Non-Financial Indicators in the Valuation Process in Czech Republic
Non-Financial Indicators in the Valuation Process in Czech Republic

Author(s): Jaroslav Hradílek
Subject(s): Social Sciences, Economy
Published by: Vysoká škola ekonomická v Praze
Keywords: M&A; non-financial indicators; valuation; benchmarking
Summary/Abstract: Purpose:This paper deals with the increased significance of non-financial indicators in company valuation process. It researched if these indicators or, more generally,non-financial data are used in business praxis in M&A transactions in Czech Republic. Design/methodology/approach:The research was conducted on a sample consisting of three Due Diligence reports used in M&A transactions (two for buyer, one for seller). In addition, one certified expert data set for valuation has been examined. A methodology was created to set the most important areas for non-financial indicators and to evaluate these reports according to these criteria. Findings: None of the researched document dealt with non-financial indicators intensively to improve the accuracy of the company valuation. Some of them dealt with certain non-financial information but none has defined a standardized system to use non-financial indicators to decrease the risk of improper value setting and possible financial losses on either side of anM&A transaction. Research/practical implications: The buyer in M&A transaction focuses primarily on financial analysis. They should take in account also the non-financial indicators, as they have significant predictive power. This can improve the accuracy of M&A transactions and lead to higher success rate of M&A transactions. The increased usage on non-financial indicators by company controlling systems is also highly recommended. The results can reduce sunken costs of M&A transactions and improve performance of small and medium enterprises. As there is a gap in a literature,bettertheoretical background for the praxis shall be provided. Originality/value:Few researches havedealt with the non-financial indicators problematics. No research has been conducted on the real data from business transactions. Further research on larger data sample recommended.

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