Valuing a Company in Kenya: Valuers, Consultants and Intermediaries

When buying or selling a business in Kenya, the price is one of the most crucial elements of the deal. The ability to accurately calculate fair market value is essential to avoid overpaying or accepting an undervaluation. The valuation of a company is a process that determines how much an organization is worth as an entity. When you are selling your business, it’s important that you understand what drives the value and how to properly quantify it for potential buyers — who may have their own valuation in mind. There are many factors that can influence the price of your business, but there are also intermediaries who can help you negotiate with third parties and come to a price both parties can agree upon.

What is the meaning of fair market value?

Fair Market Value is the price that an asset would fetch on the open market if both the buyer and seller are informed and rational. Market value can change due to a number of factors, such as supply and demand, the condition of the asset and the time of year. It is important to take these factors into account when valuing a company. Some other factors, like location, legalities and brand, are more subjective and difficult to quantify. While not impossible, it may be easier for a business owner to determine what the company is worth to them, rather than to the open market.

Valuers, Consultants and Intermediaries

The person who places a value on a company is the valuer. This person is responsible for determining the value of an asset, such as a company or its equity. A valuer can either be an internal or an external party. An internal valuer is someone who works for the company. For example, the Chief Financial Officer can be the internal valuer for the company. An external valuer is someone with the relevant experience, such as a third-party valuation expert. A consultant provides advice on a specific business matter. And an intermediary is someone who assists parties in a transaction. Intermediaries can include accountants, lawyers, brokers and investment bankers.

Confidentiality and Due Diligence

There are some parties that may want to keep their valuation and interested in a company confidential. This could be to avoid driving up the price by signalling market interest in the business or it could be because the party is looking to acquire the company without being seen as a strategic buyer. If there is an agreement that the valuation is confidential, the party conducting the valuation will be required to sign a non-disclosure agreement (NDA). Due diligence is an audit of a company’s books and records to determine its value. The buyer’s investment banker will conduct the due diligence.

Exit Strategies and Valuation Timing

The exit strategy a business owner has for selling their company will determine the timing of selling. Exit strategies include a management buyout, an IPO or an acquisition. A seasoned investment banker will be able to help you determine the ideal timing for selling your company and approach prospective buyers. In addition, they will be able to negotiate the most favourable price. A company’s valuation is highest before its product is proven, before there is revenue, and before it has an established customer base. A company’s valuation is likely to drop after an IPO, but will be the highest after an acquisition.

Relevant Information for a Company’s Fair Market Value

There are a number of items you will have to consider before calculating a company’s value. First, you need to look at the company as a whole. This means reviewing its current operations, financial position and its cash flow. Then, you need to take a look at your company’s assets. This includes everything, from the buildings and equipment to the intellectual property. Then, you need to consider the people who work for your company. This will include the employees and their level of experience. You should also consider your company’s customers. This includes the number and size of customers, as well as the length of their contract.

Finding the Right Expert for a Company’s Value

Finding the right expert to conduct a valuation of your company is an important part of the process. You want to make sure the expert is qualified to conduct the valuation and that they have experience in the relevant industry. There are many valuation companies in Kenya. However, not all of them are suitable for every business. When choosing a valuation firm, you need to make sure their experience and expertise are aligned with your business. In addition to experience, you also want to make sure the valuation expert understands your industry. This will make it easier for the expert to conduct their valuation. In turn, it will make it easier for you to review their findings.

Summing up

The valuation of a company is a crucial part of any deal, whether it’s a buy or sell transaction. A valuation will give a sense of a company’s worth based on a number of factors, including assets, daily operations and the experience of its employees. The best way to know what your company is worth is to hire an expert to conduct a valuation. This can be done internally or externally, depending on the company’s size. The best experts are those who have experience in your specific industry.