Corporate Valuation Advisory
A dedicated valuation resource in Indonesia
CVA is a specialised area in our Financial Advisory Services division responsible for Valuation and related Corporate Advisory. Unlike many valuation specialists, the Valuation & Advisory team look beyond the immediate need to measure value. We have found that clients want more than just a view on value today. More clients are more interested in how this value can be increased and how things will look tomorrow. How does the asset fit into the corporate strategy and how can they best maximise the return on assets.
In this context, we work proactively with our clients to analyse the value drivers, understand how value can either be protected or enhanced and if required establish the best way for this enhanced value to be realised.
Valuation is a complex process involving detailed analysis and industry expertise. We have a dedicated team of Indonesian based valuation specialists who are supported by the regional and global resources of our worldwide valuation practice. Our experience in performing valuations enables us to ensure that our service meets client’s needs and to recognize how those needs can best be met.
A valuation of a company or business assets requires a thorough understanding of the business which involves an independent, objective and experienced assessment of a number of factors, including:
- The industry in which the business operates
- Investors expectation of the relevant industry
- The products, markets, competitors and market share of the business
- The trading and financial record of the business
- The caliber of management and key employees
- Future prospects for the business and
- The marketability of the business assets or shares in the company.
By drawing upon our industry experts, our knowledge of transactions gained through our corporate finance practice and our global network, we ensure that the valuation takes full consideration of all industry-specific and country-specific issues.
We offer our valuation measurement services across:
- Share/Business Valuation
- Transaction Negotiation
- Financial Reporting Valuations
- Fairness Opinions
- Shareholder Value Management
In conjunction with the above mentioned services, we also have a property consultant and appraisal company within our Financial Advisory Services division which offers a broad cross-section of real estate products and services to our clients through our PwC Indonesia and global networks across:
- Asset Appraisal
- Market Study
- Feasibility Study
- Highest and Best Use Study
- Occupancy Cost & Leasing Review
Valuation is the language of business today. With the increasing demands for improved corporate decision making and corporate governance, there is an increasing need for superior quality valuation reports. We undertake valuations for:
- Acquisitions and Disposals
- Buy-out of joint venture partners
- Asset transfers for accounting and taxation
- To determine post merger shareholdings
- Revaluation of investment carrying values
- Valuation of Debt for acquisition or restructuring
- Dispute resolution
We undertake the valuation of entire businesses, shares, interests in joint ventures, company debt and share options. We have undertaken valuations for many of Indonesia’s leading companies.
Whilst we have access to the latest international valuation techniques (such as real options valuation), our approach to value is practical - we have access to databases for comparable company analysis and market transactions, ensuring that our valuation advice is always relevant to the Indonesian market.
We deliver an understanding of the value and risk implications of the client’s transaction, enabling the client to enter into negotiations with confidence and a competitive advantage. By providing robust support for the agreed negotiating position, and defenses against counter argument, we provide the client with support they need to maximize the benefits of their transactions. We can assist with answering some of the following:
Financial Reporting Valuations
- What is the achievable price range for the target/disposal?
- What are the value drivers and value risks?
- How do I negotiate the price down? How do I negotiate the price up?
- The impact of restructuring on shareholder value?
New accounting standards have required companies to perform valuations for the purpose of financial reporting in areas such as: business combination (i.e. Purchase Price Allocation (PPA) & impairment testing), stock-based compensations, and hedging activities. For clients reporting under these standards, the change to the new standards is exposing them to increased risks. Adopting these standards require a solid understanding of the standard itself, including recently proposed and future amendments, and its accounting and valuation requirements. We help the clients to manage this high-impact issue to ensure that material valuations are robust, supportable and approved by their auditors.
IFRS 3 – Business Combinations: Purchase Price Allocation (PPA)
On 31st March 2004, the International Accounting Standards Board (IASB) published IFRS 3 “Business Combinations” setting out changes for the accounting of business combinations together with proposed amendments to IAS 36 (Impairment of Assets) and IAS 38 (Intangible Assets).
