware that various studies show
between 21% and 80% of spreadsheets contain some type of error.
- Practice determines however that errors might be very
difficult to detect. Starting points are usually never crystal clear or quite fixed.
They become very flexible after the first discussions. Then scenario
analyses are developed. Changing models is very time consuming. Time pressure then
-almost unavoidably- creates non detected errors.
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Sub. 2 (Present) value calculations
Quite many cash-flow definitions exist. Each cash-flow definition
increases the number of present value calculations and time consumption
thus creating additional spreadsheet errors.
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2.2. Complex methods explained to dumbos
Starters just need to fill in a balance sheet and a P & L account
and follow the recommendations. For experts complex tools are made
available like iterations, WACC-calculations etc. Without
software it is simply impossible to calculate consistently various methods and
techniques without errors and presentable.
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See
example made for experts
why free cashflow valuation always end up
lower than more traditional discounted cashflow calculations and why free
cashflow valuations prove to be very dependent on capital structure.
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2.3. Automatic Valuation: how does that work?
The complete valuation process has now been fully automated and thus objective.
It is only necessary to fill in 4 years history P&L and the oldest balance sheet to complete a fully automated valuation.
It is now entirely up to the user to make valuations complicated by introducing his own assumptions
or keep it simple by just following the objective standard assumptions!
Without thorough valuation knowledge an objective valuation recommendation arises in less than an hour time.
Discount Rate/Wacc! To determine a risk premium from 104 years online stock exchange history, the user himself may now use up to 7 conceivable methods. He can also determine the weight and the number of years in every method. Objectivity arises by the motivated WACC - recommendation that determines first automatically weight, number of years and risk free interest rate and afterwards the WACC or discount rate, depending on the capital structure of the company and the valuation method applied.
Forecast assumptions! Assumptions may be determined now automatically and objective by well known standard statistical forecast techniques based on the four years of history. With unlikely outcomes, probability filters are applied automatically.
Continuing value! The continuing value assumption may be calculated now automatically and objective in accordance with the motivated continuing value recommendation.
Valuation methods! Some valuation experts and software producers show an almost naive enthusiasm for a specific valuation method. For this reason F-Valuation software determines always the results of all current valuation methods. Objectivity arises by the motivated recommendation concerning weighting dependent on the different valuation methods and the aim of the valuation.
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3. How powerfull is this software?
3.1. Forecasting power and tools
Forecasts are calculated up to a maximum of 50 years. Required
user input is only one (maximum 4 years) P & L account, balance
sheets, investments and depreciations.
Forecasts of profit and loss account (including cashflows) and balance
sheets are then entirely determined by software. Specific names or
omitting entries for most P&L and balance sheet items are
possible. A multitude of assumptions is feasible as to revenues,
costs and investments. Forecasting power is further enhanced by using
very flexible assumptions as to continuing value, working capital and
(desirable) balance sheet ratios. Consolidation, import and export
modules are also included. It is even
possible to predict the future based on least squares estimates.
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3.2. All valuation methods
All practical modern and classical methods of valuation are integrated
into this software. Apart of DCF(=Discounted Cash-Flow) methods, also
APV(=Adjusted Present Value) and CFROI(=CashFlow Return on
Investment) are included. One method focusses on stock
exchange companies.
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3.3. Market Risk Premium Online
Many valuation methods need frequently a market risk premium.
This market risk premium is determined on the basis of historic developments of
the returns of shares and the returns of bonds, the difference between
these two total return indices is often taken to this end.
This difference is normally called the market risk premium on shares.
The sum of the risk free return on government gilts + this market risk premium
determines the discount rate, often called WACC.
The software gives actually -unique in the world- the possibility
to download online the historic rates of return from 1900. And that without charges!
The resulting advice on the calculated market risk premium can be integrated as
such in your own calculations or change its assumptions.
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3.4. Impairment Test
The strong emphasis in modern accountancy to use fair value approaches results
in frequent valuations of the balance sheet item goodwill in order to be sure the book value is in line with its fair value.
The best method to do so is a new valuation of the underlying company or companies.
The comparison with stock exchange prices of comparable companies is often impossible.
You may also consider the question what use such a comparison could possibly have
given the erratic nature of stock exchange behaviour.
Valuations on the basis of an objective advice on the discount rate and many
other valuation aspects, gives impairment testing the necessary independence
from impressionable third parties.
