Finding how much a company is worth

[xoox]

Hi

I would need your advice on this. I am a student doing an assignment on finding suitable acquisition Small-business targets for a bigger company.

The only info I have about the Small business company from the point of view of their value is that they have been funded twice for around $10 million each by VCs. Will this info help me in finding how much the company is valued at, which I can suggest to be the company's value?

Thanks and Regards

[tkessex]

Some say that you can value a business solely on the cash or turnover it generates, and others think it's more a question of the assets the company holds. Unfortunately, neither are truly correct.

In reality it has to be a balance of the above, dependent upon the type of business being valued, as well as consideration for the market the company operates in and it's relevance in the current day. For instance it may be more beneficial to value a business with a lot of fixed and tangible assets (machinery, premises, land) on that basis, rather than turnover. On the other hand a legal or accountancy firm is more likely to be cash driven, so that would be the main focus. But debt must also be factored in, both short and long term liabilities (loans, hire purchase on equipment, mortgages, leases).

But if you consider valuation from a stock perspective, the whole process changes again. In this case people tend to use a price-to-earnings analysis, comparing the value of a company's shares to it's earnings per share. This tends to be used only to compare companies within the same industry, but it's something else to consider nonetheless.