Business valuation

There are many good reasons for buying or selling a company or shareholdings.

This is not usually a routine matter for either the buyer or the seller. A key issue is arriving at the appropriate valuation for the company concerned.

The future earnings expectations that contribute to the valuation of a business need to be carefully examined for whether they can be carried over to the long term. Another essential part of any business valuation in an acquisition or divestment process is the analysis for any obstacles in terms of company or tax law.

With our many years of experience, we will be happy to support you in due diligence and price finding – whether on the buyer’s or the seller’s side.

Our services:

• Business analysis in the finance, tax and legal segments
• Review of sectoral, competition and market studies
• Integrated business planning
• Performance of scenario analyses to determine value ranges
• Business valuation using all common valuation methods
• Development of models for purchase price financing and viability analysis
• Preparation of valuation reports for loan applications and sales negotiations

The enterprise value or the value of a shareholding serves in various circumstances as the tax base for the purposes of tax law.

For example:

• Gifting/bequest of a company or shareholdings
• Relocation of business units from companies domiciled in Germany to another country (“transfers of function” under German tax law)
• Relocation of a business owner’s (or shareholder’s) place of residence to another country (exit taxation).
• Transfer of interests in a company as a capital contribution; mergers and demergers
• Corporate restructuring/reorganisation taking into account tax loss carryforwards

For certain matters, tax law has specific valuation rules that differ from the usual valuation standards.

We will be happy to value companies or shareholdings for you, taking into account the applicable tax rules and case law, analyse and optimise tax consequences and prepare expert opinions for submission to the tax authorities.

In some cases, a valuation is occasioned by statutory requirements. Examples include:

• Expulsion of a shareholder in a German limited liability company (GmbH) and redemption of their shares
• Termination of partner status in a partnership
• Death of a co-shareholder and settlement with the heirs
• Conclusion of a control and profit transfer agreement (section 304 et seq. of the German Stock Corporation Act (AktG)
• Integration (merger) of a German stock corporation (section 319 et seq., AktG)
• Exclusion of minority shareholders/squeeze-outs (section 327a et seq., AktG)

In the event that the rights of shareholders are encroached upon or modified, the shareholders or their legal successors are entitled to a settlement. Under the German constitution and company law, settlements of this kind are made at market value. Articles of association or partnership agreements may stipulate otherwise. In the event of a settlement, the enterprise value has to be determined on an objective basis.

Our experts in Stuttgart or Munich will be happy to value companies or shareholdings for you anywhere in Germany, taking into account the applicable rules and case law. We prepare expert opinions for the courts and serve as auditors of valuation reports in the case of statutory audits. We can advise you in the preparation of settlement arrangements in articles of association or partnership agreements. As well as pure valuation issues, tax impacts also play a role here.

A fairness opinion is an expert opinion about whether the price to be paid or received in a corporate transaction is financially fair. The transaction price that is the subject of the opinion is deemed to meet the criterion of financial fairness if it is within a range of values determined using the income approach and benchmark transaction prices. Fairness opinions are becoming increasingly important as a result of damages claims against management due to breaches of due diligence obligations. IDW standard IDW S 8 “Principles of the Preparation of Fairness Opinions” sets forth the principles that German Public Auditors (Wirtschaftsprüfer) must follow in this regard. A fairness opinion prepared in accordance with IDW S 8 can serve as proof of meeting due diligence obligations and thus safeguards against liability risks.

A fairness opinion may be prepared in various situations:

• Business acquisitions and disposals (M&A transactions)
• Public takeover offers in accordance with the German Securities Acquisition and Takeover Act (WpÜG)
• Management buyouts
• Relocations
• Instructions from a majority shareholder
• Outsourcing solutions
• Sale and leaseback arrangements

A fairness opinion provided by us in accordance with IDW S 8 can assist you in the following ways:

• Safeguarding management and supervisory bodies against liability risks
• Documenting management’s decision based on our opinion letter and valuation memorandum
• Verifying and communicating the benefits of a corporate initiative
• Reducing information asymmetries between management and stakeholders

WiTreu has extensive expertise and many years of experience in the preparation of independent fairness opinions and related consultancy, especially in relation to business divestments and acquisitions.