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January 2021

The Importance of Business Valuation

The Importance of Business Valuation

The Importance of Business Valuation

 

There are many reasons why Business Valuations are important. It is an essential input to many of the decisions that boards, management, regulators and investors make every day in modern business Such As:

  • Litigation
  • Exit strategy planning
  • Merging
  • Buying a business
  • Selling a business
  • Strategic planning
  • Funding
  • Selling a share in a business

 

Why is called business valuation ?

Determining the true value of a business, a process called “business valuation,” is not just important when the owner is looking to sell the company.

To obtain a business valuation, business owners may wish to contract with a professional appraiser to provide an opinion that will be viewed as independent and objective with the IRS. The resulting business valuation then may be used in a variety of planning applications.

Not all the methods adopted internationally can be fit locally; this fact is rarely considered, especially that the problem of estimating the fair value of assets and companies has become one of the most debatable issues in most of Arab countries.

 

How does the business valuation process work?

Business valuation is a process and a set of procedures used to estimate the economic value of an owner’s interest in a business. An accurate valuation of a closely held business is an essential tool for a business owner to assess both opportunities and opportunity costs as they plan for future growth and eventual transition. It provides either a point-in-time assessment of relative value for an owner, or perhaps the price a buyer would be willing to acquire the business.

 

Read Also :

What is feasibility study and how it affects in project management?

https://truth-uae.com/en/investment-opportunities-in-egypt/

 

Common Business Valuation Methods:

 

Asset Valuation

Company’s assets include tangible and intangible items. Use the book or market value of those assets to determine your business’s worth. Count all the cash, equipment, inventory, real estate, stocks, options, patents, trademarks, and customer relationships as you calculate the asset valuation for your business.

 

DCF Valuation:

In this valuation method we estimate the value of an investment based on its future cash flows. DCF analysis attempts to figure out the value of an investment today, based on projections of how much money it will generate in the future. The Discounted Cash Flows Method requires the following analysis – Revenue, Expense, Investment, Capital structure and Residual value analysis. It values the company considering:

  • Free cash flow to the firm (FCFF).
  • Free cash flow to equity (FCFE).

 

Book Value:

Book value is total assets minus total liabilities and is commonly known as net worth. The book valuation technique is usually used as a method of cross-testing the more common technique of applying multiples to EBITDA, cash flow, or net earnings.

 

Replacement cost

The cost approach is based on the logic of the principle of substitution. The concept is that prudent investors will not pay more for a property than they would for a substitute property of equivalent utility. As with the market approach, there are two potential starting points for a cost approach to valuation: reproduction cost and replacement cost.

Reproduction cost is the estimated cost, at current prices, to create an exact replica of the subject asset, using the same materials, construction techniques and standards, design, and quality of workmanship, and incorporating all the property’s deficiencies, over-adequacies, and obsolescence’s into this exact duplicate.

Replacement cost is the cost to replace an existing property with a new one of equivalent utility, as of a specified date.

Finally.. the concept of estimation and determination of fair value is extremely relative and complicated. Accordingly, it is very difficult to arrive at a conclusion whereby an accusation of detriment is hurled or a reform is praised. In witness whereof, in order to seek a fair judgment and objective thinking, we have first to ask about the basis and assumptions of evaluation if we really want to safeguard our sold assets.

 

The Importance of Business Valuation , Truth Economic & Management Consultancy

 

Resources :

https://masource.org/the-importance-of-business-valuation/

November 2020

What is feasibility study and how it affects in project management?

What is feasibility study and how it affects in project management?

What is feasibility study and how it affects in project management?

Feasibility study is a formal project document that shows results of the analysis, research and evaluation of a proposed project and determines if this project is technically feasible, cost-effective and profitable.

A feasibility study determines whether the project is likely to succeed in the first place. It is typically conducted before any steps are taken to move forward with a project, including planning. It is one of the—if not the—most important factors in determining whether the project can move forward.

