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The comparative business valuation approach is based on the principle. Comparative approach to estimating the value of an enterprise (business). Prospects for the application of the comparative approach

Borukhin D. S., Tsareva S. V., Gaponenkova N. B., Motina T. N., Breslavets I. N., Bespalova S. V., Drozhdinina A. I., Skotarenko O. V., Smirnov A V., Rapnitskaya N. M., Kibitkin A. I.,

5.2. Comparative approach to estimating the value of an enterprise (business)

A feature of the comparative approach to property valuation is the orientation of the final value, on the one hand, to the market prices for the purchase and sale of shares owned by similar companies; on the other hand, on the actually achieved financial results.

The comparative approach assumes that the value equity firm is determined by the amount for which it can be sold in the presence of a sufficiently formed market. In other words, the most probable value of the valued business may be the actual sale price of a similar firm, fixed by the market.

The theoretical basis of the comparative approach, which proves the possibility of its application, as well as the objectivity of the resulting value, are the following basic provisions. Firstly, the appraiser uses as a guide the prices actually formed by the market for similar enterprises or their shares. With a developed financial market the actual purchase and sale price of the enterprise as a whole or one share most integrally takes into account numerous factors that affect the value of the enterprise's equity capital. These factors include the relationship between supply and demand for this species business, risk level, industry development prospects, specific features enterprises and much more, which ultimately facilitates the work of an appraiser who trusts the market. Secondly, the comparative approach is based on the principle of alternative investments. An investor, investing money in shares, buys, first of all, future income. The production, technological and other features of a particular business are of interest to the investor only from the standpoint of the prospects for generating income. The desire to get the maximum return on invested capital with an adequate level of risk and free placement of investments ensures the alignment of market prices.

Thirdly, the price of an enterprise reflects its production and financial opportunities, market position, development prospects. Consequently, in similar enterprises, the ratio between the price and the most important financial parameters, such as profit, dividend payments, sales volume, and the book value of equity capital, must coincide. hallmark of these financial parameters is their determining role in the formation of income received by the investor.

The comparative approach has a number of advantages and disadvantages that a professional appraiser should take into account. The main advantage of the comparative approach is that the appraiser focuses on the actual sale and purchase prices of similar enterprises. In this case, the price is determined by the market, because the appraiser is limited only by adjustments that ensure the comparability of the analogue with the object being valued. When using other approaches, the appraiser determines the value of the enterprise based on the calculations made.

The comparative approach is based on retrospective information and, therefore, reflects the results of production and financial activities actually achieved by the enterprise, while the income approach is focused on forecasts of future income.

At the same time, the comparative approach has a number of significant drawbacks that limit its use in valuation practice.

First, the basis for the calculation are the financial results achieved in the past. Consequently, the method ignores the prospects for the development of the enterprise in the future.

Secondly, a comparative approach is possible only if the most diverse financial information is available not only for the enterprise being valued, but also for a large number of similar firms selected by the appraiser as analogues. Receipt additional information from enterprises of analogues is a rather complicated and expensive process.

Thirdly, the appraiser must make complex adjustments, make adjustments to the final value and intermediate calculations that require serious justification. This is due to the fact that in practice there are no absolutely identical enterprises. Therefore, the appraiser is obliged to identify these differences and determine ways to level them in the process of determining the final value. The ability to apply the comparative approach primarily depends on the presence of an active financial market, since the approach involves the use of data on actually completed transactions. The second condition is the openness of the market or the availability of financial information required by the appraiser. The third necessary condition is the presence of special services that accumulate price and financial information. The formation of an appropriate data bank will facilitate the work of the appraiser, since the comparative approach is quite laborious and expensive.

The essence of the comparative approach to determining the value of the company is as follows. A business similar to the firm being valued that was recently sold is selected. Then the ratio between the market price of the sale of the analogue enterprise and any of its financial indicators is calculated. This ratio is called the price multiplier. To obtain the market value of equity, it is necessary to multiply a similar financial indicator of the company being valued by the estimated value of the price multiplier.

The comparative approach to business valuation is in many ways similar to the income capitalization method. In both cases, the appraiser determines the company's value based on the amount of campaign revenue. The main difference lies in the way the amount of income is converted into the value of the company. The capitalization method involves converting annual income into value using a capitalization ratio. A capitalization ratio based on market data is used as a divisor. The comparative approach also operates with market price information and the amount of income achieved by a similar firm. However, in this case, income is multiplied by the value of the ratio between price and income.

The comparative approach involves the use of three main methods, the choice of which depends on the objectives, object and specific conditions of the assessment:

Peer company method;

Transaction method;

Method of branch coefficients.

Consider the content, the optimal scope and the necessary conditions application of each method

The peer-to-peer method or the capital market method is based on the use of prices formed by an open stock market.

The basis for comparison is the price of one share of open joint-stock companies. Therefore, in pure form this method is used to evaluate a minority stake.

The method of transactions or the sales method is focused on the acquisition prices of the enterprise as a whole or its controlling stake. This determines the most optimal scope this method- evaluation of 100% capital or a controlling stake.

The technology of applying the method of an analogue company and the method of transactions is practically the same, the difference lies only in the type of initial price information: either the price of 1 share, which does not provide any elements of control, or the price of a controlling stake, including a premium for elements of control

The main stages of enterprise valuation using the analogue company method:

I stage. Gathering the necessary information.

II stage. Comparison of the list of similar enterprises.

III stage. The financial analysis.

IV stage. Calculation of price multipliers.

V stage. The choice of the value of the multiplier, which is appropriate to apply to the company being valued.

VI stage. Definition of the final value

weighting intermediate results.

VII stage. Making final cost adjustments by the method

Comparison of financial indicators of the company being valued and peers. A comparative approach to the assessment of an enterprise involves the use of techniques and methods already existing in Russian practice financial analysis. The appraiser analyzes balance sheets, profit and loss statements, additional information, and calculates financial ratios. Financial analysis is an essential component in determining the comparability of similar companies with the enterprise being valued. The distinctive features of financial analysis in a comparative approach are manifested in the following:

firstly, only based on the results of the financial analysis, the appraiser makes a decision on the comparability and inclusion of certain firms in the list of analogue companies;

secondly, financial analysis allows you to determine the place or rank of the company being valued among peers;

thirdly, financial analysis is the basis for making the necessary adjustments to ensure the necessary similarity of the company being valued with peers;

fourthly, financial analysis makes it possible to substantiate the degree of confidence of the appraiser in a particular type of price multiplier in their total number and, ultimately, to determine the weight of each cost option when deriving the final value.

Based on the results of financial analysis, a so-called summary table of financial ratios is compiled.

The table is drawn up in any form, however, it must contain the valued company and complete list analogues of the estimated value of the most important financial ratios, for example,
such as:

The share of net profit in sales proceeds;

The share of equity in the total sources of financing of the company;

liquidity ratios;

Asset turnover ratios.

Due to the fact that the value of indicators for peers and the company being valued is likely to differ significantly, in order to make subsequent decisions, in addition to the estimated actual values of financial ratios for peers and the company being valued, it is necessary to include auxiliary indicators in the table, such as the arithmetic mean and median. It is extremely important at the final stage of the financial analysis to determine the place occupied by the company being valued among the selected analogues for each of the presented indicators. The totality of the places occupied serves as the basis for determining the final rating of the company being evaluated.

The materials of this table will be used by the analyst at the stage of choosing the value of the price multiplier for the business being valued.

Characteristics of price multipliers

The main tool for determining the market value of the equity capital of an enterprise using a comparative approach is price multipliers.

The price multiplier reflects the ratio between the market price of the enterprise and any of its indicators that characterize the results of production and financial activities.

