Valuation

A valuation includes a theme for valuation, short write-up of the company and a valuation based on the DSPmodel® and other recognized methods of valuation.

Valuation using the DSPmodel®

A valuation includes a valuation theme, a brief company prospectus and a valuation based on the DSPmodel® and other valuation methods.

In practice, a company valuation is carried through in 5 stages as outlined below.

1. Contact between consultant/company owner and Dahl-Sørensen & Partners. Signing of a valuation agreement and choice of a valuation theme.
2. Visit to the company. Study, interviews and procurement of material.
3. Analysis, description, estimate and report preparation.
4. A draft report is sent to the client for his review and approval.
5. The final valuation report, including a company valuation, is sent to the client.

A period of 2-4 weeks must be expected to lapse from the time the agreement is signed and until the final report and valuation is available.

To ensure impartiality in the valuation process, a valuation fee of 0.25 pct. of the sum of assets of the company in question according to the latest revised audit is charged. The minimum fee is DKK 25,000.

If required, we will consult other independent valuers with special compentences in the fields of, say, engineering or property valuation.

Value check using the DSPmodel®

If the company or its advisors merely request(s) an estimatation of the company's value, a value check using the DSPmodel® can be carried out. Upon, e.g., email request, Dahl-Sørensen & Partners will send all relevant tables and information sheets to the company or its advisors - to be returned duly filled in. Dahl-Sørensen will use the DSPmodel® for analysis purposes. A "value check" consisting of a value outline of 2 - 6 A4 sheets will be sent to the client.

It is recommended to outline different value scenarios (3-5) with different conditions in order to give a useful picture of a company's value. In that way, a "value range" is created in which the actual value will, in all probability, be reflected. A value check can be made in respect of shares as well as business activities/assets, cf. above.

The basic fee for a value check (a Mini check) is DKK 10,000 plus an additional DKK 500 for every subsequent scenario. The prices are excl. VAT.

If an extended value check, the socalled Plus check, is requested the price is DKK 20,000 excl. VAT. this includes:

• Personal meeting
• Check of the company
• Specification of conditions and opportunities
• A 4-6 pages report

A value check is performed by Dahl-Sørensen & Partners on the basis of an interview with the management of the company and selected documents. A value check is therefore to be considered as an indication of the value of the company, and thus not to be applied in a sales process or in contract documents. In this case a valuation is needed. See Valuation.

Discountet Substance Pricing - DSPmodel®

DSPmodel® - Discounted Substance Pricing - used to appraise a business'/activity's goodwill/negative goodwill in connection with a disposal of a business activity.

The fundamental factor in this model is - besides operations - the amortisastion/depreciation a takeover of the activity results in and the interest expenses caused by a financing of the assets and goodwill. The amortisation/depreciation is broken down as follows:

1. Depreciation of property, plant and equipment.
2. Amortisation of intangible assets. Under this model, it is the acquisition goodwill which is assessed as reasonable.
3. Amortisation/depreciation/investments required to reinvest in and maintain the existing assets to be able to maintain the earnings basis during the estimted life of the business. It is assumed that the investments match the amortisation/depreciation in the long run.

Re 1) As for depreciation of property, plant and equipment, the following assumptions apply:

• The assets are valued and taken over at their actual market value.
• The assets are depreciated using the straight-line method at a rate of 5% annually for properties/buildings and up to 30% for plant and machinery.

Re 2) As for amortisation of intangible assets, the following assumptions apply:

• The value of goodwill is found as the the goodwill which the operations in question can sustain via interpolation.
• Goodwill is amortised on a straight-line basis over the life of the assets or other period.

The financial expenses incurred by a purchaser to acquire the assets are included as well, plus the costs of financing the goodwill to be paid.

For this model, the same assumptions apply for the valuation of the actual value drivers, including the life, the discount rate and the growth as in "Discounted Share Pricing".

Discounted Share Pricing - DSPmodel®

DSPmodel® - Discounted Share Pricing - used for the valuation of a business' equity and goodwill/added value that might have been accumulated/generated in the company. Eller med fradrag af badwill/mindre værdi.

The value of the equity - also called "the market value" is determined based on the future net earnings and any synergies from joint operation, discounted over a given period at a given discount rate. The model includes a number of variable "value drivers", all of which affect the value. These value drivers and other assumptions are:

• Discount rate: the interest after tax at which teh future earnings is dicounted back in order to make up the net present value. The discount rate reflects the purchaser's expected return on the invested capital and thus consists of a risk-free interest plus a risk premium.
• Life: the budget period by which the future earnings are discounted back. The life is variable: from 1-20 years. The period reflects the time horizon within which it is possible - with reasonable certainty - to estimate a correct earnings figure. Also, it is within this period that the investors' "pay back" period lies. The life can be determined on the basis of an analysis of the company's products, market position, productive apparatus and human resources.
• Products: an analysis illustrating the stage/life cycle of the individual product and similarly for the company's total product mix. In addition, the company's ability in relation to product/concept innovation is assessed. Further, the company's "Corporate Branding", registerede trademarks and any patents are evaluated.
• Market position: an analysis based on the company's client and supplier relations with regard to dependency, risk and spread of same and the entire company culture and image (brand). Also, it is assessed if the company has international sales or a potential for same. The general market is assessed and the company's growth potential and revenue per employee is evaluated.
• Productive apparatus: an analysis of the company's existing productive apparatus, operating equipment, buildings/properties/leases. Use of IT and access to infrastructure. Necessary investment needs to be able to maintain production and competitiveness.
• Human resources: an analysis illustrating the company's knowhow and human resources. The points evaluated are employee age, seniority, educational level, superior/further education and teamwork skills. The company's organisational culture, communication, cooperation, general job satisfaction and many other staff matters in relation to the company, making parallels to "the knowledge accounts theory".
• Synergies from joint operations: an evaluation of the synergies that can result from operating two businesses jointly. In the model, these can maximally be discounted back for five years. Such synergies are basically allocated between the purchaser and the seller on the basis of a given allocation key in a given period, following which all risks and earnings pass to the purchaser.
• Growth: a significant value driver monitoring the future, budgeted earnings. Growth is estimated based on the company's growth record, industry analysis and the general market growth with due regard to a general prudence principle, since an assessment of a future growth rate is connected with considerable uncertainty. Financial key figures regarding revenue, contribution margin, profit margin, solvency ratio and cash are part of the assessment of the company's future growth potential.