Several years ago the term ‘unicorn companies’ was first coined and now, in the world of business valuations, there has been a lot of attention given to the increasing number of unicorns that can be seen.
A unicorn company is simply a start-up business whose valuation exceeds $1 billion – so named because of how rare this occurrence is. However, with promising technology start-ups an increasingly desirable target on the merger and acquisition market, valuations have spiralled, meaning there are a growing number of unicorn companies in existence.
Victor Basta, managing partner of advisory firm Magister Advisors, recently said that many start-ups are reaching “mythical valuations”, as Unicorn companies without an adequate unique selling point or platform are attracting the same astronomical valuations as more sustainable companies. He uses the examples of Pinterest, Shazam, Evernote and Snapchat as Unicorns “with a serious long-term risk” because the business model does not lend itself to long-term growth.
What the emergence of Unicorn companies ultimately points to is the difficulty and complexity of business valuations; without the right technical skills and business experience it is easy for valuations to sky rocket into the realms of mythology.
With an established expertise in forensic accounting, Frenkels Forensics can help with business valuations for a range of reasons – whether someone is looking to buy or sell a company, sell their share of a business, or divide up a business because of a divorce or dispute between among the firm’s partners.
By taking a comprehensive view of a business, its stock, assets, IP, staff, customer base, order book and of course turnover, Frenkels Forensics’ accounting experts can produce a report that does not simply say how much a business is worth, but proves how much a business is worth. This will prevent over-inflated valuations that have no grounding in reality, which is vital if progress is to be made with the acquisition, sale, or dividing-up of a business.
By Vitek Frenkel – find me via Google+.