As such indicators, you can use not only profit, but also cash flow, dividend payments, sales proceeds and some others.

The price multiplier is calculated for all similar enterprises.

To assess the market value of the company being valued, the value of the price multiplier chosen by the analyst is used as a multiplier to its similar indicator.

To calculate the price multiplier, you need to:

1) Determine the value of capitalization or the market value of the equity of the company of the analogue. To do this, the market price of a share of a similar company is multiplied by the number of shares outstanding. This will give us the value of the numerator in the formula. The share price is taken as of the last date prior to the valuation date, or it is the average of the maximum and minimum prices for the last month.

2) Calculate the required financial indicators: profit, sales proceeds, cost net assets and others. This will give us the value of the denominator. This can be an indicator of financial results either for the last reporting year, or for the last 12 months, or the average value for several years preceding
evaluation date.

In valuation practice, two types of price multipliers are used: interval and moment.

The first type includes multipliers: “Price/earnings”, “Price/cash flow”, “Price/dividend payments”, “Price/sales proceeds”.

Momentary multipliers include: “Price/Book Value”, “Price/Net Asset Value”.

The division of price multipliers into interval and moment multipliers is important from the point of view of the number of shares in circulation used in the calculations. So, when calculating interval price multipliers, it is necessary to calculate the average number of shares in circulation for the same period that was used to determine a specific indicator. For example, if net income was calculated as an average for the last three years, then the average number of shares outstanding for the same years should be calculated.

Multipliers "price/earnings", "price/cash flow"

This group of multipliers is the most common valuation method, because information about the profit of the company being valued and its peers is the most accessible. To calculate the multiplier, any indicator of profit that can be obtained by the analyst in the process of its distribution can be used. Therefore, in addition to the net profit indicator, you can use profit before tax, profit before interest and taxes, etc. The main requirement
nie - the complete identity of the indicator used for the analogue and the company being valued, i.e. A multiplier based on earnings before taxes cannot be applied to earnings before interest and taxes. The multiplier "price / profit" significantly depends on the methods of conducting accounting, therefore, if the analogue is foreign company, it is necessary to bring the profit distribution system to uniform standards. Only after all the necessary adjustments have been made can the required level of comparability be achieved, allowing the use of a multiplier.

As a basis for calculating the multiplier, you can use not only the amount of profit received in the last year before the valuation date. The appraiser may use the average annual profit calculated over the last five years. The evaluation period may be increased or decreased depending on the available information and the presence of extraordinary situations that distort the main trend in earnings dynamics.

The basis for calculating the multiplier "Price / cash flow" can be any indicator of profit, increased by the amount of accrued depreciation. Therefore, the analyst can use several variants of this multiplier.

During the valuation process, the analyst seeks to calculate the maximum number of multiples, since applying them to the financial base of the company being valued will lead to the emergence of several cost options that differ significantly from each other. The range of results obtained can be quite wide. Therefore, a large number of multipliers used will help the appraiser to identify the area of the most reasonable value. This judgment is based on mathematical methods. However, there are economic criteria that justify the degree of reliability and objectivity of a particular multiplier.

For example, large enterprises it is better to evaluate on the basis of net income. Small companies - on the basis of profit before taxes, since in this case the effect of differences in taxation is eliminated. Orientation to the multiplier "Price / cash flow" is preferable when evaluating enterprises whose assets are dominated by real estate. If the enterprise has a sufficiently high share of the active part of fixed assets, a more objective result will be obtained by using the "Price / Profit" multiplier.

The most common situation in which the “Price/Cash Flow” multiplier is used is unprofitability or a small amount of profit, as well as a discrepancy between the actual useful life of the enterprise’s fixed assets and the depreciation period adopted in financial accounting. This is possible in the case when the value of the assets will be insignificant, although they will last for quite a long time.

Multiplier "Price/dividends"

This multiplier can be calculated both on the basis of actually paid dividends and on the basis of potential dividend payments. Potential dividends are typical dividend payments calculated for a group of similar enterprises based on a comparison of their actual dividend payments and net income.

The possibility of using one or another multiplier of this group depends on the objectives of the assessment. If the valuation is for the purpose of taking over an enterprise, then the ability to pay dividends is irrelevant, since it can cease to exist in the usual mode of management. When evaluating a controlling stake, the appraiser focuses on potential dividends, since the investor gets the right to decide the dividend policy. Actual dividend payments are important when valuing a minority stake, as an investor cannot force management to increase the dividend even if there is sufficient earnings growth.

The “Price/dividends” multiplier is rarely used in practice, despite the availability of the information necessary for the calculation. This is due to the fact that the procedure for paying income to investors in open and closed companies differs significantly. In closed companies, owners can receive monetary benefits in the form of various payments, rent reductions, etc. The “Price/dividends” multiplier is appropriate to use if dividends are paid fairly consistently both in peers and in the company being valued, or the company's ability to pay dividends can be reasonably predicted. The appraiser must ensure that the amount of dividends is calculated at an annual percentage rate, even if dividends are paid quarterly.

Multiplier "Price/revenue from sales"; "Price/volume"

This multiplier is used quite rarely, mainly to check the objectivity of the results obtained by other methods.

The multiplier "Price / sales revenue" gives good results when evaluating enterprises in the service sector (advertising, insurance, ritual services, etc.). The multiplier "Price / sales revenue" does not depend on the methods of accounting. The undoubted advantage of this multiplier is its versatility, which relieves the appraiser of the need to make complex adjustments used in the calculation of the Price/Earnings multiplier.

If the goal of the valuation is to take over the company, then it is better to focus on the “Price / sales revenue” multiplier, since it excludes the possibility of a price increase due to short-term profit growth provided by the efforts of the financial manager. However, in this case, the appraiser should carefully consider the stability of the sales proceeds in the future. Since the takeover of a company is usually accompanied by a change in the management staff, this can lead to a complete replacement of production personnel and a drop in sales volumes. The peculiarity of the application of the "Price / sales proceeds" multiplier is that the appraiser must necessarily take into account the capital structure of the company being valued and analogues. If the ratio of own and borrowed money significantly different, then the assessment is best done on the basis of the market value of the invested capital.

Scheme for valuation of enterprises with different ratios of own and borrowed funds

1. For an analogue company, the invested capital is calculated as the sum of the market value of equity capital and long-term liabilities.

2. The debt-free multiplier is calculated as the ratio of invested capital to the financial indicator of the analogue.

3. The amount of invested capital is determined for the enterprise being evaluated: the adequate financial indicator of the enterprise being evaluated is multiplied by the calculated value of the debt-free multiplier.

4. The market value of the equity capital of the assessed enterprise is calculated as the difference between the invested capital and the value of long-term liabilities of the assessed company.

The "Price/Volume" multiplier is a variation of the "Price/sales revenue" multiplier. In this case, the price is compared not with a value, but with a natural indicator, which can reflect the physical volume of production, the size of production areas, the number of installed equipment, as well as any other unit of power measurement.

Multiplier "Price/Book Value"

To calculate the price/book value multiplier, the financial basis is the book value of either all or net assets of similar companies at the valuation date or the latest reporting date. This multiplier refers to the so-called momentary indicators, since information about the state on a specific date is used, and not for a certain period of time.

The optimal scope of this multiplier is the assessment holding companies or an appraisal, if it is necessary to urgently sell a large block of shares, which is part of the securities portfolio of the company being valued.

The financial basis for the calculation is either the value of net assets, or total cost assets of the company being valued and its peers. Moreover, both the information from the official balance sheets of companies and the adjusted value obtained by the appraiser by calculation can be taken as a basis.

