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Phase 1
Data Collection and Initial Assessment
Objective:
● Gather relevant information and understand the business context.
Key Steps:
● Collect financial statements, including balance sheets, income statements, and cash flow statements for at least the last 3-5 years.
● Gather details on assets under management (AUM), revenue streams (recurring vs. one-time), client demographics, and retention rates.
● Identify market positioning, including competition and industry trends.
● Review historical growth patterns and future projections.
Phase 2
Business Analysis
Objective:
● Evaluate the operational and market dynamics influencing value.
Key Steps:
● Assess the quality of the client base, including segmentation, loyalty, and concentration risks.
● Examine the stability of revenue, focusing on recurring revenue streams.
● Review operational efficiency, including cost structures and profitability margins.
● Analyze the competitive landscape and identify differentiators (e.g., niche expertise, service offerings).
Phase 3
Selection of Valuation Methodology
Objective:
● Choose the most appropriate valuation methods based on the nature of the business.
Key Steps:
● Consider commonly used methods in wealth management, such as:
● Market Comparables: Valuing the business based on recent M&A transactions in the same industry.
● Discounted Cash Flow (DCF): Calculating the present value of projected future cash flows.
● Multiples Method: Applying industry-standard multiples (e.g., EBITDA, AUM, or revenue multiples).
● Evaluate which method best captures the business’s unique characteristics.
Phase 4
Financial Modeling and Valuation Calculation
Objective:
● Perform detailed calculations and arrive at a valuation estimate.
Key Steps:
● Build a financial model incorporating historical data and future projections.
● Apply chosen valuation methodologies and test assumptions for accuracy.
● Account for risk factors, including market volatility, regulatory changes, and economic conditions.
● Reconcile different valuation methods to arrive at a final range or single estimate.
Phase 5
Drafting and Presentation of the Report
Objective:
● Compile findings into a clear, comprehensive, and professional document.
Key Steps:
● Prepare a detailed written report, including an executive summary, methodology, findings, and conclusion.
● Include supporting documentation such as financial models, comparative data, and key assumptions.
● Ensure the report is structured logically and adheres to industry standards.
● Present the valuation results to stakeholders, addressing questions and explaining assumptions.
Phase 6
Review and Finalization
Objective:
● Validate the report and ensure accuracy before submission.
Key Steps:
● Review the report with colleagues, accountants, and legal advisors to verify accuracy and completeness.
● Make adjustments based on stakeholder feedback, ensuring the final report is robust and defensible.
● Issue the final valuation report for client or stakeholder use.