Arrangement of an independent estimate of the cost of business and assets
Estimate is one of the key elements of the investment project implementation. To estimate the existing tangible project assets in monetary terms with an allowance for the changing market situation and, therefore, to forecast an expected profitability from the project investment is a quite challenging task.
Taking the core activity features into account, I prefer building financial models based on the Capital Assets Pricing Method.
The concept of investment value is different to the project participants (the originator, the seller, the investor, the creditor, etc.) which affects the transaction structure and the investing philosophy (from the point of view of the participants’ motives), in general. This fact becomes the key objection in decision-making, resulting in the perception of overestimated price by the buyer or underestimated one – by the seller. A very limited number of valuation companies apply the check for common sense, being only guided by the valuation standards, and there is even fewer of those who apply the individual valuation, taking the buyer’s/seller’s needs and means into consideration.
With my approach I try to forge a compromise between the interests of the project originator who has made financial investment in tangible assets, which is the basis for any investment project, and the investor (perhaps, the buyer of the entire project). The current market situation has created the conditions where the depreciation of assets and their transition from the category of assets to the one of liabilities takes place, since such tangible objects, having not been brought into the state of ability to generate the incoming cash flow, are loss-making, indeed, and require funds for their maintenance.
In that case, my office is the one to carry out the full set of actions which allows for getting all advantages of a certain project across to the investor (buyer) and showing the real cost of the made investment and its investment attractiveness.
The asset owners quite often want to sell their assets. The inflated expectations from the sale are justified by the asset attractiveness, however, at the same time, such attractiveness should be properly demonstrated to the buyer, who, in that case, becomes his own project investor for which our consortium jointly with the originator perform all necessary work – form a deep-laid investment project.
In this case, the estimate prepared to the extent of the investment project is more unbiased and takes all transaction participants’interests into account.
The integral investment project implementation participants are banks. The international banking standards require the valuation by independent accredited or rating companies. My office cooperates with a wide circle of the extremely specialized valuation companies providing their services in the international market. Such an approach allows for focusing on the project investment attractiveness aspects and, as a result, on the real estimate of the project initial assets.
Furthermore, by the joint efforts of my office and my partners, based on the richest experience and common sense, without the involvement of expensive rating valuation companies and writing multivolume reports, we are able to prepare a substantiation study report describing quite clearly and in a well-argued manner how much some or other investment project will cost to a certain buyer in certain market conditions.
Business valuation is a quite subjective process, no matter how the methodologies would try to standardize it. Such subjectivity is expressed in certain amounts the customers could lose without our professional approach to their investment projects.