The process of forming the final value of the value consists of three main stages: the choice of the value of the multiplier, which is appropriate to use for the company being valued; reconciliation of the preliminary results of the market value obtained as a result of the use various kinds price multipliers; making final adjustments.

The choice of the multiplier value is the most difficult and critical step, requiring especially careful justification, which is subsequently recorded in the valuation report submitted to the customer. Since there are no identical companies, the range of the same type of price multiplier calculated for the entire list of peer companies can be quite wide. The analyst, first of all, cuts off the extreme values of the multiplier and calculates its average and median values using analogues.

The choice of the value of the price multiplier is made on the basis of an analysis of the actual average and median values for each financial ratio, as well as the position of the company being valued in terms of the element of comparison. The method of searching for analogues is reduced to the selection of companies whose indicators are closest to those evaluated according to criteria such as:

The structure of the balance sheet;

Reports on financial results;

Values of financial ratios.

For the selection of analogues, a mathematical justification can be proposed: analogue companies are selected whose indicators do not exceed a given deviation over the entire range of values from the indicator of the company being valued, both downward and upward. In this case, the list of comparable companies is reduced, but the economic logic does not always coincide with the mathematical calculation, and in this case, all elements of comparison are given equal importance.

Then, the results of financial analysis, concentrated in the so-called “Financial Ratios Summary Table”, are involved in the assessment. To select the value of a particular type of price multiplier, the analyst uses the financial ratios that are most closely related to it. Based on a comparison of the values of the financial ratio, the position (rank) of the company being valued among similar companies is determined. The choice of the value of the price multiplier for the company being valued using the data of the "Summary Table of Financial Ratios" is usually made by an expert. For these purposes, it is possible to apply the method of graphical comparison of the values of the financial ratios of the company being valued with adequate financial indicators of peer companies in order to determine the place occupied by the company being valued. The minimum and maximum values of the coefficient are analyzed for the entire list of analogues, as well as the calculated average and median values. You can offer a mathematical justification: for example, the liquidity ratio, min value 0.95 is taken as 0%, max value 4.2 is taken as 100%. Then the value of the indicator for the company being valued, equal to 1.34, in percent will be 8.92% = (1.34 - 0.95) / (4.2 - 0.95).

Then the appraiser conducts a graphical comparison of the values of the multipliers by analogues with the closest values of the calculated minimum, maximum and median values of financial ratios. Usually, not a specific value of the price multiplier is chosen, but a range of the most objective values. For example, if the range of financial ratios of the company being valued compared to peers is below average, the final value of the multiplier will be determined in the range: average or below average.

The analogue company method involves the use of price information from the stock market for open joint-stock companies, therefore it is recommended to adjust (reduce) the selected value of the price multiplier due to the lower level of capitalization of the company being valued.

Coordination of preliminary market value results. The comparative approach allows the analyst to use the maximum number of all possible types of multipliers, therefore, the same number of cost options will be obtained in the calculation process. If an analyst proposes as a final value a simple average of all obtained values of the market value of equity capital, then this will mean that he equally trusts all multipliers.

The most objective method for determining the final value of the market value is the weighting method. The appraiser, depending on the specific conditions, goals and object of assessment, the degree of confidence in this or that information, gives each multiplier and, accordingly, the cost option its own weight. Based on this weighting, a final cost value is obtained, which can be taken as the basis for subsequent adjustments.

Making final adjustments

The final value obtained as a result of applying the entire set of price multipliers must be adjusted in accordance with the specific conditions of business valuation. The most typical are the following amendments.

Portfolio discount is provided in the presence of unattractive nature of asset diversification for the buyer. The analyst, when determining the final cost option, must take into account the existing non-performing assets, for example, non-production purposes.

If in the process of financial analysis it is revealed either the insufficiency of own working capital, or an urgent need for capital investments, the resulting value must be subtracted.

It is possible to apply a discount for low liquidity.

In some cases, an adjustment is made in the form of a premium for the controls provided to the investor. This amendment ensures the universality of the peer company method, as it allows it to be used to estimate the controlling share of equity.

The comparative approach, despite the sufficient complexity and laboriousness of calculations and analysis, is an integral method for determining a reasonable market value. The results obtained by this method have the most objective market basis, the quality of which depends on the possibility of attracting a wide range of peer companies. Consequently, the main factor hindering the use of the analogue company method and the transaction method in Russian practice is the lack of sufficient and reliable pricing and financial information on domestic analogue companies. However, the emergence in recent years of firms specializing in the collection and analysis of such information, as well as various electronic sources, is a significant breakthrough in this direction. In this way, further development assessment infrastructure will help expand the scope of the comparative approach.

Industry coefficient method

The method of industry coefficients, or the method of industry ratios, is based on the use of recommended ratios between the price and certain financial parameters. Industry coefficients are usually calculated by special analytical organizations on the basis of long-term statistical observations behind the ratio between the price of the enterprise's own capital and its most important production and financial indicators. Based on the analysis of the accumulated information and generalization of the results, fairly simple formulas for determining the value of the enterprise being valued were developed.

The method of industry coefficients has not yet received sufficient distribution in domestic practice, since there is no necessary information accumulated over a period of sufficiently long observation in a relatively stable market.

Considered in Table. 5.8 indicators (formulas) were developed and derived by US analysts to evaluate small businesses, which include firms with annual net sales from $100,000 to $3 million. The formula represents a small business valuation method that is part of the comparative approach and is called the industry coefficient method (ratios). Small business valuation uses a large number of formulas, some of which have been developed for certain situations, certain types of small businesses and have limited applicability. Others are universal in nature and have been widely used.

The basis for bringing these formulas to certain standards is the general main goal of acquiring a business - obtaining an adequate return on invested capital by the owner, regardless of how specific type business he is dealing with. Possible differences are related to the actual or perceived risk of a particular assessed object, the level of which is diagnosed by the range of multipliers.

Each formula offers the use of a specific set of indicators for evaluating: a grouping of settlement assets, net sales proceeds (annual or monthly), cash flow generated by equity. The formulas offer the appraiser a range of multiplier values calculated on the basis of a large number of transactions. The value selected within the range is applied as a multiplier to that of the firm being valued, normalized in accordance with the requirements for preparing information for valuation purposes. The result obtained represents the value of a certain asset or group of assets, which are called settlement.

Formulas have long been used to value small businesses. However, this method does not exclude the use of other relevant valuation methods, the results of which should be taken into account in the final stages of the valuation through appropriate adjustments.

The method of industry coefficients has its advantages and disadvantages, which must be taken into account in the process of its application when evaluating small businesses. The most significant of them are as follows.

Benefits of Using Formulas

The formulas are market based as they include data from accountants, business brokers, bankers, professional appraisers, government agencies, trade associations, and others. Some are based on actual market transactions data provided by brokers and other market participants, others are traditional "Rule of Thumb" formulas applied in certain business areas.

The formulas provide the investor with the possibility of comparison and clearly reflect the market assessment of industry risk.

The formulas provide a unified valuation of the business, although the construction and use of the formulas depends on economic conditions, regional features and other factors.

Formulas determine the cost of a small business with a reasonable range of values. The resulting range is compared with cost options obtained using other relevant valuation methods included in other approaches.

The formulas are quite easy to use, they are clear to both professionals and non-specialists.

Formulas are most useful and effective for the preliminary assessment of small businesses in the absence of information related to this business.

Disadvantages of the method and the complexity of using formulas

The value obtained using the formulas must be confirmed by other methods.

The formulas are general and, therefore, do not take into account the specifics of cash flow and income generation, location, existing leasehold rights, the condition of equipment, improvements and furnishings, the reputation of the firm among consumers, suppliers, bankers and other market participants, barriers to entry into the industry, etc. d. The application of formulas requires making all the necessary adjustments.

