Share Valuations

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Recommended: Similarities and differences between commercial and non commercial organizations

Share Valuations " The valuation of unlisted shares is highly subjective, especially

when the object is to fix a fair price for acquisition by the company

or by the owners fellow shareholders"

Share valuations are necessary because there are many circumstances

when shares in private companies need to be valued, these include

* Management buy outs, buy ins or disposals

* Determining a price for the purchase by a company of its own

shares

* Setting a price for employee share options and management

incentive schemes

* Inland revenue "fiscal" valuations for capital gains tax,

inheritance tax, capital duty, and stamp duty.

* Determining a fair value in a legal or commercial dispute.

What makes share valuation difficult is that every company is

different and individual circumstances must be considered in depth, in

order to arrive at a value, in valuation there is likely to be some

conflicting pressure between parties, this reinforces the need for

valuation to be fully supported by reasoning and analysis. If you are

looking to sell a business you will be looking for the most

appropriate price, occasionally when firms may want to take out a loan

they will offer shares in the company as security against the loan.

Usually we would use the stock exchange to put a value on a share but

there are only 2000 companies out of 1.5 million on the stock exchange

the rest have to be valued.

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