Valuations and Finance

In any corporate finance transaction, there are two certainties that have to be dealt with early on in the transaction: a valuation of a business and the subsequent funding and finance on that particular valuation.

Valuations are based on theoretical guidelines and for a valuation to be of use there has to be a willing seller or buyer.  Most commonly the seller thinks the business is worth more than the purchaser considers it to be.  Sound commercial judgement is always needed to ensure that the valuations are structured with any transaction.

Therefore the key to valuations is the ability to encompass the valuation within negotiation skills to ensure that clients receive the best interest and the best advice.

The reasons that the valuations and the negotiation skills are key is because the funding ultimately determines the price that can be paid for a business and the manner in which a deal is processed.  It would be very easy to come up with a theoretical valuation that is simply not fundable by any of the finance houses providing finance for these deals. 

The funding can cover many different types as follows:

  • Overdraft
  • Term loan
  • Invoice discounting
  • Equity finance
  • Mezzanine finance

Sometimes a funding proposal will be a combination of the above, but again this will depend very much on the business being bought, whether there are sufficient assets to give security or whether in fact the loan is effectively a cashflow lend.

The process can be onerous, time consuming, but well worth it when the final result ends up in a deal concluded effectively and efficiently.

Contact our Corporate Finance team if you require advice on valuations and funding.

Services expert: 
Managing Director and Head of HSKS Greenhalgh Corporate Finance
Director - Taxation Services

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