Business & Intangibles Valuation
The economic value of a business, of its intangibles and of the instruments that fund it.
The economic value of a business, of its intangibles and of the instruments that fund it.
The discipline brings together what used to be separate practices. A PPA needs the business and its intangibles on the same basis; marking a fund needs its portfolio holdings and its receivables under the same assumptions. Splitting that across firms or teams is what produces the inconsistency the auditor finds.
Operating businesses, holding companies, minority interests and the assessment of a departing shareholder's stake, through discounted cash flow, listed and precedent transaction multiples, and adjusted net asset value. CPC 46, IFRS 13, IVS 200 and Brazilian Corporate Law.
Brands, customer relationships, contracts and backlog, licences and concessions, proprietary software, patents and know-how, in purchase price allocation, impairment testing and corporate reorganisations. CPC 04 and IAS 38. See in detail →
Interests in privately held companies, fund units without a secondary market, receivables portfolios, non-performing loans, debentures and securitisations, valued through receivable cash flows with calibrated expected loss and through a line-by-line build of the portfolio. CPC 48, CPC 40 and CVM Resolution 175. See in detail →
Derivatives, options, swaps and optionality embedded in contracts and in equity instruments, through Black-Scholes-Merton, lattice models and Monte Carlo simulation. CPC 48 and IFRS 9. See in detail →
A valuation of a business or equity interest is mandated by one of the circumstances below. In each, the purpose of the report determines the applicable standard, authorized users, and the level of technical defensibility required.
Best international practice requires simultaneous application: and triangulation, of the three core approaches. In critical engagements, divergence among them is explicitly addressed in the report, with justification for the conclusion adopted.
Applied to assets with reliable financial projections. CBG models both FCFF (discounted at WACC) and FCFE (discounted at Ke) depending on engagement nature: FCFF for standalone enterprise analysis, FCFE for measuring equity interests with a specific capital structure. The cost of capital is built via CAPM adjusted for emerging markets, with bottom-up country risk premium calculated from sovereign CDS spreads and adjustments for country beta and size premium.
Applied as methodological triangulation and reasonableness test against the DCF. Listed peer multiples are used for continuous measurement (mark-to-market), while precedent transaction multiples capture control premia when the engagement involves a corporate negotiation. Sample selection is justified on technical criteria: geography, size, margin, maturity stage: and adjusted for liquidity, control, and size via Pratt Stats and quantitative methods.
Applied when the asset is pre-operational, in distress, or when use value is lower than liquidation value. CBG applies book equity as a minimum reference and market-adjusted equity when material discrepancies exist between book value and fair value of identifiable assets and liabilities, typically in holding companies, financial institutions, and entities with material fixed assets.
The procedure is the same regardless of report purpose. What varies is the depth applied at each stage, according to the materiality and complexity of the asset being valued.
Technical meeting with client, scope definition, identification of authorized users, data sources, information restrictions, and timeline. Engagement letter signed before kickoff.
Audited financial statements, management projections, material contracts, sectoral regulation, listed comparables, and precedent transactions. Every source is archived in working papers.
Historical analysis of margin, capex, working capital, leverage, and cash generation. Sector benchmarking and identification of the critical value drivers specific to the asset.
Modeling by revenue and cost line, with defensible assumptions and named sources. Explicit horizon calibrated to the business cycle, typically 5 to 10 years. Integral sensitivity to the most sensitive drivers.
CAPM with unlevered and relevered sector beta, equity market risk premium, hard-currency risk-free rate adjusted for inflation differential, country risk premium, and size premium when applicable.
DCF with FCFF and/or FCFE depending on scope, terminal value via Gordon and reasonableness test via exit multiple, listed and precedent multiples with documented adjustments, asset approach when applicable.
Reconciliation of the three approaches, explicit justification for the adopted conclusion, sensitivity on critical drivers, and construction of a defensible range when the engagement demands it.
Full documentation archived for seven years, formal report following the engagement standard (CPC, IFRS, IVS, or Brazilian Corporate Law), and availability for defense in auditor, regulator, counterparty, or arbitrator review.
The technical points below concentrate the highest volume of review and challenge against valuation reports in the Brazilian market. The CBG methodology anticipates each one in report construction.
Calibration of the country risk premium is the most frequent reason for technical challenge against a DCF. CBG applies a bottom-up CRP via sovereign CDS, with adjustments for sector exposure and size: not Damodaran's generic spread applied linearly.
In emerging-market DCFs, 60% to 80% of enterprise value typically resides in the terminal value. CBG defends the perpetuity via ROIC vs. WACC convergence, real growth assumption consistent with potential GDP, and a reasonableness test via exit multiple.
The distinction between operating and non-operating items, and the separation between maintenance capex (recurring, within the DCF) and expansion capex (excluded when there is no projected return base) are points where reports are frequently challenged.
Revenue projections anchored in uncontracted commercial pipeline, geographic expansion without corresponding capex, or rising margins without an explicit driver are red flags for any experienced auditor.
Control adjustments (typically 20% to 35%), liquidity (DLOM via Finnerty, Chaffe, or Longstaff), and size (Duff & Phelps Risk Premium Report) must be justified quantitatively: not applied as generic heuristic.
Material divergences among DCF, multiples, and asset approach must be explicitly addressed in the report, with justification for the adopted conclusion. Silence on divergence is a defensibility deficiency.
CBG works under simultaneous CPC and IFRS standards, with methodological reference to IVS (International Valuation Standards) and full compliance with the Brazilian Corporate Law.
| Standard | Scope |
|---|---|
| CPC 46 / IFRS 13 | Fair value measurement: fair value hierarchy (Levels 1, 2, and 3), observable and unobservable inputs, valuation techniques. |
| IVS 200 | Businesses and Business Interests: international standard applied to the valuation of businesses and equity interests. |
| CPC 15 / IFRS 3 | Business Combinations: reference for valuation of the acquired business in PPA engagements. |
| CPC 01 / IAS 36 | Impairment of Assets: reference for impairment of equity investments. |
| Law 6.404, arts. 8, 45, 226 | Corporate valuation for incorporation, merger, spin-off, and exercise of withdrawal rights. |
| CVM Inst. 319, 361, 436 | Valuations for public offerings, going private, and related-party transactions in the Brazilian capital markets. |
| RFB IN 1.700 | Valuation for related-party transactions and federal taxation, when applicable. |
Business valuation engagements conducted by the CBG team. Each case documents the context, the technical approach adopted, and the standards applied.
Case · Telecom
Fair value measurement of regional fiber-optic operator for a fund controlled by foreign private equity. DCF/FCFF triangulated with multiples.
Case · Infrastructure
Fair value of a fund holding in an urban rail concession held in offshore structure. DCF FCFE with bottom-up CAPM.
Case · Cross-border
Cross-border valuation of integrated lifestyle hospitality platform, with operational assets outside Brazil. Asset-by-asset income approach.
Case · Impairment B3
Impairment testing of one of Brazil's largest listed food retailers. CGUs by store and regional cluster, VIU via DCF.
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