Tax & Audit

Evaluation of Company and Intangible Assets

The service allows traditional valuation methods to be complemented with an analysis (benchmarking) aimed at making the assignment of value more objective, clarifying the strengths and weaknesses of the company to be valued (i.e., tested parties) with respect to “comparable” companies.

• Tangible asset valuation
• Intangible asset valuation
• Business enterprise valuation

Three strengths of the analysis:

• Methodological rigor (M|R combines academic research and professional experience)
• Independence of the evaluation body and authority of the analysis (university spin-off)
• Objectivity of the analysis (identification of strengths and weaknesses)

The methodology is useful in contexts related to the evaluation of the company’s value or the value of intangible assets (e.g. trademarks and patents) in particular moments of the company’s life:

• company transfer, contribution and liquidation
• merger and acquisition (M&A), transformation and sale
• investment in venture capital of unlisted companies (private equity and venture capital)
• listing on financial markets (IPO)
• self-diagnosis, including predictive models of business crises
• entry in the balance sheet of the value of intangible assets.

In a first phase, the analysis involves a selection among the different traditional methods:

• Asset Method;
• Income Method;
• Financial method (DCF);
• Mixed equity-income method with independent estimate of goodwill (Mixed Method);
• Method of multiples (Multiples).

Based on the characteristics of the tested party and the life stage it went through, with reference to:

• updated infra-annual accounting situation;
• financial statements for the last 3/10 financial years (based on company age);
• tax returns for the same years (for companies using simplified accounting);
• updated chamber of commerce certificates;
• (Possible) appraisals of assets present in the company assets showing a value other than the book value;
• historical series of sector and competitors.

In order to then define a range of values ​​for the certified party, the following are evaluated, depending on the chosen method:

• the discount rate (risk free);
• the discount period;
• the “normal” rate of return (for the sector);
• market multiples;
• the weighted average cost of capital (Wacc);
• the nominal average growth rate of operating cash flow;
• systematic risk (ẞ);
• the residual value.

The benchmarking analysis is then carried out on the basis of commercial and financial information that can be inferred from structured databases and information from the web and social media, through the following stages:

  1. Analysis of the reference market. A careful analysis of the reference market is conducted on the basis of information of various kinds, internal and external to the tested party.
  2. Addressing the search strategy: the initial set or “peer group” is defined, with respect to the reference company (i.e., tested party) starting from essential data extraction criteria (market, activity classification, independence, legal form, sizing, consolidated financial data); the survey is based, in this phase, on the use of commercial databases (e.g. Aida, Orbis,…).
  3. Quantitative analysis: the “peer group” is analyzed with reference to a series of indices (liquidity, solidity, profitability..) to refine the comparability between the individuals identified and the tested party on the basis of economic and financial profiles;
  4. Qualitative analysis: the comparability defects are eliminated and a final set of companies is defined by means of:
    • Review of descriptions related to the activity provided by the database;
    • Viewing and gathering in-depth information from the company’s website;
    • Balance sheet analysis, explanatory note and management report;
    • Consideration of historical chamber of commerce registrations at the Chamber of Commerce;
    • Analysis of the summary diagram of direct and indirect shareholdings, of natural and legal persons.

The benchmarking analysis provides for a minimum number of comparable companies (i.e., comparables) and a minimum number of observations for greater significance of the statistical distribution.

5. Benchmarking analysisthe final peer-group is analyzed in terms of a series of key indicators (Activities, ROI, ROS, Return on Invested Capital, EBITDA) for each company and for each year included in the period under analysis.

6. Value range definition for the tested party: the definition of the interval is made taking into consideration any cases of positioning at the extremes of the distribution of the reference profit indicators.

For the subjects “at a loss” within the set of comparables -“peer group”, the underlying facts and circumstances are specifically analysed.

7. Preparation of a detailed report: in order to ensure maximum transparency and reproducibility of the analysis, an adequate description of all the steps of the analysis is provided, highlighting the search strategy and the comparability criteria adopted. In addition to the detailed report in text format, a summary of the work is provided in presentation format.