How To Complete a Successful Company Valuation in Latin America

Before taking advantage of the Latin America business opportunities, one should complete a company valuation. Completing a valuation of a company in Latin America applies the same principles and procedures that would be used to evaluate a company in other countries. A potential difficulty facing an analyst within Latin America is the availability of quality and reliable information in order to accurately complete the valuation. With that in mind it is very important to employee the services of a Back Office company with experience in this type of activity in order to ensure that the valuation is completed accurately and truly represents the true value of the business.

company valuation latin america
How To Complete a Successful Company Valuation in Latin America

Company valuations are normally calculated on the basis of either:

  • Stock value (or market value), which is the value of the company if it were a public entity
  • By the equity value (or book value), when the company is private.

A deep analysis will include an investigation of quantitative and qualitative elements of financial statements, environmental issues, industry specific considerations and main variables forecast (particularly income and cost forecasts). Given that information, an analyst will calculate expected cash flows, income, CAPEX and other variables, leading to the final valuation of the company’s net present value.

Difficulties With Company Valuations in Latin America

Often company financial statements and cash flow forecasts are not always representative of the reality of the company

An issue facing the analysts within Latin America and the world, is that often company financial statements and cash flow forecasts are not always representative of the reality of either the company and/or industry (and instead include a degree of over optimism). Often the basis for this, is that reports are sometimes distorted in order to comply with Governmental regulations, to meet internal bench-marks / targets and/or to gain tax advantages. In addition to this, accurate and reliable industry information is not always available for all sectors, therefore, a large challenge for any analyst completing a valuation is to “clean” the available information of any identified distortions and to acquire accurate data to support the valuation premise. To achieve this, it is very important to have the support of the right Back Office Team that has the skills, experience and financial understanding.

Need For Due Diligence

To mitigate the risk described above, investors should do thorough due diligence using both industry and market research from independent parties. Although the work is expensive and time consuming, the the additional outlay will result in higher quality information and an improved and more accurate valuation. Hence it will ensure that the investment company is truly receiving value for money.

Biz Latin Hub can help your Company Valuation in Latin America

In conclusion, in order to ensure that the valuation of a company is accurate and truly reflects the company fundamentals, it is recommended that investors spend sufficient time and resources on the valuation; and use a credible team of analysts, supported by accurate and validated industry information in order to complete the valuations process.

Should you require more information regarding company valuations, due diligence or financial reporting services, don’t hesitate to contact Biz Latin Hub.

Or read about our team and expert authors.

Watch this video to learn how we can help you start your business in Latin America today!

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The information provided here within should not be construed as formal guidance or advice. Please consult a professional for your specific situation. Information provided is for informative purposes only and may not capture all pertinent laws, standards, and best practices. The regulatory landscape is continually evolving; information mentioned may be outdated and/or could undergo changes. The interpretations presented are not official. Some sections are based on the interpretations or views of relevant authorities, but we cannot ensure that these perspectives will be supported in all professional settings.
Craig Dempsey

Craig Dempsey

Craig is a seasoned business professional in Latin America. He is the Managing Director and Co-Founder of the Biz Latin Hub Group that specializes in the provision market entry and back office services. Craig holds a degree in Mechanical Engineering, with honors and a Master's Degree in Project Management from the University of New South Wales. Craig is also an active board member on the Australian Colombian Business Council, and likewise also active with the Australian Latin American Business Council.

Craig is also a military veteran, having served in the Australian military on numerous overseas missions and also a former mining executive with experience in various overseas jurisdictions, including, Canada, Australia, Peru and Colombia.

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