The growth and recognition of project management have changed significantly over the past few years, and these changes are expected to continue and expand. And with the rise of project management comes the need for a feasibility study.

 

The importance of feasibility study in project management can only be understood within the context of the types of feasibility studies and their main focus. There are three types of feasibility studies. These three types are the Market, Technical and Financial Study. Technical feasibility places particular focus on the availability of technology that is needed to achieve the objectives of the project. The key considerations of technical feasibility are whether the technology is obtained locally, the costs of the technology if it is to be imported and how relevant is it to the achievement of project objectives. In a broad sense technical feasibility seeks to determine the availability, costs and technological risks associated with technology that is needed to achieve project objectives. For example technologically intense projects such as mining require a detailed technical feasibility study that will determine technological availability, costs and associated risks particularly to the environment.

 

How feasibility study affects in project management?

  • Improves project teams’ focus
  • Identifies new opportunities
  • Provides valuable information for a “go/no-go” decision
  • Narrows the business alternatives
  • Identifies a valid reason to undertake the project
  • Enhances the success rate by evaluating multiple parameters
  • Aids decision-making on the project
  • Helps to meet the objectives of the business.
  • Helps to meet the expectations of the stakeholders.
  • Delivers the work at the right time.
  • Resolves problems and issues much earlier.
  • Responds to risks on time.
  • Manages constraints such as scope, quality, schedule, costs, resources)

 

 

Investment Opportunities in Egypt

Investment Opportunities in Egypt

Investment Opportunities in Egypt

Egypt’s 2030 vision plans to develop a competitive, balanced and diversified economy. Supporting innovation and knowledge, social justice, economic development and the environment. The sustainable development strategy is achieved through a collaboration system investing in human capital and diversified locations in Egypt to improve Egyptians’ quality of life that is built on transparency and social equality , That makes Investment in Egypt is a real opportunity.

Egypt’s fast-growing, young population of 105 million, diverse and expanding economy and its strategic location linking the Middle East, Europe, Africa and Asia all make it an ideal hub for regional and global investment. As an added incentive, a basket of beneficial trade agreements, including GAFTA and COMESA provide the country with favored access to regional growth markets. As Egypt enters a period of political and economic stability, and a reform-minded government carries out an overhaul of the country’s subsidy system, now is the time to invest in Egypt.

 

Why Egypt:

Egypt is one of the highest population densities and ranked 15 internationally and third in Africa. At January 2015, Egypt’s population reached 88 million according. Meanwhile the estimated number of Egyptian abroad is 8 million according to figures released by the Ministry of Foreign Affairs.

Egypt has emerged as a consumer market of significant importance in the MENA region, as witnessed by the arrival of dozens of global brands and the sharp expansion of retail sales in the past years. This is partly due to the sheer size of Egypt’s population that puts it as the most populated country in Africa and the Middle East, as well as the fact that 50% of Egyptians are between the age 15 and 44. Egypt has access to large key markets through various multilateral and bilateral trade agreements with the USA, European Union, Middle Eastern and African countries; which secure benefits to Egyptian-based producers supplying these markets.

Key global markets in Europe, the Middle East, Africa and the Indian Subcontinent are all readily accessible from Egypt. Closer to the European and North American markets than other major exporters including India, China and the Philippines, Egypt is also located on key international logistics routes.

Egypt benefits from the Suez Canal, which is considered to be the shortest link between the east and the west due to its unique geographic location. Approximately 8% of the world’s maritime shipping passes through the Suez Canal each year.

Truth Economic and Management Consultancy provides a selected Investment opportunities in major Sectors in Egypt.

October 2020

Mergers and acquisitions Steps

Mergers and acquisitions Steps

 

Mergers and acquisitions have become an important business strategy for companies looking to
expand into new markets, gain a competitive edge, or acquire new technologies and skill sets.
Decisions on mergers and acquisitions are taken after considering a few facts like the current
business status of the companies, the present market scenario, and the threats and opportunities
etc. In fact, the success of mergers and acquisitions largely depend upon the merger and
acquisition strategies adopted by the organizations.