Formulas can be misleading. The method is based on universal formulas that are easy to calculate and use, but they also smooth out specific details. In practice, there is no one-size-fits-all business, as two small businesses in the same industry can have the same net annual revenue but vastly different cash flows. An objective assessment using these formulas should be based on the results of financial analysis.

Market formulas apply to a business that has a market value or, in other words, can be sold. In the process of applying the formulas, the appraiser may have a false judgment that the value of the business should be such, because it is calculated mathematically. However, in practice, a small business that generates income and uses assets efficiently cannot always be sold for a number of reasons. For example, the income of the business being valued may depend on the unique abilities of the owner. In some cases, it is unprofitable for the buyer to purchase an existing business at the estimated price, since it can be quite easily opened from scratch, so the business being valued may have a lower sale price than the value calculated by the formula.

Table 5.6

Summary table of the range of price multipliers used in the evaluation of small businesses (foreign practice)

Consider the procedure for assessing a small business on a conditional example.

The business being valued has multiple full-time owners who also own the property that is used by the business. Source of information for evaluation
ki - income tax declaration of the owners. The cash flows do not include the cost of the owners and managers and the rent for the use of space.

Stage 1. Preliminary analysis of retrospective reporting and normalization of the original reporting.

Table 5.7

Balance sheet adjustment

Indicators				At market value at the valuation date

1. Current assets:
Cash
Accounts receivable
Inventory
Total current assets
2. Non-current assets:
Real estate
Equipment
Total fixed assets
Total assets
Commitments
Equity
Total liabilities

Based on the analysis of the retrospective balance sheet of the company being valued and the actual state of assets as of the valuation date, changes were made to the following balance sheet items:

1. Accounts receivable (debts overdue by 1.5 years are excluded).

2. Inventory (excludes inventory due to poor storage).

3. Real estate (assessment of the market value of real estate was carried out using the comparative analysis sales and income capitalization method).

4. Equipment (the cost of equipment is determined taking into account functional wear and tear).

In the process of normalization financial reporting the following adjustments were made to the expenditure side (Table 5.10).

Included:

1) wage one manager with all due taxes and payments (the potential owner can be the only one and use a hired manager);

Table 5.8

Normalization of financial statements

2) rent for real estate (since small businesses can be sold separately from real estate, at the first stage, the assets being valued should not include the value of real estate, which can be taken into account in the final value of the business value in a joint sale due to the appropriate adjustment).

Excluded:

1) state income tax (assessment is carried out on a pre-tax basis);

2) the cost of maintaining a personal car (an atypical expense item for a small business).

Stage II. Calculation of the cash flow generated by equity capital.

Table 5.9

Cash flow (CSR)

Stage III. Calculation of the market value of the estimated assets of the company being valued.

Table 5.10

Calculation of the market value of assets

Annual method net income (ANR)	Monthly method net income (MNR)	Annual method cash flow (OCF)

Annual net revenue from the sale of goods and services (ANR)	Monthly net revenue from the sale of goods and services (MNR)	Annual cash flow generated by equity (OCF)

ANR multiplier	MNR multiplier	OSF multiplier

Value of settlement assets	Value of settlement assets	Value of settlement assets

Application of mathematical methods in a comparative approach

Correlation-regression analysis is one of the most flexible methods of processing statistical information. It refers to the so-called factor analysis, which allows you to identify the dependence of the desired variables on the given factors and synthesize the mathematical and economic meaning of the identified dependence.

With regard to the comparative approach to business valuation, such information is, on the one hand, market data on the value of shares of companies listed on the stock market, on the other hand, indicators of financial economic activity these companies. In this case, price multipliers are the basis for the analysis of the regression model, which are used when calculating the company's value using the analogue company method or the transaction method.

The regression function shows what the mean value of a variable will be if the independent factors take on a specific value. If we represent the market value of the company being valued as a variable and analyze, based on the available information for similar companies, its dependence on the pricing indicators of the companies' activities, then we can build a regression model for calculating the value of the company being valued.

The simplest and most illustrative method of building a regression model is a single-factor linear regression. In the analysis process, you can use multivariate linear regression and non-linear models, however, the use of more complex models requires a more thorough financial analysis of the results achieved by the enterprise and an assessment of their impact on the market price for the shares of this company. Others no less difficult question is the description of these economic relationships by mathematical functions, which is not always possible due to the specifics of Russian market processes and the lack of a sufficient, reliable information base.

The possibility of using regression models in conditions Russian market So far, it is limited to the sectors of the electric power industry, the oil and gas producing and processing industries, companies providing communications services, telecommunications services, and some others. That is, industries in which the shares of a large number of enterprises are freely traded on the stock market.

Estimating the value of a company based on the construction of a regression model involves next steps: information gathering and preliminary data analysis; selection of one (system) pricing indicator; construction of a matrix of pair correlation coefficients, identification of the dependence of the variable on the selected factors (factor).

Determining the type of model and numerical estimation of its parameters. Checking the quality and significance of the model.

Calculation of the variable value based on the constructed regression model.

Let us consider in more detail the content of each of the stages.

Collection and preliminary analysis of the necessary information. When assessing the value of an enterprise in the framework of the market approach, it is necessary to collect information about peer companies. This should be, firstly, data on the market capitalization of companies obtained from the stock market. Here the appraiser can choose on the basis of which prices he will calculate the market capitalization. These can be both average prices for a certain period of time, and values as close as possible to the date of assessment. The first option is usually used when there are fairly strong fluctuations in the price of shares over a certain period of time, due to general economic and market factors. If the reason for the fluctuations is related to changes in the business activities of the company, then the inclusion of this analogue in the list is inappropriate. When talking about the quantitative component of capitalization, most often the average price of all completed transactions in the market is chosen as the basis for calculation.

The choice of pricing factors that affect the indicator under study forms the basis of the future model. In the market approach, such financial indicators as revenue, profit, cash flow, dividends, net asset value, book value of assets and some others can serve as a base. The choice of a specific indicator or their system depends on the available information, the economic significance of the selected indicators for a particular company, as well as the preferences of the evaluator. In the case of building a one-way regression, one indicator is selected. However, the evaluator can build several independent versions of the models and then compare the final values obtained using each of them.

Identification of a quantitative relationship between the market value of the company and the factor chosen as the financial basis for building the regression model. At this stage, the appraiser mathematically confirms the validity of the analytical choice of one or another factor. This can be done using correlation analysis, namely the construction of a matrix of correlation coefficients that measure the closeness of the relationship of each of the factor-signs with the effective factor. The values of the correlation coefficients lie in the range from -1 to +1. The positive value of the coefficient indicates a direct dependence, in our case, of the market value on the chosen financial base, negative meaning- about the reverse. The closer the value of the calculated coefficient is to 1, the stronger the dependence of the market value on a certain factor. The dependence is considered sufficiently strong if the correlation coefficient in absolute value exceeds 0.7, and weak if it does not exceed 0.4. When this coefficient is equal to zero, the connection is completely absent. The correlation coefficient gives objective assessment degree of dependence only with a linear regression model.

In practice, the appraiser is faced with analogue companies, indicators of financial and economic activity of various scales, especially if, along with domestic analogues, Western ones are used that surpass the company being valued in terms of sales volume, net assets, etc. several times. In this case, it is advisable to carry out logarithmic scaling of the sample data, introducing relative (percentage) differences in the initial data into consideration in order to get rid of the scale effect when constructing the regression equation. Logarithmic scaling is the calculation of the natural logarithm of each value of the generated sample.

