Valuation in Spain!
Spain works very differently to the Netherlands.
There is a difference between the enterprise value and the price paid for a company.
The enterprise value is a number that is the result of a certain valuation method to determine the enterprise value.
The price is the amount the buyer pays and is the outcome of a negotiation process.
Price and enterprise value are usually not equal.
In Spain they always think in the form of “I think it’s worth it”.
Methods of calculating value in use
There are roughly two approaches to arriving at a going-concern value:
Methods that mainly look at historical figures and methods that revolve around future cash flows.
There is something to be said for both methods, and in practice a mix of both methods is often used.
This method of calculating value in use mainly looks at the past.
The advantage of this approach is that it quickly gives a first indication of the value in use.
The disadvantage is that the future of the company – which is, after all, what the buyer is primarily interested in – is hardly considered. In general, this method of calculating the business value leads to simple formulas such as:
3 x the net profit
0.75 – 1.5 x the annual turnover
The major disadvantage of this method is that the enterprise value is based entirely on past results.
But as with investing, these do not offer any guarantee for the future.
Moreover, it does not consider other factors that can be very decisive for the enterprise value Spain also works a lot outside?
How dependent is the business on the owner?
Are large investments needed in the short term?
Let us do a management buy in check and see what and how the company can be taken over. This always costs less than a company that you buy too expensively.