The last year or so has been volatile in many respects. The COVID-19 pandemic created an atmosphere of uncertainty as the global economy reeled from the effects of the virus. Even as the pandemic raged, valuations needed to be made, and businesses had to continue to operate.
The impact on valuations of assets is significant: many companies now face new challenges relating to their finances, legal matters and may have to navigate regulatory changes, all of which affect their value. How can potential buyers and investors receive an accurate valuation in such an uncertain and volatile environment, and how can assets properly prepare for valuations?
We believe that the answer lies with digital data. In the age of analytics, a wealth of digital data is accessible for most businesses. As businesses enact digital transformation strategies, their reliance on data grows, and more activity is recorded and stored. As data becomes more integrated into assets, it will undoubtedly increase their value. Individuals have access to a wealth of real-time data to help investors choose where they should put their money to reap the optimum financial reward. Similarly, digital data allows investors to get more comfortable with short to mid-term forecasts rather than relying on long term models.
Opportunity in uncertainty
The coronavirus pandemic created an environment of extreme uncertainty. However, for investors and business owners, crises are not an alien concept. Many experienced the catastrophic consequences of the financial crisis in 2008 and have formulated strategies to ride out the economic implications. Despite this, financial uncertainty will likely undermine investor and buyer confidence.
However, a trend that has emerged this year is the view that opportunity lies in uncertainty. A panel of dealmakers said that they continue to evaluate investment opportunities across all sectors, even those hit particularly hard by the coronavirus pandemic. In this situation, digital data allows potential investors to see how companies perform throughout a crisis and whether they are a viable acquisition in the circumstances.
How can digital data determine asset value?
Digital due diligence is now an essential part of asset valuation. For potential buyers to identify assets that are likely to be successful, data is required. But what kinds of data are helpful in asset valuation?
Market mapping and share
Firstly, data can determine an asset’s market share and reveal how the asset compares to key competitors. Search demand and web traffic data can show a potential buyer the interest that an asset receives. This information will also enable the potential buyer to map growth opportunities within a particular market accurately.
Investors and potential buyers can also use data to determine online sentiment about an asset. Identifying general sentiment is a crucial step in identifying an assets reputation. Do online conversations reveal negative sentiment about the asset in question? This data can help assets compare online sentiment to competitors, which may reveal areas that need improvement. Online sentiment data will also enable stakeholders to break down key topics of conversation within the sector to test loyalty and the stickiness of the customer by relevant cohorts.
Large volumes of data, if utilised correctly, enable businesses to formulate a defensive growth strategy. Companies that store, analyse and act on data can provide markets with better products and in-demand services that increase revenue. Similarly, companies planning to expand to new markets must use data to plan their approach carefully. The bottom line is that growth-orientated companies attract higher valuations. For this reason alone, the effective utilisation of digital data should be high up on the business agenda.
Digital data itself is a valuable asset
Nowadays, companies have access to a massive amount of data. Data of all kinds is invaluable in this day and age where almost everything is recorded and quantified. However, the effective utilisation of this data is vital. Companies with advanced analytical capabilities perform better than their less data-savvy competitors. They use a wide range of data to make objective decisions and, as a result, are more likely to make decisions faster and execute them.
When preparing for a sale, many businesses do not realise the value that their data has. For companies that have not yet learned the intrinsic value of data, it may be easy to overlook it in the valuation process. For example, Facebook proved that intangible data had a demonstrable value when it was made an Initial Public Offering in May 2012. To increase the value of a business, stakeholders must first make effective use of all accessible data. However, some companies may not have the capacity or expertise to do this.
That’s where we come in.
We are here to help you
Using data in valuations can be complex, and you may not know where to start. If this is the case, we can help you. We help investors and business leaders from a range of industries use a range of digital data to help determine the true value of an asset. To do this, we combine more than 19 data sources, which we triangulate to ensure robustness. Similarly, our global datasets provide the foundation for in-depth reports by our expert consultants. This data feeds into our proprietary tools: that help private equity, venture capital, portfolio companies, and independent brands make commercial sense of digital data, whether for valuation or business improvement. Click here to connect with us today, we’d be happy to talk through your requirements in more detail.