COMPANY VALUATION

COMPANY VALUATION FOR FOREIGN INVESTORS IN TURKEY

Companies need company valuation in mergers, acquisitions, IPO transactions and especially for foreign investors.

Foreign investors should make valuations in the relevant company before investing in companies in Turkey. Because the company's current market value and future potential value can only be determined by company valuation.

The findings and analysis in issues such as current debts and tax liabilities of the company to be invested, receivables that become impossible to collect for the company, profitability rates with company net sales, company location, the life span of depreciable assets (machinery, building, vehicle, fixtures) the company's reputation for its creditors and finally, whether the funding of the company's resources are made from equity or in credit institutions are vital for investment security.

The value of the assets in the company ledger records does not reflect the reality since it shows the cost value on the relevant date. The difference between the cost value and the actual value of the company's assets increases with the impact of technological developments and rising inflation rates. Finally, company valuation studies may be needed as it is not possible to see the effect of the market or location advantages of companies on the balance sheet.

Additionally,

·      Organizations that fund companies lend based on the value of the company and the company's future sales performance.

·      Valuation work can be done to see how the company value varies according to time. In this way, the success of company management can be tested.

·      Company valuation is needed in case of company bankruptcy and liquidation processes.

·      A valuation can be made in inheritance sharing transactions.

·      For portfolio managers, company valuation work may be needed to see if the company value is trading below the market value.

 

The company valuation is a determination of what the value of the relevant company will be in the future as a result of analysing the sector and economic circles in which the companies are positioned, based on the information of the companies’ financial statement in the past and current period financial statement.

Variables such as research and development activities, technology usage, company's establishment location, capital, dividend policy and dividend distribution power, investment needs and financial strength that can meet the necessary investments, economic life of investments, scrap value of company assets, marketing power of goods and services may affect company value.

Factors outside the company; sector-related developments, the country's economy and the conditions of the global economy and developments in state regulations affect the value of the company.

Therefore, it is not possible to reach an absolute conclusion in company valuation. Following the current data, the current value of the company is predicted in the future.

The process works as follows when valuation is carried out:

1-    To determine the best valuation method for the company, the purpose of the company valuation and the problems that may occur should be analysed.

2-   Information within the company and outside of the company is collected and analysed.

3-   After the collected data is evaluated, the company's current valuation should be made by the valuation method following the purpose of the company.

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