Valuation: a Strategic Tool Beyond the Final Number

Valuation: a Strategic Tool Beyond the Final Number

When talking about Valuation, many entrepreneurs focus only on the result: how much is my business worth? However, the true strength of Valuation it's in the process, and not just in the number. More than estimating prices, it is a strategic tool that reveals the factors behind the company's value and guides crucial decisions for the present and the future of the business.

In this article, we explore how the Valuation (or “Valuation Report”), can transform Business Management, bringing benefits that go beyond pricing, especially in Mergers and Acquisitions (M&A) processes.

Much More Than Pricing

According to Aswath Damodaran, a world reference in corporate finance, Valuation It is the process of estimating the value of a company based on its results, assets, risks, and future prospects. There are several approaches to evaluating a business, the most common of which are:

• Discounted Cash Flow (FCD)
• Market Multiples
• Book Asset Value

Each method is appropriate according to the context and objective of the analysis. During the preparation of a Valuation Report, entrepreneurs often discover that the process offers an in-depth analysis of the business, highlighting Strengths, Opportunities, Weaknesses, and Threats that were not previously considered in Management.

Business Self-Knowledge: a New Perspective

On a daily basis, many entrepreneurs lose their strategic vision of the business. Some identify risks or growth potentials but are unable to quantify them in a structured way. O Valuation answers essential questions, such as:

• What products, services, or units generate the most value?
• Where are the main risks of the operation?
• Is there an excessive focus on customers, suppliers, or key people?
• Is the company's growth sustainable?
• What factors are reducing the value of the business?

According to PwC (Strategy and Transactions, 2022), 87% of entrepreneurs who carried out a Valuation they formally identified opportunities for improvement that were not on the management's radar.

Data-Based Decision-making

O Valuation it is a powerful tool for basing strategic decisions with concrete data. It helps on several fronts, such as:

• Expansion to new markets or segments
• Fundraising with investors or financial institutions
• Mergers and Acquisitions Assessment
• Succession or exit planning

With greater clarity about drivers of value, entrepreneurs can act with more confidence, reducing risks and optimizing results.

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Access to Capital and Credibility

A well-prepared Valuation Report reinforces the perception of solidity and organization in the face of Stakeholders, bringing benefits such as:

• Easy approval of bank credit
• Attracting investors and strategic partners
• Credibility with suppliers and partners

ABVCAP Research with Funds from Private Equity and Venture Capital indicates that companies with updated Reports are 23% more successful in raising funds.

Succession and Long Term Planning

Business Succession is a challenge in many organizations. Delaying this planning can lead to high costs. O Valuation anticipates the process, allowing for a structured transition for Partners, Family Members or External Investors.

Not only that, it identifies actions that could increase the value of the company in the future.

Practical Cases: Valuation In Action

FC Partners has already supported several processes of Valuation with concrete impacts.

Among several examples of analyses that can provide valuable insights with practical suggestions for the impact of each decision, we can mention a few:

• Impact of Hiring through an Employment Contract PJ
• Analysis of Results by Cost Center in Project Companies
• Evaluation of the impact of leverage on the Weighted Average Cost of Capital
• Sensitivity Studies for Investment Decisions, Corporate Structure, or Expansion

Each analysis is accompanied by simulations and practical recommendations, based on the experience of our M&A specialists.

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Conclusion: Valuation as a Strategic Guide

More than a number, the Valuation is a strategic guide. It broadens the entrepreneur's vision of the business, guides critical decisions and strengthens the Company's position to grow in a sustainable way. In Mergers and Acquisitions processes, it is an indispensable tool for negotiating with confidence and maximizing value.

If you haven't done one yet Valuation, may be missing one of the most valuable tools for leading with clarity and long-term vision.