Course: INBETS SME VALUATION KIT, Section: Introduction

Introduction
- Introduction
  
  Welcome to the INBETS SME Valuation Kit! The Valuation Kit is divided into 5 sections:
  
  Introduction
  
  Valuation methods and tools
  
  Challenges regarding SME valuation
  
  Sticking points of SME valuation
  
  Course conclusion
  
  Reasons for valuation
  The reasons for business valuations can be divided into valuations made in accordance with statutory requirements or contractual agreements and valuations carried out for other reasons.
  
  Valuations for contractual reasons occur particularly in the event partners join or leave a partnership, in relation to inheritance disputes and inheritance settlements, as well as for settlements made in accordance with family law.
  
  On the other hand, business valuations are often made based on entrepreneurial initiatives such as the purchase or sale of businesses, mergers, additions to equity or third-party capital, contributions of non-monetary assets (including the transfer of entire net assets of businesses), initial public offerings, management buy-outs or in connection with value-oriented management concepts. Business valuations are also carried out based on commercial and tax law valuation questions (Fédération des Experts Comptables Européens, 2001).
  
  It is important to remember that the purpose of the valuation vil impact the outcome.
- Glossary
- Market value
  
  The market value the estimated amount for which an asset should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion (International Valuation Standards Committee (IVSC))
- Fair value
  
  The fair value is the price that would be negotiated in an open and unrestricted market between a knowledgeable, willing but not anxious buyer and a knowledgeable, willing but not anxious seller acting at arm's length (Rundle, 2016)
- Fundamental value
  
  The fundamental value is an analytical judgement of value based on the perceived characteristics inherent in the investment, not tempered by characteristics peculiar to any one investor, but tempered by how these perceived characteristics are interpreted by one analyst versus another (Pratt and Niculita, 2008).
- Value versus price
  
  The Oxford Dictionary for the Business World defines “price” as (in part) “[the] amount of money for which a thing is bought or sold”. Price is an observed historical fact. It is the result of a dealing between at least one buyer and at least one seller. The term “market value” is the amount that an asset is expected to realise if sold on a particular day. An opinion as to market value may be based on a consideration of market prices but the two are not necessarily the same.

Introduction

Introduction

Glossary