Background and problem discussion: Business valuation is no precise science. There is no
universal legal framework which dictates how the valuation should be performed and
therefore, it is no right way to estimate a company’s value. However, there is a lot of literature
within the business valuation area which could help facilitate the valuation procedure and
minimize the risk of failure. It is thus interesting to study and review the business valuation
process in theory and in practise to see how it should be performed and how it is in reality.
Aim of the study: The purpose of this paper is to provide an overview of the business
valuation process according to the theory and to map out the assumptions that underlie this
process. Additionally it aims to compare the appraisers’ valuation process, with the compiled
theoretical framework in order to identify the differences and likenesses and then to interpret
them. Furthermore the purpose is to review the valuation procedure between different
appraisers and to be able to make a conclusion if there is a specific framework that is used in
general.
Delimitations: This paper focuses on the general use of the business valuation process and
therefore no specific attention to a certain industry or phase of the business valuation process
will be examined. Only the three most well-recognized valuation models among many
existing, asset-based, income-based, and market-based approaches are presented. Moreover
the paper studies only a company’s value as a result of the valuation process and not the value
given through negotiation.
Method: In order to answer the issues of this thesis the studying of the relevant literature on
the subject and qualitative interview-investigation were conducted. The interviews were
performed with three professional appraisers and one interview with a theorist. Furthermore,
collected information was analysed and conclusions have been made on the basis of the
analysis.
Analysis and conclusion: According to the result of this study, there is no unique framework
for the business valuation process that exists in practice. The appraisers’ valuation procedure
is based on the primary valuation idea presented in the theory however the particular appraiser
has developed their own framework which is derived f...
