Cost and period of stock price calculation | By purpose (M&A. Third-party allocation, taxation, stock options) and points to note when making a request
The cost of stock price calculation (cost of corporate value evaluation) is determined by the purpose and destination of the valuation report, the number of valuation methods, and the complexity of the subject of evaluation. A guideline based on our experience is that M&Formal stock price valuation reports used in A and third-party allotment capital increases are typically 800,000 to 1,500,000 yen (excluding tax), from around 500,000 yen for simple calculations for internal consideration, to 1,500,000 to 3,000,000 yen for complex projects involving multiple businesses or overseas companies. Our guideline is 4 to 6 weeks if all the materials are available, and about 2 months if the project involves evaluation of multiple projects and support for creating a business plan. If there is a deadline, please request 1.5 months in advance.
In this article, we will provide a guideline for stock price calculation costs by project type based on our experience, and explain the factors that determine costs.&A: We will organize the differences by purpose, such as third-party allocation capital increase, stock options, and organizational restructuring, the standard period, and the items that should be communicated when requesting a quote.
Cost of stock price calculation: guideline based on our experience
The cost of stock price calculations ranges from hundreds of thousands of yen to several million yen, even if you look at the published price list, so it is difficult to judge by comparing the prices alone. Therefore, we will provide a guideline for each type of project based on our experience with projects that we have handled in the past. All fees are tax-excluded, and the actual cost will vary depending on the content and purpose of the evaluation.
Estimated costs by project type
| Case type | Estimated cost (excluding tax) | Main contents |
| Simple calculation for internal consideration | 50About 10,000 yen~ | A single project, one or two evaluation methods, and a concise report. M&For internal decision-making, such as initial consideration of A and grasp of price perspective. |
| Official stock price valuation report (standard case) | 80~1.5 million yen | M&A. For purposes such as third-party allotment capital increases, stock options, and organizational restructuring, multiple evaluation methods are used in combination, including providing explanations to the board of directors and transaction partners. If submission/explanation to an auditing firm is involved, the upper end of the range |
| complex case | 150~3 million yen (individual estimate) | Including multiple businesses/subsidiaries, there are latent shares such as class shares and stock options, cash flow denominated in local currency, country risk, English reports are required for evaluation of overseas companies, etc. |
Calculation reports that are submitted to an audit firm (such as assumptions for accounting for third-party allocation of capital and stock options, and those that form the basis for PPA and impairment tests) are reviewed by the audit firm's valuation experts. As a result, it is necessary to submit supporting materials for assumptions and calculation models, and to respond to questions, and the standard of reporting is also higher, so the cost will be higher than in-house calculations for the same purpose.
In addition, when requesting an audit firm-affiliated FAS or a major valuation company, the cost can range from several million yen to over 10 million yen in cases involving multiple businesses or multiple subsidiaries of a listed company. Additionally, free diagnostics and automatic calculation reports are separate from the official calculation report signed by an expert.
Factors determining the cost of stock price calculation
- Purpose and submission destination: Is it for internal decision-making, is it for explanations to the board of directors, shareholders, or transaction partners, or is it for submission to auditing firms, tax authorities, or courts? Therefore, the more difficult it is to submit to, the more evidence will need to be provided and the scope of involvement of experts will increase.
- Number of valuation methods: Only the DCF method, or a combination of similar company comparison method, market value and net worth method, etc. M&It is standard for calculation reports for A and third-party allocation to use multiple methods in combination.
- Complexity of the subject to be evaluated: For example, whether it is a single business or multiple businesses, the number of subsidiaries and affiliated companies, the presence or absence of non-business assets, and the presence or absence of latent shares such as class shares and stock options.
- Cross-border: In addition, when evaluating overseas companies, we add local currency denominated cash flow, country risk, local comparable company data, and report preparation in English.
- Scope of explanations: Furthermore, to what extent does this include attendance at board meetings, explanations and response to questions from auditing firms, tax authorities, and other party's evaluators?
Differences in stock price calculation costs by purpose
The concept of required value, evaluation method, and report format vary depending on the purpose of stock price calculation. Therefore, it is not uncommon for stocks of the same company to yield different results if they are used for different purposes.
Comparison of value concepts, methods, and reports by purpose
| Purpose | What is required | Main evaluation methods | Note |
| M&A (acquisition/sale) | Basis for the validity of the transaction price. The buyer uses it as a record of the board of directors' decision-making, and the seller uses it as support for negotiations. | DCF method, similar company comparison method, (for reference) market value and net assets method | Organize the handling of synergies and control premiums. Alignment with post-acquisition PPA |
| Third party allotment capital increase | Explanation that the issue price does not fall under "particularly advantageous issue" (Company Law) | DCF method, similar company comparison method. Recent transaction examples | Accountability to existing shareholders. For listed companies, check the exchange rules as well. |
| stock options | Basis for setting the exercise price (tax eligibility requirements, fair assessed value in accounting terms) | DCF method, similar company comparison method, Black-Scholes (for option value), etc. | Tax-qualified "value per share" and accounting fair value are different concepts. Check availability of safe harbor |
| Stock buying and selling between shareholders, acquisition of treasury stock | Between buying and selling parties or tax validity | Depending on the purpose, market value method, DCF method, dividend return method | If individual shareholders are involved, discuss the relationship with market value for tax purposes with your tax advisor. |
| Inheritance/gift tax declaration | Evaluation based on the basic property evaluation notice | Similar industry comparison method, net asset value method | M&A completely different evaluation from stock price calculation for purpose A. Scope of work of a tax accountant |
| Organizational reorganization (merger ratio/stock exchange ratio) | Fairness of ratio | DCF method, market price method, etc. of each company involved | Explanation to both shareholders. It is common for listed companies to involve a third-party valuation organization. |
| Impairment test/PPA | Fair value/value in use as an accounting estimate | DCF method | Focused on responding to audit firm reviews |
standard period
If it is an official stock price valuation report for a small to medium-sized unlisted company and all the documents are available, our guideline is 4 to 6 weeks. If evaluation of multiple projects is involved, it is expected to take about 2 months. The biggest factor that determines the time period is whether or not you have a business plan in place. If you are requesting support for creating a business plan, please contact us separately regarding the period.
