The Zephyr database
In this article Andrew Strickland takes an in-depth look at the complex nature of the valuation of shares in private companies and how the comprehensive Zephyr deal information database can benefit members.
If using the markets approach, the business valuer nearly always struggles with finding guideline companies against which to compare the business upon which he is focused. He can seek inspiration from the values of the shares of public companies on the various markets; however such comparisons can be increasingly strained for smaller private companies.
Alternatively, he can look at evidence of prices paid by listed companies on the acquisition of private companies. Finding such data from the financial reports of public companies can be very time consuming as it involves a considerable research effort. Such data, once located, clearly has to be used with considerable care in any event, in order to identify the transactions and then to interpret the messages on value which they provide. Almost inevitably the business valuer is obliged to use data which is not directly comparable when using the markets approach to business valuation. However the valuer does need to make sure that he is using the most relevant data that is available. The markets approach will nearly always provide information which is persuasive rather than compelling.