The Ideal Steps for Mergers and Acquisitions.
1. Acquisition Strategy.

2. Acquisition Criteria.
3. Searching for Target.
4. Acquisition Planning.
5. Valuing and Evaluating.
6. Negotiation.
7. Due Diligence.
8. Purchase and sales Contract.
9. Financing.
10. Implementation.
The Importance of Consultancy Service in UAE for
Mergers and Acquisitions :
The advancement of this process by providing consultancy services in order for investors to proceed
faster. and smoothly will provide great convenience The services provided by our company
are realized under the leadership of a professional and experienced team. Even a small mistake in
mergers or acquisitions may cause the process to prolong or unexpectedly reject your application. It
is an important criterion for everything to be done properly in order to have a business in a region
with high economic power. such as the United Arab Emirates. First of all, it is a part of this
consultancy service that you know what work areas in the country have a bigger market and then
you can find the companies that can be owned by mergers or acquisitions Then, the process is
supported by preparing your documents and making the application perfectly within the specified
time.

Truth Economic succeed in the merging process of an existing companies according to the following:
 Federal Law No. (2) of 2015 in Commercial Companies.
 The requirements of the Securities and Commodities Authority.
 The requirements of the Ministry of Economy.
 UAE Central Bank requirements

Corporate Governance Direct Benefits

Corporate Governance Direct Benefits

 

Corporate Governance is the structure that characterizes the business connections that exist
between Company Shareholder, Management team, the Board of Directors, and all other key
Stakeholders. Corporate Governance makes organizations more responsible and Transparent to
Investors and gives them the devices to react to authentic stakeholder concern. It adds to
improvement and expanded admittance to capital energizes new Investments, supports financial
development, and gives business openings.
A lack of corporate governance can lead to profit loss, corruption and a tarnished image, not only
to the corporation, but to the society, or even worse will influence global as a whole. This form
of corporate governance management is also designed to limit risk and eliminate corrosive
elements within an organization.
The Direct benefits of Corporate Governance:
 Risk mitigation – An effective corporate governance framework helps to mitigate
risks, providing shareholders in non-listed companies with the comfort that although their
exits may be difficult, their interests will be safeguarded by the board and management. A
good governance framework will also induce reflection on exit strategies, giving additional
comfort to prospective shareholders deciding whether to invest in the company.
 Improved capital flow – An increase in confidence by investors and banks in the
company due to robust financial management reporting will not only improve access to
capital, but also minimise both cost of capital and cost of equity, resulting in an optimised
capital flow. Deciding on an appropriate capital structure is thus a key element of good
corporate governance. Transparency, especially regarding everything of interest to
investors, will command a lower risk premium, therefore lowering the cost of capital and
equity.
 Reputational boost – Transparency in a company’s internal policies, control
mechanisms and how it deals with its suppliers, vendors, media, staff and government
bodies will boost its reputation and thus its brand value.
 More effective, better decision-making – Good corporate governance also aims
at a faster decision-making process by establishing a clear delineation of roles between
owners and management.
 Improved reporting – Improved reporting on performance in turn leads managers and
owners to make more informed and fact-based decisions, leading ultimately to improving
sales margins and reducing costs.
 Focus on compliance – Good corporate governance will adequately rest on policies
requiring the company to stay compliant with local laws and regulations; it will synchronise
risk management and compliance to ensure the company has proper control mechanisms,
meets its objectives and operates efficiently in terms of people, processes, technology and
information.

 Higher staff retention – An increase in staff retention and motivation can be
expected, especially from senior staff, when the company has a well-defined and
communicated vision and direction. A focus on the company’s core business will also make
it easier to penetrate the market and attract the interest of shareholders. Additionally,
millennials – now the largest single group on the labour market in many countries – tend to
rank an organization’s commitment to responsible business practices highly in their
employment choices.
 Limitation of disruptive behaviour and conflicts of interest – By
establishing rules to reduce potential fraud and malpractices amongst employees; and
avoiding conflicts of interest namely through minority shareholders being given their share
of voice by being represented by independent directors.

