VALUATION OF ENTERPRISE FOR SHARE ISSUANCE PURPOSE

Appraisal of a business before an initial public offering (IPO) is a task that begins with every business. By only when specification is precision that value of business, the old East or the home start as new captures the current situation of the company before deciding whether or not to buy the bond.
Why is it necessary to appraise the enterprises value before issuing shares?
First of all, we talk about determining business value for objects such as:
• Have been and are preparing for equitization
• Preparing to issue bonds for the first time to the public
• Expected significant changes in the ownership or capital configuration of the company such as mergers, joint ventures, capital transfers, M&A, franchises, etc.
• Being on the way to develop and expand the scale of operation, or there is a change in organization of production and business activities.

The determination of enterprise value before issuing shares aims to:

• Help investors and shareholders accurately determine the value of the company in terms of money before deciding to "lower money" to buy bonds.
• Helping businesses complete legal procedures for initial public offering (IPO) bonds
• Helping businesses redefine their growth potential, especially re-establishing expected debts such as tax issues, risks of property disputes, etc.
• Helping businesses see their strengths and weaknesses so that they can "persuade" investors more.
• The success of initial bond issuance depends a lot on the preparation of legal procedures and other factors. If this preparation is not thorough, the parties involved in the IPO may face difficulties, and the value of the shares/bonds of that IPO will be reduced upon listing.

Content to be appraised when valuing a business
When conducting business valuation, the valuation unit needs to evaluate the following factors:

* Subjective factors of the business

• Financial statements: Ensure accuracy and completeness
• Fixed, intangible assets: Validate current value at market value, condition, and title
• Human resources: Identify the strengths and weaknesses of the staff
• Business plan: Analysis of business development strategies, including effectiveness and ineffectiveness.
• Marketing plan: Analyze the effectiveness of programs, marketing strategies, implementation costs, brand measurement...
• Field of activity: Analysis of the companys field of activity, the current situation and potential for development in those fields vực
• Competitors: Identify competitors, threats to the companys growth
• Internal management system: Evaluation of effectiveness, applicable management standards.
• Legal issues - taxes, capital structure...

Economic contracts

System of suppliers: Determine reliability, terms of trade, potential risks 
* Objective factors
• Industry analysis
• Impact of national economic situation and trends
• External competitive factors.
• participating in enterprise participation, IPO, business valuation, initial stock issuance

Enterprise valuation method
According to Vietnam Valuation Standard No. 12 (TDGVN 12), there are guidelines on approaches and methods of enterprise valuation. In which the approach in business valuation includes: approach from the market, approach from cost and approach from income. Appraisers and appraisers can use all sorts of approaches to business valuation. Each of these approaches includes different valuation methods, which in aggregate include the following main methods:
• Average ratio method
• Transaction price method.
• Property Method
• The firms free cash flow discount method
• Discounted dividend stream method
• Discounted net equity cash flow method
• Intangible assets of the business

For businesses that are preparing to conduct an IPO, determining the value of intangible assets is extremely important. Because with tangible assets, investors can easily identify through records, calculations and statistics of accountants or tax authorities.
However, for intangible assets, businesses need specialized units in the industry to appraise prices to determine the most accurate, avoiding loss of the overall value of that business.
See also: Actual situation of intangible valuation in Vietnam and appraisal methods
According to Vietnam Valuation Standards issued by the Vietnam Valuation Association, intangible assets include:
• Intellectual property (brand, trademark, Salogan, reputation...)
• Intellectual property rights in accordance with the law on intellectual property (copyright, industrial property rights,...).
• Non-contractual relationships that bring economic benefits to the parties, relationships with customers, suppliers or other entities (customer lists, databases...).
• The right to bring economic benefits to the parties is specified in the civil contract in accordance with the law (the right to exploit minerals, the right to do business, the right to emit emissions is transferable).
• Other Intangible Assets.