The choice of a regression model, on the basis of which the valuation of the company will be carried out in the future. Consider a one-factor linear regression model, which has received the greatest practical distribution.

The regression linear estimation model in the case of applying logarithmic scaling will look like this:

The regression parameter equations are given in the corresponding mathematical reference books, in addition, you can use the EXCEL analysis package, in which, for given input and output sampling intervals (market value and one or another pricing indicator), the regression parameters are calculated and the regression equation is built automatically.

Checking the quality of the applied company valuation model using correlation and regression analysis. Model quality analysis can be carried out in several ways, the main ones being residual analysis, outlier analysis, and coefficient of determination analysis.

Residual analysis allows you to get an idea of how well the model itself is matched and how correctly the method for estimating the coefficients is chosen. The study of residues is carried out by studying the schedule of residues. It can show the presence of any dependency not taken into account in the model. If the model is built correctly, the residual plot should represent equally distributed random variables.

Outlier analysis is also done with a residual plot, which is good at showing outliers from the model. Special attention should be paid to such anomalous observations, since their presence can grossly distort the value of the obtained estimate. One of the most acceptable ways to eliminate the effects of outliers is to exclude these points from the analyzed data, i.e. exclusion from the list of analogues of those companies, the value of indicators of which strongly deviates from the built model.

The most objective way to check the quality of the resulting model is to calculate the coefficient of determination. The coefficient of determination is the correlation coefficient squared (R2). It shows the proportion of the variation of the resulting variable, which is under the influence of the studied factors (factor), i.e. determines what proportion of the variation of the estimated variable is taken into account in the model and is due to the influence of the selected factors. The closer R2 is to one, the more significant the model is. The boundary value is the coefficient of determination equal to 0.7. If the resulting value is less, then the model cannot be used for estimation. The calculation of this coefficient, as well as the plotting of residuals, is performed automatically using the EXCEL analysis package during the simulation of the regression equation.

Calculation of the value of the valued business by setting the value of the basic financial indicator of the activity of the valued enterprise in the resulting regression model. If logarithmic scaling was applied in the process of building the model, then after calculating the natural logarithm of the required variable (in our case, the value of the company being valued), it is necessary to go to the initial values, i.e. calculate the exponent of the natural logarithm.

The considered model involves the use of information about the price of shares of companies sold in the stock market in small lots, therefore, it is a kind of capital market method and allows you to evaluate minority stakes in an enterprise. In the case of valuation of controlling interests or value share capital in general, it is necessary to make an adjustment for the degree of control.

The method of principal components can be conditionally attributed to factor analysis, which, on the basis of real-life relationships between factors, makes it possible to determine the effective indicator - the value of the business. The main difference between the principal component method and the one-factor regression model is that it operates with a large set of input factors that are closely related to each other. When building regression models, the initial parameters must be conditionally independent. AT economic models multicollinearity problem, i.e. linear or other dependence of factors close to it appears almost always, since the main most significant financial and production indicators of the enterprise, affecting its value, are quite closely interconnected. In this case, the use of correlation-regression analysis in its pure form is not justified either from a mathematical point of view (it is impossible to calculate the regression parameters) or from an economic point of view - a meaningful interpretation of such a model will not correspond to reality. The essence of the principal component method lies in the mathematical transformation of the matrix of initial values in such a way that during the calculations a new matrix is built, where each relationship of the initial factors to each other and their influence on the final indicator (business value) is displayed by a certain conditional generalized factor (principal component). The search for the main components is reduced to the task of selecting the first, most significant, main component, and further ranking the components. The new components are weakly correlated with each other, but the dependence of the calculated indicator on some of these factors continues to be significant. This is where regression analysis comes into play, which is based on newly obtained factors, usually two or three of them are significant. The sequence of procedures performed in the process of applying the principal component method in assessing the value of a business in in general terms similar to the stages of regression analysis outlined earlier. However, here there are cardinal differences of the following nature: the valuation of a company using the method of principal components includes several blocks of analysis that are unique to this mathematical technique. It is these blocks that will be considered in more detail, and for the stages characteristic of both methods, only special features will be highlighted.

Scheme for calculating the cost of business using the method of principal components:

1) data collection and analysis. Identification of a system of interrelated factors that form matrices of initial data;

2) building a matrix of pair correlation coefficients, identifying the interdependence of the initial factors (multicollinearity);

3) carrying out mathematical transformations of the matrix of initial values in order to determine new significant factors(main components);

4. choice of regression model and numerical estimation of its parameters;

5. checking the quality and significance of the resulting model;

6. determination of business value based on the constructed model.

Collection and preliminary analysis of information. The main difference of this stage from the one-factor regression model is that the formed system of initial factors consists of several interdependent price-forming indicators of the company's financial and production activities. This system may include information on the amount of revenue, profit, net assets, value of fixed assets, production capacity (both design and actual), the share of borrowed funds, etc. In addition to the listed quantitative factors, the principal component method makes it possible to use the qualitative characteristics of the enterprise's activities. So for the electric power industry, it is important to analyze the factor of the so-called scarcity (non-deficiency) of the company. This indicator characterizes the compliance of the company's capacity with the needs of the region in electricity and is used to resolve the issue of the need to purchase the missing amount of electricity on FOREM. If this factor is not taken into account, the developed model will not be able to adequately reflect the market value of the enterprise, taking into account its real position in the industry. The appraiser needs to determine the numerical value of the deficit (surplus) of electricity for all peer companies. In the absence of the necessary information, this factor is taken into account in subsequent calculations as a qualitative one. Each analogue is assigned a sign of 1 or 0.

To eliminate the scale effect in the first stage, it is also possible to carry out logarithmic scaling of the initial data, since the scale effect has a greater influence in the method of principal components than in simple regression models. If during the analysis of analogue companies a strong spread in the values of pricing indicators is revealed, it is necessary to bring these values to a more comparable form.

Construction of a matrix of pair correlation of initial parameters. This stage of the principal component method, unlike regression models, is quite formal, since the matrix is, in fact, a mathematical confirmation of the possibility of using the principal component method to assess the market value of a business. If the pair correlation coefficients exceed the value of 0.7, then the factors are in strong interdependence and the application of the method of principal components is justified.

Transforming the matrix of initial parameters into a matrix of principal components and determining the most significant of them. This procedure consists of several sequential operations, as it is quite complex and laborious.

The process of step-by-step transformation of the source data matrix
in general view is shown in Fig. 5.3:

Rice. 5.3. Scheme for converting the matrix of initial parameters into the matrix of principal components, where Х is the matrix of initial data with dimension m?n; n - the number of objects of observation (analogue companies); m is the number of elementary analytical features (pricing indicators) Z is a matrix of standardized feature values; R(S) - matrix of pair correlations; Y - diagonal matrix of eigenvalues; U - matrix of unnormalized eigenvectors; V - matrix of normalized eigenvectors; A - factorial mapping matrix (at first it has the dimension m?n - according to the number of initial price-forming features, then r most significant components remain in the analysis)

We bring to your attention the journals published by the publishing house "Academy of Natural History"

COMPARATIVE (MARKET) APPROACH TO BUSINESS VALUATION

Studying the material of the chapter will allow the student to:

know

features of using the market approach to business valuation;
key multipliers within the framework of the market approach and the specifics of their use;
requirements for choosing an analogue company;

be able to

Justify the choice of multipliers used to assess the value of a business, as well as make the necessary adjustments when using the financial indicators of foreign peer companies;

own

capital market method;
transaction method;
industry specific method.

Analogue Selection Algorithm in the Comparative Approach

Comparative approach - a set of methods for estimating the value of an object based on comparison with analogues, information about the value of which is known. At the same time, an asset that is similar to that assessed in terms of the main economic, material, technical and other characteristics that determine its value can be recognized as an analogue.

