1. Scope of business valuation
Key areas assessed in the business valuation process:
- External factors:
+ Industry analysis
+ Impact of the national economic situation and trends
+ External competitive factors
- Internal factors:
+ Financial statements – ensuring accuracy.
+ Assets – verifying value, condition and ownership.
+ Human resources – identifying the strengths and weaknesses of the workforce.
+ Sales strategy – analysing sales policies, including an assessment of what is and is not effective
+ Marketing – reviewing the effectiveness of marketing programmes and strategies
+ Business sectors – assessing the company’s fields of operation
+ Competitors – understanding potential competitive threats.
+ Internal management system – is it effective? Does it need improvement?
+ Legal issues – tax, capital structure…
+ Contracts and leases
+ Supplier network – reliability and commercial terms
2. Business valuation methods
Under the business valuation standard issued with Circular No. 36/2024/TT-BTC of 16 May 2024 of the Ministry of Finance, methods are grouped into three approaches:
- Market approach: the guideline public company method (using ratios such as P/E, P/B, P/S and EV/EBITDA of comparable companies) and the transaction method.
- Income approach: the free cash flow to the firm (FCFF) method, the free cash flow to equity (FCFE) method and the dividend discount method.
- Cost approach: the asset-based method, which values the business from the value of its assets and liabilities.
Where sufficient information is available, the valuer should use at least two methods from two different approaches, and explain why if only one method can be applied.
