Why is there a rising scope for importance of business valuation
With signs of economy reviving the importance of valuation of business is gaining momentum among the business men in the region. The SME’s in the construction industry are taking a lead in the trend to value their firms.
The valuation approaches that find more attraction in SME sector in UAE is Income Approach where the future revenue plays a crucial role. The asset approach is popular among the highly capital intensive companies while marketing approach is used when the comparison of different companies are available.
The valuation is important for various reasons such as:
1. Sale of Business: It is quite common that the business men in SME sector has stake in more than one business in UAE. The main reason for conducting business valuation is because business owners are planning to sell their stake in some of their business and to focus attention on their key businesses. With economy growing most of them want to cash out their hard work.
2. Division of business: The major businesses in UAE are Limited Liability Companies with numerous partners and quite often when partners decide to part their ways the only way to arrive at the value of the business with greater accuracy is through Business Valuation. There are times when the family divisions have also resulted in division of the business. To ensure that all the parties get their worth of money Business Valuation plays an important role.
3. Expansion of business: As business are crossing geographical barriers and moving beyond the horizons the value of the firms play a key role in business planning. Understanding the current position will help in efficient planning and coordination.
4. Financing Requirement: With the objective of raising cheaper finance it sometimes becomes necessary for companies to analyze the value of the firm and for the financial institutions. With many wealthy investors showing eagerness to invest in UAE the importance of valuation is getting more significance.
5. Mergers & Acquisition: The mergers and acquisition in the SME sector in UAE is also witnessing a rapid increase and business valuation becomes a crucial factor for decision making.
The Facebook valuation has aroused curiosity in the minds of the people. With such curiosity the trend for business valuation is increasing in UAE as well.