MES-Pillai Institute of Management Studies

and Research (PIMSR),

New Panvel

Master of Management Studies (MMS)

(Batch : 2022-2024)

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 MMS - Semester – III
Subject : Corporate Valuation and Mergers &
Acquisitions (CV & MA)

Chapter– 9 : Writing Valuation Report

and Reporting Standards

Lecture date : 11.12.2023

by
Dr. K.G.S. MANI

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Lecture date : 11.12.2023
Chapter–9: Writing Valuation Report and Reporting Standards
(1) Guidelines for preparation of Valuation Report :
The Appraisal Foundation, American Society of Appraisers,
National Association of Certified Valuation Analysts, Institute of
Business Appraisers, and The Canadian Institute of Chartered
Business Valuation have prescribed valuation reporting standards
to be followed by the companies. The guidelines are provided by
the Uniform Standards of Professional Appraisal Practice (USPAP)
developed by the Appraisal Foundation, USA. The USPAP defines
appraisal as “the act of process of developing an opinion of ‘value
and an appraisal report as any communication’ oral or written of
an appraisal, review or consulting service that is transmitted to the
client upon completion of an assignment. In the Indian context,
the valuation has to be done step by step as explained under
previous chapters and reporting has to be done in a flow of
sequence.

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(2) Reporting Standards :
According to USPAP, each written or oral “business valuation”
report must be presented in the following manner :
(i) Clearly and accurately set forth the appraisal in a manner that
will not be misleading.
(ii) Contain sufficient information to enable those who receive or
rely on the report to understand it properly.
(iii) Clearly and accurately disclose any extraordinary assumptions
or limiting conditions that directly affects the appraisal and
indicate its impact on the concluded value.

(3) Written Business Valuation Reporting Standards :

USPAP guidelines require that each written ‘business appraisal
report’ complies with the following disclosure requirements :

(PTO)
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(i) Describe the business and ownership interest that is being
valued.
(ii) State why valuation is being done and the client’s intended use
of the valuation, opinions and conclusions.
(iii) Define the standard of value that is being estimated.
(iv) Mention the effective date of valuation and the date the
valuation report.
(v) Describe the valuation process.
(vi) Spell out all assumptions and limiting conditions that have a
bearing on the analyses, opinions and conclusions.
(vii) Specify the information considered, the analytical procedures
followed, and the reasoning underlying the valuation, opinions
and conclusions.
(viii)Explain the rationale for the valuation methods and procedures
followed.

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(ix) Set forth any additional information that justifies compliance
with or permitted deviation from the USPAP “business appraisal
development” standards.
(x) Include a signed certificate stating compliance with USPAP
Standards Rule. The thrust of this certificate is on the valuer
declaring that the valuation is not biased or motivated.

(4) Steps in writing Report:

(i) Executive Summary (briefly 2 page only)
(ii) Write briefly about the Target Company, its financial highlights,
(iii)Synergy for Merger of Target Company (with your company
(Acquiring Company).
(iv) Details on valuation method applied and justification.
(v) Method of Valuation on Goodwill (with justification).
(vi) Purchase consideration (equity shares, debentures, cash).

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(vii) Details of calculation of Exchange Ratio (Swap Ratio).
(viii)Payment of Cash to Target Company to repay its outside
liabilities, payment to TC shareholders who do not want
allotment of shares in Acquiring Company.
(ix) Calculation of EPS, comparison and comments with pre-merger
and post-merger figures.
(x) Presentation and explanation to Top Management (Boar od
Directors)

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THANK YOU