Determining the value of a business using the methods of a comparative approach is based on information about transactions with securities of peer companies or data on the capitalization of such companies. The reliability of the enterprise value assessment within the framework of the comparative approach assumes the existence of a developed stock market of the country and its information support, which allows expressing the current financial condition enterprises and their prospects. The grounds for using the comparative approach are:

- relative stability of the stock market;
- the presence of an analogue company (or several similar companies) on it;
- the openness of the company-analogue and the liquidity of its shares (the appraiser must be convinced of the publicity of this company, as well as the liquidity of its shares and the presence of demand for them).

Depending on the availability and accessibility of information, the characteristics of the object of assessment, the subject and conditions of the proposed transaction, in the case of a comparative approach, the following methods are most common:

- a method of transactions, which is based on information about big deals with blocks of shares of companies-analogues in the market;
- industry-specific method used in the case of a relationship between the company's revenue and its value;
- capital market method based on information about peer companies whose shares are quoted on the stock market. This method is the most common method of comparative approach.

The limitation in using the results of the comparative approach is determined by the presence of one or more analogue companies, their comparability with the company being valued, industry conditions, external economic factors. The comparative approach is based on correlating the market capitalization of an analogue company and the financial results of its activities with the corresponding indicators of the company being valued.

At the same time, the choice of the type of financial result, which can be different types earnings, as well as cash flow, revenue and other indicators depend on how comparable the company being valued and its analogue are, taking into account the specifics of both companies.

At the same time, the appraiser must take into account that the value of a business calculated by the comparative approach may not be determined accurately enough even if there is a close analogue. This is because a non-public company, whose shares (or shares) are illiquid, carries over the indicators typical of large public companies. Therefore, it is obvious that the use of a comparative approach for assessing small enterprises is inappropriate: in addition to the incompatibility of the level of liquidity, in this case there will also be a discrepancy in the scale of activities.

In ch. 1 it was noted that the need to evaluate companies with market capitalization is justified only if the stock market is unstable during this period. However, in such a situation, the use of a comparative approach is absolutely inappropriate, since it is based precisely on stock market information. And in this case, the assessment of the company should be carried out using the tools of the income or property approach.

The defining moment in the framework of the comparative approach is the choice of analogues and their primary analysis. This algorithm includes the following sequence of actions.

1. Establishing that the company being valued and the company-analogue operate in the same industry, according to SIC- a code in accordance with which the attitude to a particular industry is interpreted taking into account the narrow profile of the activities of the companies present in it. Single SIC-kor indicates that companies produce substitute goods that satisfy the same needs and are targeted at the same consumer segments. In ch. 2 when considering the method SARM it was found that companies belonging to the same industry have the same systematic risks.

To determine a list of companies belonging to the same industry, you can use search engine companies websters online, Inc at www.webstersonline.com/sicsearch.asp?siccode=23.

2. Having defined the list open companies operating in the same industry as the one being assessed, a detailed analysis should be carried out to justify their comparability on the following factors:
- - taxation conditions used by companies. Differences may occur if companies operate in different countries(the methodology of the comparative approach, with certain adjustments, allows the use foreign analogues). In addition, cases may be considered when one of the companies, for example, is a resident of a special economic zone and enjoys appropriate tax preferences. Also, differences can be observed if one of the companies uses a simplified taxation system, is temporarily exempted from paying mandatory contributions to the budget, etc.;
- - the capital structure, determined on the basis of financial statements, which should be available from peer companies due to their open nature;

conditions for attracting borrowed capital. Obtaining information on this criterion in relation to peer companies is rather difficult, however, the appraiser must at least compare these conditions with the average market ones;

terms of depreciation policy. If the company being valued and the company-analogue use different methods of depreciation, this is reflected in their profit - it is most often considered as a financial result used when calculating multipliers within the comparative approach.

In addition to the considered criteria for comparability of companies, the appraiser must also take into account the following factors:

- the size of the company. As mentioned above, the algorithm of the comparative approach for the valuation of small businesses cannot be applied, however, if the objects of valuation are not small enterprises, the appraiser should in any case take into account the comparability of their sizes;
- territorial location. If the company being valued and the peer are located in different countries, a number of adjustments need to be applied, which will be discussed in detail in paragraph 3.3. In addition, this factor should be taken into account if companies are residents of one country, since geographical remoteness (this is especially true for assessing Russian companies) directly affects logistics and other costs;
- stage life cycle companies. It is unlawful to evaluate a newly created enterprise by extrapolating to it the corresponding multipliers of a company that has been operating on the market for a long time. This is due to the fact that the object of assessment is characterized by much higher risks associated with the early stage of the life cycle. In addition, no one can guarantee that the development period will be successfully completed and the company being valued (as well as its analogue) will reach the stage of maturity. Therefore, the use of a comparative approach in the evaluation of new enterprises should be avoided.

At the same time, it should be noted that the comparative approach is often used to evaluate venture business (usually new, and most often small), which contradicts the above provisions. Therefore, it must be emphasized that the use of a comparative approach is acceptable for valuing a venture capital business by the time its investor divests, i.e. by the time the company acquires a solid financial basis and possibly open.

3. Ranking of analogues of the company being valued according to all listed factors for selection of several (or one) closest ones.

In conclusion of the general characteristics of the comparative approach, it should be noted that it is possible to evaluate an operating company using stock market data only using market value. Therefore, the more accurately its value is determined, the more reliable the result of the assessment obtained using this approach.

The comparative approach assumes that the value of a firm's equity capital is determined by how much it can be sold for in the presence of a sufficiently formed market. In other words, the most probable value of the valued business may be the actual sale price of a similar firm, fixed by the market.

The theoretical basis of the comparative approach, which proves the possibility of its application, as well as the objectivity of the resulting value, are the following basic provisions.

Firstly, the Appraiser uses as a guide the prices actually formed by the market for similar enterprises (shares). In the presence of a developed financial market, the actual purchase and sale price of an enterprise as a whole or one share most integrally takes into account numerous factors that affect the value of the enterprise's equity capital. Such factors include the ratio of supply and demand for this type of business, the level of risk, the prospects for the development of the industry, specific features of the enterprise, etc. This ultimately makes it easier for the Valuer to trust the market.

Secondly, the comparative approach is based on the principle of alternative investments. An investor, investing money in shares, buys, first of all, future income. The production, technological and other features of a particular business are of interest to the investor only from the standpoint of the prospects for generating income. The desire to get the maximum return on placed investments with adequate risk and free placement of capital ensures the alignment of market prices.

Thirdly, the price of an enterprise reflects its production and financial capabilities, market position, and development prospects. Consequently, in similar enterprises, the ratio between the price and the most important financial parameters, such as profit, dividend payments, sales volume, and the book value of equity capital, must coincide. A distinctive feature of these financial parameters is their decisive role in the formation of income received by the investor.

Depending on the goals, object and specific conditions of the assessment, the comparative approach involves the use of three main methods.

1. The method of the company-analogue.
2. Method of transactions.
3. The method of industry coefficients.

The peer company method or the capital market method is based on the use of prices formed by the open stock market. Thus, the basis for comparison is the price of a single share of joint-stock companies of an open type. Therefore, in its purest form, this method is used to evaluate a minority stake.

The method of transactions or the sales method is focused on the acquisition prices of the enterprise as a whole or a controlling stake. This determines the most optimal scope of this method - the valuation of an enterprise or a controlling stake.