Apart from the abolishment of annual goodwill amortisation and the pooling of interests method, the IFRS 3 represents a fundamental change in requirements to a detailed purchase price allocation. Whereas historically, in the majority of acquisitions the excess purchase price over the fair value of the tangible fixed assets has often been allocated entirely to goodwill, the allocation of the costs of a business combination across all assets acquired and liabilities assumed is now required according to fair value measurements. All acquisitions will have to be accounted for under the purchase method and will involve rigorous identification and valuation especially of intangible assets newly acquired within a business combination.
We can assist the client in determining and allocating value to various entities or business units and analyzing the potential allocation impacts on their earnings and cash flows under different transaction structures; and determining and supporting fair market values for the acquired assets once the deal has closed.
We have experience in the valuation of intangible assets and intellectual property, as well as tangible assets (e.g., property, plant and equipment).
IAS 36 – Impairment of Assets: Impairment Reviews
All listed companies that report under International Financial Reporting Standards have to comply with the new provisions of IAS 36 from 31st March 2004, which involves:
- Allocation of all assets to cash generating units
- No amortisation of goodwill and indefinite-lived intangible assets
- Annual impairment tests instead of amortization
Implementing the new principles for impairment testing will be very time consuming for many companies. With the first application of the new standards a company will be defining an accounting strategy for a long period of time. An in-depth analysis of the financial implications of proposed and past acquisitions and more rigorous impairment testing is essential.
We prepare reports (fairness opinions) on the terms of proposed transactions (such as the sale of a subsidiary) to determine whether the transaction is fair to a company’s shareholders. The subsidiary is valued and it is this range of values against which the offer price for the subsidiary is compared and deemed either fair or unfair from a financial perspective.
A fairness opinion is not required in every transaction. For companies listed on the Jakarta Stock Exchange, there are certain situations in which it is required by law to comply with Otoritas Jasa Keuangan (OJK) regulations.
- Conflicts of Interest (IX.E1). Where a company is entering into a transaction with a company in which a director, commissioner or a majority shareholder (or an associate of any of these) has a financial interest, an independent assessment of the value of the transaction is required in order to ensure that the price at which the asset is being acquired/sold is at arm’s length and not detrimental to the public or minority shareholders.
- Material Transactions and Changes in Core Business Activities (IX.E2). Whenever a material transaction takes place or there is a change in the company’s core business, an independent assessment on the transaction value must be provided to the company’s shareholders. For these purposes material is greater than 10% of the company’s revenues or 20% of its equity.
A comprehensive written report on the transaction will be provided to the Board of the Company. A summary is also prepared for inclusion in the circular sent to shareholders. These reports must be prepared in both Bahasa Indonesia and English, and lodged with OJK.
Shareholder Value Management
All firms talk about Shareholder Value, although very few consistently generate premium returns for their shareholders. We focus on optimizing the firm’s strategic value via exploring the value of the options available to improve that value. We assist the client to identify tasks and decisions such as making an acquisition, restructuring of the business to release capital, operational and financial decisions – that improve firm value. Our clients will receive:
Services Offered by our Property Advisory
- A clear picture of value
- Identification of strategic options available to management
- Prioritised options to increase value
- An implementation plan
- Review and feedback on improvements
- Asset Appraisal - Individual or portfolios asset appraisal for the purposes of accounting as required by the International Accounting Standards (IAS) or the International Financial Reporting Standards (IFRS), insurance, merger and acquisition, disposal, litigation (expert determination and disputes over value).
- Market Study - Review of the historical supply and demand, rental rates and selling prices.
- Feasibility Study - Provision of an independent feasibility analysis of property development opportunities.
- Highest and Best Use Study - Evaluation of the alternative development options of a vacant land or an improved property that are reasonably probable, legally permissible, physically possible, appropriately supported, financially feasible, and results in the highest value.
- Occupancy Cost & Leasing Review - Assessment of the occupancy cost of property assets, space utilization and review of leasing obligations.
Advisory Transaction "On a page"