Business valuation is required mainly in the following situations.
1Valuation for transaction
In order to assist companies’ decision-making, such as considering transaction prices when conducting mergers and acquisitions (stock transfers, mergers, stock exchanges, etc.), the valuation of a company or business corresponds to valuation for transaction. Today, this is not only for internal decision-making purposes but also for other purposes. In order to fulfill our external accountability, we are increasingly obtaining valuation reports from third-party valuation organizations.
2Valuation for internal use
In the acquisition an independent third party valuation for intra-group transactions and transactions between related parties, provides information on the reasonableness of transactions and the fact that transaction prices have not been determined arbitrarily from a tax perspective.
3Valuation for the Purpose of Disputes, etc.
Business valuation may be required in connection with the submission of valuation reports or mediation to the courts.
For example, when you attach a Share Value Calculation Report (calculating the "fair value" under the Companies Act) as documentary evidence when filing a sale through a court in connection with a takeover request by a dissenting shareholder or squeeze-out by a minority shareholder
or when you are in dispute about the share price and show the validity of the price, valuation reports can be useful.
4Valuation for Financial Accounting Purposes
Purchase price allocation (PPA) is typically used for financial accounting purposes.
PPA is a procedure in which the individual assets and liabilities acquired or transferred in connection with an M&A are marked-to-market, and goodwill or negative goodwill, which is the difference between the consideration received and the fair value of the acquisition, is calculated and the accounting transactions for the business combination are appropriately reflected in the financial statements.
In this process, identification and valuation of intangible assets, such as brands and customer relationships, as well as real estate and personal property, which are tangible assets,
are important for disclosing M&A intentions to investors.
- What are the strengths of Tanizawa Sogo Appraisal Co., Ltd. ?
One of our strengths is that we can conduct one-stop valuations in cooperation with the professional in charge of real estate appraisal and the professional in charge of business valuation for M&A, and can calculate the value of shares in business succession by companies such as an asset holding company, which has business assets such as hotels, golf courses, hospitals, and nursing homes, and other companies that have high importance of real estate value in corporate value.
In the valuation of manufacturing companies, it is important to assess the value of factory equipment and factory lines as well as real estate. In this regard, we have a wealth of experience, and one of our strengths is that we can conduct smooth valuations.
Tanizawa Sogo Appraisal Co., Ltd. is a member of the global networking Valuation Research
Group (VRG), which is centered on the US independent assessment organization Valuation Research Corporation (VRC).
What merits do you have?
In today’s increasingly cross-border M&A world, where foreign firms acquire companies in Japan or abroad when conducting mergers and acquisitions targeting Japanese companies with subsidiaries or affiliates, we cooperate with the VRG in each country and share part of the research work.
By outsourcing valuations to a local firm and by unifying contact points with companies around the world we believe that support will become smoother.
In addition, we believe that VRC in the United States has a wealth of experience in purchasing price allocation (PPA) operations, sharing know-how on the identification and valuation of intangible assets, and making it possible to prepare reports that can withstand audit reviews.
- What is the purpose for business valuation?
When you are considering an M&A or business succession to a third party, and you would like to know the value of your company’s stock, when negotiating an M&A. Share value assessment reports have been widely used as materials in negotiations.
We strive to produce reports that are both convincing and easy to explain.
- What do you think is important for business valuation?
First, we conduct financial due diligence to determine whether there are assets with unrealized gains and losses that do not appear on the books and whether they can be recovered. We also check whether overtime payments are outstanding, and whether reserves for retirement allowances, etc., are appropriately posted.
On the earnings front, we will examine the company’s normal profitability and the validity of the business plan, taking into account track record, business plans, industry trends, and the content of management interviews.
We believe it is important to reflect the findings of these processes appropriately in corporate value.
- Is business valuation the only service that can be supported in the M&A process?
No, the general process of M&A is as follows.
We cooperate with alliance experts (lawyers, tax accountants, etc.) not only in valuating companies.
We have put in place a system that enables us to provide M&A advisory services in an integrated manner.
In particular, in the hotel and Japanese inn industry, we provided services from business succession support in collaboration with our affiliate, Japan Hotel Appraisal Co., Ltd. to management support such as post-merger integration (PMI) after the merger.
This makes it possible to provide more consistent support.