Business case

Valuing an e-commerce business for management incentives

Situation: Transactions
Asset & investment valuation

Context

Our client, a retail company operating in the e-commerce sector, wished to set up a profit-sharing plan for the company’s managers in order to incentivise them to develop the business activity.

Key Takeaway

Profit-sharing plans for company managers are usually implemented to involve managers in the development of the company and motivate them to achieve objectives. In order to set up profit-sharing schemes, the market value of the company’s equity must be established. To value a company with different business segments, a sum-of-the-parts approach is more typical as it makes it possible to take into account the operational specificities and risk of each business line.

Accuracy Role

We valued the company using the discounted cash flow method. This was considered the most appropriate approach to take into account the company’s growth and profitability trajectories projected in the business plan.

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