The method of industry coefficients or the method of industry ratios is based on the use of recommended ratios between the price and certain financial parameters. Industry coefficients are calculated on the basis of long-term statistical observations by special research institutes for the sale price of the enterprise and its most important production and financial characteristics. As a result of the generalization, quite simple formulas for determining the value of the enterprise being valued were developed.

Enterprise price retail is formed as follows: 0.75 - 1.5 of the amount of net annual income is increased by the cost of equipment and stocks owned by the assessed enterprise.

The essence of the comparative approach in determining the value of the enterprise is as follows. An enterprise similar to the one being assessed, which was recently sold, is selected. Then the ratio between the sale price and any financial indicator for the analogue enterprise is calculated. This ratio is called the multiplier. Multiplying the value of the multiplier by the same basic financial indicator of the company being valued, we get its value.

The comparative approach to business valuation is in many ways similar to the income capitalization method. In both cases, the appraiser determines the company's value based on the amount of campaign revenue. The main difference lies in the way the amount of income is converted into the value of the company. The capitalization method involves dividing the amount of income by the capitalization ratio, built on the basis of general market data. The comparative approach operates with market price information in relation to the income achieved. However, in this case, the income is multiplied by the value of the ratio.

The process of valuation of an enterprise using the methods of an analogue company and transactions includes the following main stages.

I stage. Gathering the necessary information.

II stage. Comparison of the list of similar enterprises.

III stage. The financial analysis.

IV stage. Calculation of estimated multipliers.

V stage. The choice of the multiplier value.

VI stage. Determination of the final value of the cost.

VII stage. Making final adjustments.

Introduction

An increase in the value of an enterprise is one of the indicators of the growth in the income of its owners. Therefore, periodic business valuation can be used to analyze the effectiveness of enterprise management. Traditional methods of financial analysis are based on the calculation of financial ratios and only on the data of the enterprise's financial statements. However, along with internal information, in the process of assessing the value of an enterprise, it is necessary to analyze data characterizing the operating conditions of an enterprise in a region, industry, and the economy as a whole.

The current stage of the formation of market relations requires the active formation of institutional foundations and assessment infrastructure. This concept includes the creation of the necessary legislative framework, the development of domestic valuation standards, the development of a network of valuation firms, the creation of training centers for the training and retraining of specialists. Business valuation is based on the use of three approaches: cost, income and comparative. Each approach involves the use of special techniques and methods, based either on past achievements, or on the present state of the firm, or on expected future earnings.

This paper reveals the main provisions of the comparative approach. The theoretical basis of the comparative approach, which proves the possibility of its application and the objectivity of the effective value of the value of the enterprise, are the following provisions. Estimating the value of a business based on a comparative approach involves the use of actual market prices for similar enterprises (shares) as a guideline.

General characteristics of the comparative approach

The theoretical basis of the comparative approach, which proves the possibility of its application, as well as the objectivity of the resulting value, are the following basic provisions.

Firstly, the appraiser uses as a guide the prices actually formed by the market for similar enterprises (shares). In the presence of a developed financial market, the actual purchase and sale price of an enterprise as a whole or one share most integrally takes into account numerous factors that affect the value of the enterprise's equity capital. Such factors include the ratio of supply and demand for this type of business, the level of risk, the prospects for the development of the industry, specific features of the enterprise, etc. This ultimately makes it easier for the Valuer to trust the market.

Advantages of the comparative approach:

If there is sufficient information about analogues, accurate results are obtained;

The approach reflects the market, taking into account the real supply and demand for such objects, as it is based on comparing the enterprise being valued with analogues that have already been bought recently or whose shares are freely traded on financial markets;

The price of an enterprise reflects the results of its production and economic activities.

Disadvantages of the comparative approach:

It is based only on retrospective information, practically does not take into account the prospects for the development of the enterprise;

It is difficult and sometimes impossible to collect financial information about analogues (due to the insufficient development of the stock market, many joint-stock companies do not give their quotes to the stock market, and closed joint-stock companies, of which there are a lot, do not disclose financial information);

Significant adjustments are required due to strong differences between enterprises (equipment, assortment, development strategies, quality of management, etc. differ).

The comparative approach is implemented through three methods.

1. Capital market method is based on the real prices of shares of open enterprises that have developed on the stock market. The basis for comparison is the price of a single share of a joint-stock company. Used to value a minority interest.

2. Deal method- for comparison, data are taken on sales of controlling stakes in companies or on sales of enterprises as a whole, for example, in case of takeovers or mergers. The method is used when purchasing a controlling stake in an open enterprise, as well as for evaluating closed companies that operate in the same market segment as open ones and have similar financial indicators. Includes multiplier analysis.

3. Industry coefficient method- involves the use of ratios or indicators based on sales data of companies by industry and reflecting their specific specifics. Industry coefficients are calculated by special research institutes on the basis of long-term statistical observations of the sale price of enterprises and their most important production and financial characteristics.

Characteristics of price multipliers

Determining the market value of the company's own capital by the comparative method is based on the use of price multipliers. A price multiplier is a ratio that shows the ratio between the market price of an enterprise or share and the financial base. The financial base of the estimated multiplier is, in fact, a meter that reflects the financial results of the enterprise, which include not only profit, but also cash flow, dividend payments, sales proceeds, and some others.

a) determine the share price for all companies selected as an analogue - this will give us the value of the numerator in the formula;

b) calculate the financial base (profit, sales proceeds, net asset value, etc.) either for a certain period of time or as of the valuation date - this will give us the denominator value.

For evaluation, several multipliers are calculated according to the formula:

where M is the estimated multiplier;

C - the selling price of an analogue enterprise;

FB is a financial indicator of an enterprise similar to the object of assessment.

The financial base of the estimated multiplier is, in fact, a meter that reflects the financial results of the enterprise, which include not only profit, but also cash flow, dividend payments, sales proceeds, and some others.

To calculate the multiplier, you need:

Determine the share price for all companies selected as an analogue - this will give the value of the numerator in the formula;

Calculate the financial base (profit, sales proceeds, net asset value, etc.) either for a specific period or as of the valuation date; this will give the value of the denominator.

The share price is taken as of the last date preceding the valuation date, or it is the average of the maximum and minimum price values for the last month. The financial base should be an indicator of financial results either for the last reporting year, or for the last 12 months, or the average value for several years preceding the assessment date.

Four groups of multipliers are commonly used in business valuation:

1) price/earnings, price/cash flow;

2) price/dividends;

3) price/sales proceeds;

4) price/value of assets.

Depending on the specific situation, the judgment about the value of the enterprise can be based on any of the multipliers, or any combination of them. To do this, several multipliers are calculated for each analogue enterprise, risks and financial indicators are analyzed, after which a multiplier is selected that best matches the available financial information about the enterprise being evaluated.

Price/earnings or price/cash flow multiple used subject to the following rules:

1) the income base (profit or cash flow) can be determined in various ways: before and after accounting for depreciation, interest payments, taxes, dividends. The main requirement is compliance with the selected multiplier of the analogue enterprise;

2) the choice of the multiplier depends not only on the financial information obtained, but also on the structure of the assets of enterprises: the price/cash flow multiplier is more appropriate to use to evaluate enterprises that own real estate, the book value of which is decreasing, although the market price may increase. This is because depreciation charges are added to net income when calculating cash flow. If the company's assets are dominated by rapidly obsolete equipment, a more appropriate base is net profit;

3) since the valuation of a business is carried out on a specific date, the multipliers of analogue enterprises should be calculated based on the materials of reports that are as close as possible to the valuation date;

4) the income base is determined on the basis of retrospective data for a number of years using the simple average, weighted average or trend line method;

5) the price/earnings multiplier can be calculated both for the enterprise as a whole and per share;

6) the use of a large number of similar enterprises can give a spread in the value of the multiplier.

