The method should be determined based on the activity and context. RSM Belgium helps you to analyze the valuation methods and decide on the appropriate methods. the most commonly used methods are:
  • Equity approach :  This valuation method is based on the accounting data. As the accounts are kept at historical value, the assets must be adjusted to the market value.
  • Free cash flow approach The value of the company is calculated on the basis of future cash flows.  In other words, the valuation is based on predictions of how much money the company will earn in the future.
  • Multiples approach: When valuing on the basis of multiples, a company is valued on the basis of a multiple of results. A 'multiple' refers to the ratio between enterprise value and a key figure in the profit and loss account, such as enterprise value/operating result (e.g. 5 times EBITDA).
  • Specific approaches  Some sectors have a sector-specific approach, in which case the valuation "focuses" on turnover and/or other elements.
In the analysis of the company's results, adjustments are made to the results for non-recurring expenses/revenues. Finally, the financial feasibility has to be taken into account. Is the value of the valuation such that financial institutions/banks are willing to finance the acquisition?