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BVXä
is a paradigm shift in the field of business valuation theory.
Commonly known finance theory
states, “… the value of the firm is independent of financing…”
Such theory and its advancements have been the foundation for corporate
valuations. However, the real world has significant deviations from the
simplified assumptions used in such theories. In real world, value of a
firm depends on available financing, terms of the deal, the structure of
the deal, and operating parameters.
Business ValueXpressä
(BVXä)
defines Value of a Firm as,
“Value of a
Firm is the Equilibrium of Price, Terms, and Deal Structure that
satisfies the needs of all parties to an M&A transaction.”
BVXä
calls this approach to valuation as the Equilibrium method of
valuation.
Using BVXä’s
Equilibrium approach one values businesses based on Future Performance,
Financial Leverage, Financial Return Expectation, Cash Flow (Not
Profits), Deal Structure, Asset Type, and Exit Strategy. For more
discussion see Valuation Approach of Business ValueXpress™.
The Equilibrium approach satisfies
the needs of all parties to the transaction; specifically, the needs of
the seller, the buyer, the lender, the tax authorities, and the business
itself. Some of the needs that BVXä
satisfies are maximize selling price, minimize buyer equity, achieve
buyer’s ROI target, meet lender obligations, pay all taxes, fund
working capital etc. For more discussion see BVXä
Methodology.
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