| step | content | guideline |
| Data collection/hearing | Receive financial documents, business plans, and capital policies. Interview with managers and business managers | 1~2 weeks |
| Analysis/evaluation | Analysis of past performance, verification of business plans, calculation of discount rates, evaluation using various methods, sensitivity analysis | 1~2 weeks |
| Draft report/discussion | Presentation of draft calculation report, confirmation of assumptions, and corrections as necessary | 1week |
| Finalization/Explanation | Finalization of the valuation report and explanation to the board of directors, auditing corporation, etc. | 1week |
This means that each stage in the table above is a total of 4-6 weeks. Therefore, if you have a fixed date, such as the date of a resolution at a board of directors meeting, the date of payment for a capital increase, or the date of grant of stock options, we recommend that you make your request at least 1.5 months in advance.
Items to communicate when requesting a cost estimate for stock price calculation
To obtain comparable quotes from multiple appraisers about the cost of your stock valuation, please provide the following information:
- First, the purpose of the calculation and where the report will be submitted (board of directors, auditing firm, tax authority, counterparty, etc.)
- Next, evaluation targets: company name, industry, number of businesses, sales scale, existence of subsidiaries, listed/unlisted.
- Evaluation reference date and date when a valuation report is required
- Type of stock: Only common stocks, or are there latent stocks such as class stocks, stock options, and bonds with stock acquisition rights?
- Presence of business plan and preparation status (period, granularity, presence or absence of management approval)
- Desired evaluation method (if unsure, leave it to the evaluator)
- Necessity of sensitivity analysis/scenario analysis
- Also, deliverables: Is it only the calculation report or do you also need a calculation model (Excel)?
- Finally, the scope of explanations: attendance at board of directors meetings, necessity of consultation with the audit firm and other party's evaluator.
Points to note when getting a low cost estimate for stock price calculation
- Distinguishing between a simple trial calculation and a formal calculation report: A free diagnosis, an automatic calculation report, or a simulation using several sheets of Excel are different from a calculation report that can be submitted to a board of directors or an auditing firm. Therefore, please request the one that suits your purpose.
- Does not include support for creating a business plan: If you request without a business plan, additional costs and time will be incurred for the evaluator to assist in creating it.
- Explanation response not included: If responding to questions from the audit firm or the other party is an additional fee, the total cost will increase as a result.
- Experience of the appraiser: If you hire an appraiser who does not have practical experience appropriate to the purpose (favorable issuance decisions for third-party allocations, tax eligibility requirements for stock options, consistency with PPAs, etc.), the valuation report may not be suitable for your purpose.
summary
Based on our experience, the cost of stock price calculation is generally 800,000 to 1,500,000 yen (excluding tax) for a formal stock price valuation report. A simple calculation for in-house consideration starts at around 500,000 yen, a complex case involving multiple businesses, latent stocks, and overseas companies costs around 1 to 2 million yen, and costs for the same purpose can be higher if the cost involves submission and explanations to an auditing firm. Additionally, since the concept of value and evaluation method required differ depending on the purpose, it is important to clearly communicate the purpose and destination when making a request, and to compare estimates by including the content to be evaluated, the scope of explanations, and deliverables. If there is a deadline, please make your request 1.5 months in advance.
Things you can discuss with Keystone Advisory
At Keystone Advisory, M&A. A certified public accountant is in charge of stock price calculations for purposes such as third-party allotment capital increases, stock options, and organizational restructuring. Regarding the cost of stock price valuation, if you let us know the purpose, submission destination, deadline, and overview of the subject of evaluation, we will provide you with a quote that clearly states the valuation method, sensitivity analysis, explanation, scope of deliverables (valuation report/calculation model), and tax classification. We also handle calculations that are consistent with post-acquisition PPA and impairment tests, as well as stock price calculations for Indonesian companies by Japanese companies.Contact formPlease contact us from.
References
Japan Institute of Certified Public Accountants “Corporate Value Evaluation Guidelines”
Writer
Kensuke Tanabe (CPA)
Keystone Advisory
Engaged in valuation/PPA work, statutory audits, and IPO support at Tohmatsu Audit Corporation and PwC Advisory. He assumed his current position after working as a director at a PE fund and an issuer at an operating company.
*The cost and period estimates in this article are based on our experience at the time of writing, and do not represent the market price as a whole. Actual costs will depend on individual estimates. Please consult a tax accountant regarding stock valuation for tax purposes.
