The prospective owner needs to take into account the need for additional cash outlay which is needed to boost the growth of the company. Human resources apprehension due to the new ownership should also be considered. Also, more efficient cost management techniques to offset higher direct costs and wages are needed to ensure profitability.
The decision of acquiring a business entity requires a thorough evaluation. It is irrefutable that business acquisitions entail a huge amount of risk. As with any investment, a business is associated with the prospect of high returns. However, due to the problem of information asymmetry or imperfect information, it is often difficult to ascertain the intrinsic value of an investment and its future returns. Thus, different valuation principles are used to determine the true value of an investment (Jones and Dyke 1998).
Another important consideration in acquiring a business is the scenario after the transaction. It is essential that the new owner of the business if familiar with the issues currently faced and will be faced by the company he buys. Numbers are not the only factors to take into account during a purchase but the managerial and operation concerns as well. In fact, quantitative analyses should always be accompanied and complemented by qualitative considerations.
This report will focus on ascertaining the true value of...
In fact, quantitative analyses should always be accompanied and complemented by qualitative considerations.
This report will focus on ascertaining the true value of Phil Classic Car Collection Limited (PCCCL) and the considerations which should be taken into account in making the best decision. The first part will look at the true value of the business by employing common valuation techniques traditionally applied in the market. Also, the profitability and efficiency of the company will be assessed by a financial and trend analysis based on the available financial issues. Qualitative analysis will also be utilized in order to gain a more realistic and reliable valuation. Lastly, the company will also look at the different decisions to be faced should an investor acquires Phil Classic Car Collection Ltd. The report will conclude with its findings and recommendations.
II. Business Valuation
In business acquisitions, perhaps the first consideration that a buyer asks is the amount of money that it takes to acquire the business. Afterwards, there is an evaluation of the true value of the business. Company valuation goes beyond looking at the company's accounts as it refers to the "intrinsic worth of the company (Jones & Dyke 1998)." The prospective buyer asks if the business is worth the price that the seller wants.
There is a lot of valuation techniques used in order to appraise the value of a business organization. Among the most popular are the book value, adjusted book value, income capitalization, discounted earnings, discounted cash flow valuation, price earnings multiple, dividend capitalization, sales multiple, profit multiple,