Fair Valuation
Case Study: Fair Valuation for Fundraising and Compliance
- Private Company
- Income Approach
Client Background
A private company sought to raise funds for business expansion and operational improvements. Additionally, certain shareholders planned to transfer preference shares to non-residents, necessitating compliance with regulatory requirements for securities issuance. To ensure a fair and accurate valuation, the company engaged MYVALUATION for professional valuation services.
Understanding the Business and Requirements
To initiate the valuation process, we conducted discussions with the company’s management to:
- Assess the financial and operational position of the company
- Determine the required funding amount and purpose behind the capital raise.
Review key documents, including:
- Previous allotments and shareholding structure
- Latest audited financial statements
- Charter documents of the company
- Shareholder Agreements entered during previous funding rounds
- Cap Table
From these discussions, we understood that the company aimed to expand its business operations and required an appropriate valuation methodology to reflect its future potential.
- Selection of Valuation Methodology
Since the company was a privately held entity operating in present and expand more in future, traditional valuation approaches—Asset Approach and Market Approach—were not suitable due to the absence of publicly traded comparables and market-based valuation metrics. Instead, we opted for the Income Approach, which is based on future cash flow projections and anticipated business growth.
We collaborated with management to prepare reliable financial projections, ensuring they accurately reflected the company's future performance.
- Proposal and Engagement Process
Based on the company’s operational complexity and transaction requirements, we prepared a detailed proposal outlining our scope of work and methodology. Upon receiving management’s approval, we proceeded with:
- Signing an engagement letter
- Receiving partial payment of professional fees
- Conducting in-depth discussions on projection financials and other critical valuation aspects
- Execution of Valuation Assignment
Once the engagement was formalized, we:
- Analysed financial models including projected cash flows prepared by management.
- Conducted a thorough valuation analysis using the Income Approach.
- Prepared a draft valuation report for management review.
Upon receiving management's confirmation on the draft report, we requested a Management Representation Letter (MRL) to be annexed to the final valuation report.
- Final Report and Fundraising Success
Following the receipt of the authorized MRL and remaining professional fees, we delivered the final valuation report to the company. This report enabled the company to successfully raise funds and ensure compliance with regulatory requirements for securities issuance.
- Project Timeline
The comprehensive valuation process was completed within 7 to 8 working days.
Conclusion
By leveraging our expertise in valuation, MYVALUATION facilitated a seamless and efficient fundraising process for the company. Our strategic approach ensured an accurate valuation aligned with the company's growth potential, enabling successful capital infusion and regulatory compliance.