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3.5. Flexible, Graphics, Printing facilities
A minimum of just 30 fields profit and loss account, balance sheet and
investment is required for 1 year and 1 valuation method. Over 400
fields create maximum flexibility. There is no need to fill in all
assumptions. They all have logical values or zero, if not applicable.
Graphics and printing modules are included.
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3.6. Fast, easy and cost-saving
Big companies excepted, valuations are not done frequently. So
specialized consultants are hired. Their price tag is often
prohibitive. Their models are not always error proof or impartial. Your
own valuation software enables you to decrease fees substantially. In any case, with
some hours work, your own second opinion is born.
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4. Price, specifications and system requirements!
4.1. Product Specifications, versions
1. A national basic version: the national basic version
has all the power and flexible facilities in a national environment.
It does not however, allow to change the international settings as
mentioned under the international version.
2. An international version: this upgrade of the national basic
version allows changing all international settings.
These international settings allow conversions from £ into any currency
such as Euro, $ and introduces cross border tax differences. You may also
easily change language from USA English to for example UK English, German,
French, Dutch or Flemish. It also allows, last but not least, to use the different
tax systems and valuation systems and habits of different countries.
FREE DEMO: Click HERE
3. An extended version: this upgrade of the international version
allows for users changing the model itself as if it were his own favoured Excel spreadsheet.
4. A research version: with this update of the international version,
the fundamental value by share can be automatically determined.
With a research licence, the fundamental value of all listed shares can even be
compared with the price of that share in one automated procedure in one or more countries.
This automatic selection of shares with the highest proportion value/price has
proven to beat every index at length. For further explanation concerning the special research version and how to buy the required data, see the site Fundamental Investment Research
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4.2. Languages and countries
Supported languages are English, American, German, French and Dutch.
Supported countries are the UK, USA, Germany, France, Belgium,
Netherlands.
4.3.System requirements
All versions and languages are available under Windows (3,1, NT, 95, 98, 00, XP, Vista) and in Excel versions 5, 7, 8, 10, XP and 2007.
The version for Excel in Office <= 11 (1997- 2003) differs from that under Office >= 12 from 2007, with ribbon.
For Excel 5 from 1995, only an older version 7 is available to order.
All versions of course are completely menu-driven independent from Excel and have context sensitive HELP.
The requirements for CPU, memory and disk space are modest. The research version works best with a very powerful modern computer with lots of memory and free disk space.
Processor capacity should be at a minimum 486 level with a minumum memory space of 16 MB and 20 MB free disk space.
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4.4. Prices (excluding VAT, US delivery free of VAT/Sales Tax)
The price of this unique software is only:
Version 8 |
Euro € |
US Dollar $ |
UK Pound £ |
Demo-CD for Office <=11 |
25 |
30 |
25 |
Demo-CD for Office >=12 with ribbon |
50 |
50 |
50 |
National for Office <=11 |
299 |
399 |
299 |
National for Office >=12 with ribbon |
399 |
499 |
399 |
International for Office <=11 |
399 |
499 |
399 |
International for Office >=12 with ribbon |
499 |
599 |
499 |
Extended for Office <=11 |
1499 |
1699 |
1499 |
Extended for Office >=12 with ribbon |
1699 |
1899 |
1699 |
Research licence |
on request |
on request |
on request |
All prices for one licence for standalone usage. Prices for network
licences or reselling purposes upon demand.
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5. Guarantees, service and free demo
5.1. Free demo
FREE DEMO Click HERE
A free demo of the international version may be downloaded from
the internetsite:
www.finiconsult.uk or www.finiconsult.com.
Compressed it is just over 3 MB, the full version uncompressed is just about 10 MB.
This demo disposes of all facilities of the international version; it only does not calculate.
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5.2. Product Guarantees
Any defect will be repaired free of charge if reported in writing
within one year after sales to your supplier.
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5.3. Orders
Written orders, demo and further information at out internet site :
www.finiconsult.co.uk
e-mail : info@finiconsult.co.uk ORDER CLICK HERE
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5.4. Product Service
Service includes 1 hour free telephone support from Finiconsult
both for technical problems and for content problems in the area of
valuation. Confidentiality is guaranteed.
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Copyright Finiconsult Ltd 1995-2009
Finiconsult is an independent consulting company working in the
field of corporate finance.
ORDER Click HERE
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FREE DEMO Click HERE
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