Lotus Amity is a specialised firm of Chartered Accountants; accredited Business Valuation Specialist and Forensic Accountant Specialist with Chartered Accountants Australia and New Zealand.
Why Lotus Amity?
Lotus Amity provides reports at a higher level than you’d receive from a mid-tier firm, with full partner involvement but at a lower cost for these reasons:
- mid-tier accounting practices offer a range of services including tax, audit and advisory; at Lotus Amity we don’t, we are dedicated to Business Valuations and Forensic Accounting
- mid-tier accounting firms delegate reports to junior employees with little partner involvement; at Lotus Amity all the reporting work is completed at partner level
- mid-tier accounting firms typically have premium CBD offices, large overheads and highly remunerated partners; Lotus Amity has none of these
Lotus Amity are not property valuers or business broker valuers. Lotus Amity provides robust, premium valuation reports
The reports comply with the integrity, objectivity, confidentiality and professional requirements as set out in the APES 110 Code of Ethics for Professional Accountants. The reports are often used in litigation and meet court reporting requirements.
Lotus Amity founder Simon Cook is the Queensland Chair for the business valuation group and a member of the trans Tasman Business Valuation Committee for Chartered Accountants Australia and New Zealand.
Simon holds the NYU Stern School of Business Advanced Valuation certificate with high honours, as taught by the Dean of Valuations Professor Aswath Damodaran. Simon was previously a corporate finance partner with mid-tie firm BDO and the national head of forensics. Prior to that he was senior manager with Big 4 firm Deloitte.
The Lotus Amity valuation approach
Typically for valuing a growing privately held business we adopt an income approach and model the future cash flows of the business. This is different to many other business valuers who simply adopt a multiple of earnings approach.
The problem with relying on a multiple of earnings approach is that it ignores growth and the subtleties of changing cash flow, such as working capital requirements.
To arrive at a value of the business future cash flows are discounted back to a value today. The discount rate represents the return investors require to reflect the risks associated with those cash flows.
Many valuers build up a discount rate and add subjective premiums such as a firm or industry specific risk premium and small stock premium to arrive at a discount rate that appears reasonable.
Lotus Amity do not follow this approach. We build up a discount rate based on the returns and the liquidity observed in the market. Such a rate reflects the relative returns investors require. We use the multiple approach as a secondary cross-checking approach.
Types of valuation
Lotus Amity typically value mid-sized privately held businesses with a turnover of between $1 million and $100 million or rapidly growing business. Industries include manufacturing, distribution, retail, technology, professional services and engineering.
Lotus Amity provide valuations in the following situations:
- in disputes – to help resolve shareholder, breach of contract or transaction disputes
- in transactions – for sales and buyers to gauge pricing
- in restructuring – for tax purposes
In preparing a report Lotus Amity need to investigate, analyse, research and understand:
- the business story – products and services, customers and suppliers, staff and operations, asset base, contracts, business development
- the numbers – historical and current sales performance, operating margins, non operating transactions
- the industry and economic outlook – prospects for the business
- the company – ownership, capital structure, non-operating assets, shareholder agreements
Valuations ordinarily include a business operations review, industry and economic outlook research and assessment, detailed financial analysis, cash flow, discount rate and liquidity modelling, comparable transaction research and analysis and an independent review
Each valuation reports is different. There are invariably nuances in each privately held business that need to be addressed. The stages, however, to the valuation typically look like this:
- request for business information and agreement of valuation scope, 2-3 days
- review and analysis of initial information and request for additional information, 3-7 days
- business, industry and economic outlook research, 1 – 2 days
- financial analysis, including sales and margin analysis, 2-3 days
- expected cash flow modelling, 1-2 days
- discount rate modelling and research, 1-2 days
- comparable company and transaction research and analysis, 1-2 days
- preparation of report and appendices, 5 – 7 days
- independent review and report update, 3-4 days
- issue of redacted report for factual accuracy check, 3-4 days
- final report issued, typically 4-5 weeks from engagement
Types of engagement
In accordance with the Accounting Professional & Ethical Standard 225 on Valuation Services, Lotus Amity provide the following valuation engagements:
- Valuation Engagement – where the business valuer is free to use the valuation approach, method and procedure
- Limited Scope Valuation – where the business valuer is not limited or restricted to employ and the effect on the estimate of value could be material
- Calculation engagement – where the business valuer and the client agree on the valuation approach, method and procedure
Timing and fees
Due to the comprehensive nature of the reports, we request a substantial amount of information from clients. Once this information is reviewed we then request additional information. Due to the detailed nature of the work, reports typically take four weeks to produce and fees range between $10,000 and $20,000, plus GST.
Business Valuation | Forensic Accounting
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