Do you need to know what your business or assets are worth? Chinese companies may seek valuations for regulatory or financial reporting reasons, or because management wants information to aid decision making. Professional valuation advice can provide assurance in a variety of situations.
Companies are increasingly faced with situations that require valuation of their business or specific assets. Good corporate governance requires objective, independent advice to support management decisions and show commitment to shareholders. Increasing regulatory requirements require professional opinions from reliable sources. Internal decision-making and M&A strategies are best executed using solid reliable information from an objective and trusted source.
This information can help management focus their attention on the key strategic and transactional issues that help generate shareholder value. Examples include:
- Transaction and investment advice: Independent valuation advice can help in analysing business investment or divestment opportunities. This could include guidance on joint ventures and alliances where valuation advice can help in pricing negotiations or in the final investment decision, as well as equity splits at formation or exit.
- Accounting support: Assistance can be required to comply with accounting standards under multiple jurisdictions. Hong Kong and PRC examples commonly include HKFRS 3R & ASBE 20 (Business Combinations), HKAS 36 & ASBE 8 (Impairment of Assets) and HKAS 38 & ASBE 6 (Intangible Assets). For foreign listed or reporting companies, examples include ASC 805 (previously known as SFAS 141R) & IFRS 3R (Business Combinations), ASC 350 (Intangibles - Goodwill and Other) (previously known as SFAS 142) or IAS 36 (Impairment of Assets), plus other standards required within different jurisdictions.
- Fairness opinions: Shareholders, trustees and board members may request an independent and objective view on the fairness of the price and terms of a script, non-cash or cash transaction. A fairness opinion could be required by regulators or aid a takeover defense to help the board demonstrate that it acted in good faith and on an informed basis.
- Finance and investment support: A valuation of a project from an unrelated professional firm provides objective and independent support to raise equity or debt finance, or to support investment decision making. Projects rarely operate in isolation so often a net present value appraisal is on a whole business basis, incorporating strategic benefits and assessment on their impact on existing business. Timing is a contributing factor and required returns are often calculated on IRR, ROCE, break even and pay back methods.
- Litigation and arbitration support: This can entail support for litigation or arbitration, particularly expert witness and adjudication work where fact-driven legal and financial concepts are required to settle group business, individual business and personal disputes. A claim may require the valuation of a minority or majority shareholding from professionals with industry or market specific valuation experience to settle a dispute. KPMG member firms offer an international network of independent professionals with extensive experience who are able to provide credible written evidence and/or oral testimony to a court or arbitration.
Valuation is more than a numbers exercise. Time needs to be spent to understand the business as well as the key sector and value drivers. Specialist valuation advice requires the services of professionals with a specific technical skill set and practical commercial valuation experience. This enables them to provide objective, independent advice to focus management's attention on the key transactional or strategic issues.
KPMG China has a team of valuation professionals with extensive commercial experience across many different sectors. The team has provided companies of all sizes and stages of development with valuation advice in a broad range of applications. The skills and experience of our team 2012 enable us to provide independent and objective advice to help clients make informed decisions.
KPMG China has dedicated professionals based in a number of cities including Shanghai, Beijing and Guangzhou, providing the combination of local knowledge with international experience and resources. In addition to their own in-depth market knowledge, the China valuation team can provide clients with full access to KPMG's wider range of audit, tax and advisory services.