“Evaluation : quelles sont les pratiques d’évaluation des fonds d’investissement ?” by Thomas Hachette, published in Option Finance n° 1532…
From a legal point of view, goodwill comprises of both tangible assets (e.g. equipment and/or goods) and intangible assets (e.g. brands, rights to a lease, customer lists, etc.).
Generally accepted accounting principles tend to assess a company’s value based on the value of the different assets it owns (see the section on Purchase Price Allocation). However, valuation of goodwill is still particularly important for small to medium-sized companies and retail businesses.
The scope of application includes:
- goodwill acquisition or disposal;
- capital injections, internal restructuring;
- fund raising;
- compensation for damages inflicted on the goodwill of a company (e.g. reduction in the commercial value related to the company’s location).
Like all assets, the value of goodwill depends on the economic benefits it will be likely to generate. Hence, our goal is to ensure that the valuation takes into account both:
- typical ratios used to value goodwill (percentage of turnover, profit multiples, etc.);
- the company’s projected profitability.
To apply such an approach, we reprocess the profit and loss accounts in order to specify a prescriptive result.
Our work includes the production of a detailed report setting the nature and the financial value of the goodwill assessed. We can also assist in negotiations on behalf of an acquirer or vendor of the goodwill.