Truth Economic and Management Consultancy has an accumulative Experience in Conducting
Corporate Governance Manual and Systems for all type of Companies including Private and
Public Joint Stock Companies.

UAE Federal Law on Foreign Direct Investment (FDI)

According to the UAE Federal Law No.(19) of 2018 on foreign Direct Investment, the law grants up to 100% ownership for foreign investors along with incentives and competitive advantages.

The Scope:

  • The law shall be applied to foreign direct investment projects that are established in the land of the country, while it does not apply to the financial and non-financial free zones.

 

The Direct Benefits and Guarantees:

  • The licensed foreign investment companies are treated like national companies.
  • No expropriation ensuring the property is not expropriated except for public benefit in exchange for fair compensation.
  • Not to seize or confiscate project funds unless by a court hearing.
  • Ownership 100%.
  • The right to use real estate.
  • Make financial transfers for project returns outside the country.
  • Ensuring the confidentiality of technical, economic and financial information and investment initiatives.
  • Insert a partner or a number of partners.
  • Transfer ownership to a new investor.
  • Amending the articles of association.
  • Change the legal form of the company.
  • Merger, acquisition or liquidation.

 

Truth

Truth Economic and Management Consultancy is qualified and has an accumulative experience in establishing Public Stock Joint Companies (PJSC) in the UAE. Moreover, Truth will arrange the required steps to assist the company in changing the existing license to Foreign Direct Investment license under the positive list to achieve up to 100% ownership.

Feasibility Study Importance for new business

Feasibility study is a process of a certain analysis including, Market, Technical, Financial and Legal. Feasibility study provides a company’s management with crucial information that could prevent the company from entering blindly into risky businesses.

 

The Importance of Feasibility Studies in New business

Feasibility studies are important to any business development by defining the potential obstacles that may affect the business operations and the Investment structure needed to get the business up and running. Feasibility studies aim for marketing strategies that could help convince banks and investors that investing in a particular business and project.

 

Direct benefits of conducting feasibility study

  • Identifies new opportunities through the investigative process.
  • Provides the investors with necessary information to “go/no-go” decision
  • Provide the Investors with the business alternatives
  • Identifies a valid reason to undertake the project
  • Enhances the success rate by evaluating multiple parameters
  • Aids decision-making on the project
  • Gives focus to the project and outline alternatives.
  • Identifies reasons not to proceed.
  • Enhances the probability of success by addressing and mitigating factors early on that could affect the project.
  • Provides documentation that the business venture was thoroughly investigated.
  • Helps to attract equity investment.

 

 

Truth Economic and Management Consultancy has and accumulated experience in Conducting Feasibility studies in all Sectors Since 1993.

What is Asset Valuation?

What is Asset Valuation?

Asset valuation is a method of determining the present or the fair market value of assets by using book values, discounted cash flow analysis, comparable, or option pricing models. Asset valuation includes marketable securities investments such as bonds. Asset valuation also includes valuation of tangible/fixed assets like buildings and equipment, or intangible assets such as patents, logos and trademarks.

 

Asset Valuation for Tangible/Fixed assets

In finance, Asset valuation plays a major role which often involves of both subjective and objective measurements. Asset valuation of a company’s fixed assets, which is also known as; property plant and equipment or capital assets, are straightforward to value based on the assets’ book value and replacement cost.

 

Asset Valuation for Intangible assets

Nevertheless, there are no financial statements that can tell the investors the exact value of a company’s brand or intellectual property. In an acquisition, companies can overvalue their goodwill because the Asset valuation of intangibles is subjective and can be hard to valuate, therefore, it is difficult to get an accurate measurement.

 

https://www.investopedia.com/terms/a/assetvaluation.asp#:~:text=Asset%20valuation%20is%20the%20process,option%20pricing%20models%20or%20comparables.