Company Valuation Services In Serbia
Company valuation or value of a business—specifically, the assessment of its equity and overall enterprise value—is crucial for any company facing important decisions about its future operations. Such decisions may be strategic in nature, but they can also concern day-to-day management aimed at boosting long-term productivity, enhancing financial stability, and laying the groundwork for sustained growth in the company’s value.
When valuing equity and assets, practitioners apply company-valuation methods that rest on verifiable facts. Below, we take a closer look at the starting points for valuing equity and assets, the purposes for which valuations are carried out, the underlying valuation principles, and the professionals qualified to provide these valuation services.
A company—or equity—valuation is carried out to determine the price at which the business could be sold or its ownership transferred, or to facilitate changes in the capital structure.
There are many reasons to commission a valuation, and the purpose itself will influence the resulting equity value. For this reason, valuations are typically categorized by their objective.
Typical motives for determining the value of a company’s equity and assets include:
Purchase or sale of the business
Tax-relief planning or other tax-related requirements
Corporate restructurings—mergers, acquisitions, absorptions (M&A transactions)
Strategic decision-making
Partnership or shareholder agreements
Litigation involving lost profits or economic damages
Disputes concerning minority-shareholder oppression
Compulsory share buy-outs or buy-outs of dissenting shareholders
Financial reporting
HLB TM is a tax-consulting and accounting firm that offers business advisory services and independent company valuation. Contact us for more information.
When valuing a company’s assets or equity, professionals typically rely on three generally accepted models:
Asset-based (Cost) Approach
Sometimes called the accounting or cost approach, this method determines value by adjusting the book value of assets and liabilities to their current fair values.
Market Approach
Here, value is derived from observable market data—comparing the subject company with recent transactions or publicly traded peers operating in similar industries and conditions.
Income (Earnings) Approach
Also known as the yield or discounted cash-flow method, this approach estimates value by projecting the future economic benefits the business will generate and discounting them to present value.
These approaches provide complementary perspectives; a robust valuation often considers more than one to arrive at a well-supported conclusion.
Valuing a company by the accounting—or cost—approach is the most straightforward method because it rests on the business’s current financial position. It establishes the fair market value of all assets and liabilities; equity value is simply the difference between total assets and total liabilities.
The model’s chief advantage is objectivity: it relies on balance-sheet data and so is less exposed to the valuer’s personal judgments.
However, a cost approach cannot capture or quantify intangible investments—quality of management, innovation capabilities, brand strength, reputation, and similar factors. Nor does it reflect future market conditions or the company’s growth prospects.
Typical situations in which the accounting approach is applied include:
Financial distress that threatens the company’s long-term viability
Planned liquidation
Bankruptcy proceedings and reorganizations
High asset base combined with a low return on investment
Valuations of start-ups and young businesses that have yet to prove profitability or financial stability
Under the market approach, a business is valued by comparison with peer companies. The valuer identifies firms similar in industry, size, geography, growth prospects, risk profile, and other relevant criteria, and then analyses their market prices—share quotations, M&A transaction multiples, and so on—to infer a value for the subject company.
This method is frequently used when investors are preparing offers. Its main strength is that it reflects prevailing market conditions and the company’s position within them.
Limitations include:
The assumption that the subject company should trade in line with peers—an alignment that may not always hold
The difficulty of obtaining reliable data on comparable transactions
The income approach is the most widely used framework in professional practice. It is based on the premise that a company’s current value equals the present worth of the future economic benefits (cash flows) it will generate for its owners. It is generally applied to financially sound businesses with stable, ongoing operations.
Two principal methods fall under this approach:
Discounted Cash-Flow (DCF) Method – projects future cash flows and discounts them to present value.
Capitalization Method – derives value from the company’s current sustainable earnings level.
Because the income approach integrates all relevant qualitative and quantitative information, it enables management to model alternatives and identify paths for enhancing enterprise value.
Statutory financial statements alone do not yield a realistic equity value, but they are an essential input for assessing risk and preparing forecasts. A professional valuation culminates in a documented report that answers all questions about the estimated value. Reports are prepared by qualified valuers and comply with International Valuation Standards (IVS), International Financial Reporting Standards (IFRS), and local regulations.
Depending on the engagement—sale, merger, strategic planning, financial reporting, and so forth—the report must set out:
The determined equity value
The methodologies applied
Analyses, forecasts, and reconciliations
A step-by-step description of the valuation process
The valuer’s credentials
Appendices with financial ratios and any other information used
Key sources of information include:
Economic, financial, and industry analyses
Published historical financial statements
Organisational charts, internal bylaws, management interviews, and other corporate documents
Marketing plans, budgets, and forecasts
Site visits and inspections of facilities
Market and competitor research
Derivation of multiples, discount rates, and other parameters
A licensed valuer is authorized to perform an independent assessment of a company’s equity and assets. These professionals hold recognized certificates that attest to their expertise across industries and asset classes.
Beyond establishing value, experienced valuers can deliver financial, economic, tax, and legal advisory services, helping management make key strategic decisions and chart a successful course for the future.
Optimise your operations and increase your company’s value.
Our team of economists and certified valuation experts can provide tailored solutions. For further questions or to discuss a valuation engagement, please contact HLB TM.
