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Appraisal of business
The value of a company is determined by the profits it can earn in the future based on its factors for success, which include its innovation, products and position on the market, the internal organisation, its employees and its management.
Provided that only financial targets are pursued, the value of a company is deduced from its ability to generate financial surpluses for its shareholders by the co-action of all factors that influence the profitability.
For our appraisals of business, we regularly use the procedure for profitability (Ertragswertverfahren) or the Discounted-Cashflow-Method (DCF). These procedures are set in the Statements of the Institute of Accountants (Verlautbarungen des Instituts der Wirtschaftsprüfer, IDW), especially in the Standard IDW S1, and are commonly accepted in jurisdiction.
The values of companies we determine can be the basis of:
- The selling or buying of a company or a part of a company
- The determination of an issuing price (as well as the bookbuilding margin) when a company is launched at a stock exchange (so-called Initial Public Offering)
- Foundation of a company with the contribution of assets
- Admittance of new partners into an existing company
- Merger of existing companies
- Demerger and split-up of a partnership into sole proprietorships
- Retirement of a partner after cancellation
- Cash compensation of minority shareholders
- Compensation of minority shareholders by stocks of the controlling company
- Decisions about the liquidation of a company
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