Price/dividend multiplier may be calculated on the basis of actual dividends paid or on the basis of potential dividend payments. Potential dividend payouts represent a typical percentage of the net income of peers for such payouts. This multiplier is rarely used due to the possibility of variation in the order in which companies pay dividends.

Multiplier price/revenue from sales (price/volume of production) usually used in combination with other multipliers, but it is most expedient to use it when evaluating in the service sector and when analyzing enterprises with various tax conditions. This multiplier is modified version of profit capitalization, since it is assumed that in a similar business the level of profitability products are almost the same.

Multiplier price/value of assets it is advisable to apply when evaluating holding companies, or in cases where it is necessary for short term sell a significant part of the assets. The price/value of assets multiplier is calculated in two stages:

1) determination of the value of net assets (expensive and laborious);

2) determination of the ratio between the value of shares and the value of assets.

3. Formation of the final value of the cost

The process of forming the final value of the cost consists of three main stages:

The choice of the multiplier value;

Weighing intermediate results;

Making final adjustments.

The choice of the multiplier value is the most difficult stage, requiring especially careful justification, which was subsequently recorded in the report. Since there are no identical companies, the range of the value of the same multiplier for analogue companies can be quite wide. The analyst cuts off extreme values and calculates the average value of the multiplier for a group of analogues. Then a financial analysis is carried out, and the analyst uses the financial ratios and indicators that are most closely related to this multiplier to select the value of a particular multiplier. The position (rank) of the assessed company in the general list is determined by the value of the financial ratio. The results obtained are superimposed on a series of multipliers and a value is determined quite accurately that can be used to calculate the value of the company being valued.

The comparative approach allows the analyst to use the maximum number of all possible multiplier options, therefore, the same number of cost options will be obtained in the calculation process. If an analyst proposes a simple average of all the obtained values as a final value, then this will mean that he equally trusts all multipliers. The most correct method for determining the final value is the weighing method. The appraiser, depending on the specific conditions, goals and object of assessment, the degree of confidence in this or that information, gives each multiplier its own weight, based on the weighting, the final value is obtained, which can be taken as the basis for subsequent adjustments.

The final value resulting from the application of multiples must be adjusted depending on the specific circumstances, the most typical are the following amendments. A portfolio discount is provided when there is an asset diversification that is unattractive to the buyer. The analyst, when determining the final cost option, must take into account the available non-production assets. If in the process of financial analysis, either the insufficiency of own working capital or the urgent need for capital investments is revealed, the resulting value must be subtracted. It is possible to apply a discount when evaluating a controlling stake for low liquidity. In some cases, an adjustment is made in the form of a premium for the controls provided to the investor. Thus, the comparative approach, despite the sufficient complexity of calculations and analysis, is an integral method for determining the reasonable market value. The results obtained in this way have a good objective basis, the level of which depends on the possibility of attracting a wide range of peer companies. Consequently, the development of valuation services will help expand the scope of the comparative approach.

Conclusion

For the normal functioning of society, it is necessary to have efficient enterprises. They are engaged in the production and sale of products, the provision of services and the performance of work, satisfying the needs of society. In the conditions of ongoing transformations in the economy, enterprises and their managers have to solve a number of new tasks, taking into account both economic and social factors.

The comparative approach is most accurate if there is an active market for similar properties. An analogue of the appraisal object is another object similar in terms of basic economic, material, technical and other characteristics, the price of which (the value of shares) is known from a transaction that took place under similar conditions. The accuracy of the estimate depends on the quality of the collected data, including physical characteristics, time of sale, location, conditions of sale and financing.

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Fedotova M.A. Gryaznovoy A.G. Business valuation. 2000.

Shcherbakov V.A., Shcherbakova N.A., Valuation of the enterprise (business). 2006

The comparative approach assumes that the value of a firm's equity is determined by the amount for which it can be sold in the presence of a sufficiently formed market. In other words, the most probable price of a business may be the actual sale price of a similar firm, fixed by the market.

A feature of this approach to property valuation is the orientation of the final value, on the one hand, to the market prices for the purchase and sale of shares owned by similar companies; on the other hand, on actually achieved financial results.

The theoretical basis of the comparative approach, which proves the possibility of its application, as well as the objectivity of the resulting value, are the following basic provisions.

Firstly, the appraiser uses as a guide the prices actually formed by the market for similar enterprises or their shares. In the presence of a developed financial market, the actual purchase and sale price of an enterprise as a whole or one share most integrally takes into account numerous factors that affect the value of the enterprise's equity capital. These factors include: the ratio of supply and demand for this type of business; risk level; prospects for the development of the industry; specific features of the enterprise and much more, which ultimately facilitates the work of an appraiser who trusts the market.

Secondly, the comparative approach is based on the principle of alternative investments. An investor, investing money in stocks, buys, first of all, future income. The production, technological and other features of a particular business are of interest to the investor only from the standpoint of the prospects for generating income. The desire to get the maximum return on invested capital with an adequate level of risk and free placement of investments ensures the alignment of market prices.

The comparative approach has a number of advantages and disadvantages that a professional appraiser should take into account.

The main advantage of the comparative approach is that the appraiser focuses on the actual sale and purchase prices of similar enterprises. In this case, the price is determined by the market, since the appraiser is limited only by adjustments that ensure the comparability of the analogue with the object being valued. When using other approaches, the appraiser determines the value of the enterprise based on the calculations made. The comparative approach is based on historical information and, therefore, reflects the actual results of the enterprise's production and financial activities, while the income approach is focused on forecasts of future income.

Another advantage of the comparative approach is the real reflection of supply and demand for a given investment object, since the price of an actually completed transaction most integrally takes into account the situation on the market. At the same time, the comparative approach has a number of significant drawbacks that limit its use in valuation practice.

First, the basis for the calculation are the financial results achieved in the past. Therefore, the method ignores the prospects for the development of the enterprise.

Secondly, a comparative approach is possible only if there is comprehensive financial information not only for the enterprise being valued, but also for a large number of similar firms selected by the appraiser as analogues. Obtaining additional information from peers is a complex and costly process.

The first condition for applying the comparative approach is the presence of an active financial market, since the approach involves the use of data on actually completed transactions. The second condition is the openness of the market or the availability of financial information required by the appraiser. The third condition is the availability of special services that accumulate price and financial information. The formation of an appropriate data bank will facilitate the work of the appraiser.

The comparative approach uses three main methods, the choice of which depends on the objectives, object and specific conditions of the assessment:

the method of the company-analogue;
the method of transactions;
the method of industry coefficients.

The peer-to-peer method, or capital market method, is based on the use of prices formed by the open stock market. The basis for comparison is the price of one share of open joint-stock companies. Therefore, in its pure form, this method is used to evaluate a minority (non-controlling) stake.

The method of transactions, or the sales method, is focused on the acquisition prices of the enterprise as a whole or its controlling stake. This determines the most optimal scope of this method - the assessment of 100% capital or a controlling stake.

The method of industry coefficients, or the method of industry ratios, is based on the use of recommended ratios between the price and certain financial parameters. Industry coefficients are calculated by special analytical organizations on the basis of long-term statistical observations of the ratio between the price of an enterprise's own capital and its most important production and financial indicators. Based on the analysis of the accumulated information and generalization of the results, simple formulas for determining the value of the enterprise being valued were developed.

However, despite its apparent simplicity, this method requires high qualification and professionalism of the appraiser, as it involves making complex adjustments to ensure maximum comparability of the company being valued with peers. In addition, the appraiser must determine the priority criteria for comparability, based on the specific conditions, the objectives of the assessment, the quality of the information.

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