Guide to asset valuation when buying and selling businesses

Asset valuation is the process of determining asset value in business purchase and sale transactions. The Valuation Council applies professional methods, realistic assessment and market analysis. Valuation deadlines vary according to the size and nature of the asset. Valuation results create the basis for determining business value. This article guides customers through the steps to accurately asset valuation when conducting business purchase and sale transactions.

The purpose of asset valuation when buying and selling businesses

Valuing assets when buying and selling a business is to determine the market value of the business. This process provides a basis for the parties involved in the transaction to make decisions. Accurate valuation helps ensure fairness and transparency in business sales transactions.

The main goals of business asset valuation include determining market value, evaluating operating efficiency and development potential. This process analyzes factors such as tangible assets, intangible assets, human resources and market position. Valuation results help the parties negotiate a reasonable purchase price, while also providing information to investors and shareholders.

Asset valuation also serves the purpose of business restructuring, equitization and risk management. For equitized state-owned enterprises, accurate valuation helps determine the value of shares sold to the market. During the restructuring process, valuation results are the basis for evaluating asset use efficiency and devising appropriate development strategies. Credit institutions also use valuation results to evaluate collateral when granting credit to businesses.

Asset valuation methods

Asset valuation of corporations applies many different methods. Each method is suitable for specific asset types and valuation purposes. Choosing the appropriate method plays an important role in accurately determining business value.

• The average ratio method, specified in Article 9 of Circular 36/2024/TT-BTC, determines enterprise value based on financial ratios. This method compares indicators such as P/E, P/B of a business with similar businesses. The advantage is that it is easy to apply, but the limitation is that it depends on market information.
• The transaction price method, specified in Article 12 of Circular 36/2024/TT-BTC, is based on the actual transaction price of similar enterprises. This method requires sufficient information about comparable transactions. Results reflect actual market value, but may be influenced by transaction-specific factors.
• The asset method, stipulated in Article 14 of Circular 36/2024/TT-BTC, determines enterprise value by the total value of assets minus liabilities. This method is suitable for businesses with many tangible assets, but does not fully reflect the value of intangible assets and development potential.
• The enterprise’s free cash flow discount method, specified in Article 18 of Circular 36/2024/TT-BTC, determines value based on the ability to generate future cash flows. This method is suitable for businesses with stable profits, but requires accurate forecasting of future cash flows.
• The discounted equity free cash flow method, specified in Article 23 of Circular 36/2024/TT-BTC, calculates the value of equity based on the remaining cash flow after debt repayment. This method directly reflects shareholder interests, but also requires accurate forecasts of future capital structure.
• The dividend stream discount method, specified in Article 28 of Circular 36/2024/TT-BTC, determines the stock value based on the expected dividend stream. This method is suitable for businesses with a stable dividend policy, but may not fully reflect the value for businesses that reinvest a lot.

The choice of valuation method should be based on business characteristics, valuation purposes and available information. Combining multiple methods helps cross-check and provide accurate, reliable valuation results.

Business valuation documents

Business valuation documents include necessary documents to carry out the valuation process. A complete set of documents helps ensure the accuracy and reliability of valuation results. Preparing complete documents is the responsibility of the enterprise being valued and the valuation unit.

Basic documents in the valuation file include financial reports, legal documents and technical documents related to the asset. Financial reports provide information about the financial situation, business results and cash flow of a business. Legal documents include business registration certificate, company charter and property ownership documents. Technical documents provide detailed information about the characteristics and condition of each type of asset.

In addition, the valuation dossier needs additional documents such as business plans, development strategies and market information. These documents help evaluate the development potential and competitive position of a business. For specific assets such as real estate, additional planning documents, construction permits and other related documents are needed. Providing complete and accurate documents helps shorten appraisal time and improve the quality of valuation results.

Enterprise asset valuation process

The business asset valuation process includes steps from actual survey to final report development. Standard processes help ensure consistency and reliability of valuation results. Compliance with the valuation process is the responsibility of the professional valuation unit.

The first step in the process is an actual survey, collecting information about the business and assets that need to be valued. Next, the appraisal unit analyzes the collected information, evaluates the financial situation and development prospects of the business. Based on the analysis results, the appraisal unit selects an appropriate valuation method and calculates the value.

After obtaining preliminary results, the appraisal unit conducts review and cross-checking to ensure accuracy. The final results are presented in the valuation report, including theoretical basis, application methods and conclusions about value. This report is an important basis for parties involved in business purchase and sale transactions to make decisions.

Instructions for performing business asset valuation

Valuing corporate assets requires a strict process and high expertise. With a team of experts, Long Phan provides consulting services to perform business asset valuation with the following contents:

• Consulting on choosing a reputable valuation unit with sufficient professional capacity;
• Consulting on asset valuation methods;
• Consulting on choosing the appropriate method: cost, market or income;
• Consulting and supporting the preparation of documents at the request of the appraisal unit;
• Answer business questions about valuation results.

Asset valuation for business requires expertise and experience. Customers need to choose the appropriate method, collect complete documents and follow strict procedures. Thorough financial analysis and investment risk assessment are key. The valuation report needs to accurately reflect the market value of the asset. For in-depth support on asset valuation when buying and selling businesses, please contact Long Phan via hotline: 090.673.5386 to receive free consultation.