Singapore valuation guidelines and opportunities
Neeraj Agarwal
I Neeraj Agarwal, am a Fellow Member of ICAI, practicing under the banner of M/s AAN & Associates LLP, a firm based out of Banglore Mumbai.
I am also registered under Insolvency and Bankruptcy Board of India as a Registered Valuer for valuation of Security or Financial Assets (Passed in Feb 2020)
I am also holding Bachelor of Commerce (B. Com) degree from Calcutta University (Passed in 2011).
I have corporate working experience in Wipro. After working in Wipro for a short period I started my practice in late 2013 and have been in practice so far for the last 10 years. I have also completed a Certificate Course by ICAI on IND-AS in 2020. I have also cleared Social Auditor Exam conducted by NISM.
I have been inducted as a Special Invitee to the Sustainability Reporting Standard Board, ICAI for the FY 2023-24.
Introduction
In today’s globalised business environment, the valuation of a business (or business interest) is not merely a financial exercise; it is a critical discipline underpinning mergers and acquisitions (M&A), financial reporting, investor decisions, litigation, employee share schemes, and more. In Singapore, the business valuation profession is increasingly mature, supported by robust frameworks, professional bodies, and alignment with international standards.
Key concepts & principles of business valuation
Basis of value and standard of value
One of the first steps in a valuation assignment is to identify the basis (or standard) of value—for example, fair value, market value, investment value, or intrinsic value. The IVAS Body of Knowledge for the CVA programme lists these definitions (market value, fair value under IFRS, fair market value under OECD, and so on).
This step is critical because the valuation conclusion must align with the purpose of the valuation, the applicable legal or regulatory framework, and the intended user.
Premise of value
Closely related is the premise of value (e.g., going concern, liquidation, or sale of a business segment). For example, is the business valued as a “going concern” enterprise, or is it a distressed sale? Practitioners in Singapore follow these norms in accordance with the IVS.
Key quality requirements for valuation engagements
The IVS and local professional guidance emphasise several quality aspects: terms of engagement, scope of work, data verification, assumptions and restrictions, professional judgment, and documentation and reporting.
For example, the IVAS/CVA Body of Knowledge includes ethical principles and standards of conduct for business valuers.
Approaches and methods
In business valuation, three broad approaches prevail (echoing global practice):
- Market approach — comparison with observable transactions of similar businesses or market multiples (e.g., EV/EBITDA, P/E).
- Income (or earnings) approach – discounting future cash flows (DCF) or capitalising some earnings stream.
- Cost (or asset-based) approach — less commonly used for going-concern businesses but often applied to holding companies or where asset values dominate.
These are reflected in local practice as well (see FAQ from a Singapore business valuation services site).
The valuation process in practice – steps & key considerations
Here is a typical high-level process for business valuation in the Singapore context:
1. Engagement, acceptance, and scope
a. Define the purpose of the valuation (transaction, financial reporting, litigation, ESOP, etc).
b. Identify the standard of value and premise of value (e.g., fair value under IFRS, market value, etc).
c. Agree on terms of engagement, deliverables, key assumptions, limitations, and reporting.
d. Confirm independence of the valuer and check conflicts of interest (particularly relevant for Singapore-listed companies).
2. Information gathering & due diligence
a. Collect historical financial statements, projections, budgets, and conduct management interviews.
b. Understand industry, market trends, competitive environment, and regulatory/legal issues in Singapore/Asia.
c. Identify relevant assets (including intangibles), liabilities, and other value drivers.
d. In Singapore, given the significance of intangible assets, the valuer must ensure that intellectual property, brands, customer contracts, and data assets are duly considered.
3. Selecting appropriate approaches & methods
a. Evaluate which of the three approaches (market, income, cost) is most appropriate given the business, data availability, and industry.
b. In Singapore, if there is sufficient comparable transaction data (e.g., local/regional M&A), the market approach may play a key role; for mature businesses with reliable cash flows, the income approach (DCF) may dominate.
c. For early-stage or intangible-heavy businesses, a weighted sum of parts (including estimating intangible asset value) may be required.
4. Application of approaches and reconciliation
a. Apply each method and adjust for minority or majority interests, control or non-control positions, marketability, and synergy.
b. Reconcile the results – often the valuers provide a range of values or a conclusion reflecting the weighting of methods.
c. In Singapore, given the professional environment, the report must highlight assumptions and sensitivity analysis, especially for transactions that will be publicly disclosed.
5. Reporting and documentation
a. Provide a comprehensive report: executive summary, scope, basis of value, industry and business description, financial analysis, valuation methods, conclusion, assumptions, and sensitivity analysis.
b. For Singapore-listed companies, refer to IVAS Practice Note 2 (“Minimum Disclosure Requirements for Summary Valuation Letters”).
c. If the valuation is for a listed entity transaction, the disclosure summary (often circular to shareholders) must cover the valuation key inputs, parties involved, date, and basis.
6. Consideration of emerging factors
a. In Singapore, as elsewhere, modern valuations require consideration of intangible assets, and increasingly Environmental, Social & Governance (ESG) factors which may affect long-term risk/return and thus discount rate or growth assumptions. At the 2024 Singapore Business Valuation Conference, ESG and intangible assets emerged as key themes.
b. Furthermore, the use of Automated Valuation Models (AVMs) or AI in valuation must be accompanied by professional judgment to ensure compliance with the IVS.
Common business valuation scenarios in Singapore
M&A, acquisition of business interests
When a Singapore-based company is acquiring another business (locally or regionally), the valuation of the target is critical. The valuation must feed into the purchase price allocation, negotiations, due diligence, and eventual accounting. Singapore practitioners must ensure: appropriate multiples (local/regional comparables), local tax/regulatory environment, cross-border currency risk, and ownership structure. Also, if the target has substantial intangible assets (common in tech firms in Singapore/ASEAN), ensure these are valued appropriately.
Financial reporting / fair value measurement
Under accounting frameworks (e.g., Singapore Financial Reporting Standards, Singapore IFRS equivalents), businesses may be required to measure the fair value of business combinations, impairment testing, or share-based payments. In such cases, business valuation must align with fair value definitions (often the exit price notion), and the valuers must document assumptions. The CVA programme emphasises fair value as a basis.
Employee Share Option Plans (ESOPs) and minority interests
Quite often in Singapore start-ups or private companies, there is a requirement to value the business or share classes (for ESOP purposes, or for minority buy-outs). These valuations may involve less data, more uncertainty, and thus more reliance on assumptions and scenario analysis. Professional practitioners follow IVS (and local guidance) to document assumptions, risks, lack of marketability discounts, etc.
Litigation, arbitration, dispute valuations
Valuation may be required in shareholder disputes, divorces, loss of profits claims, or breach of contract litigation. The valuer must act as an expert witness, document their methods and assumptions, and ensure independence and professional standards. The CVA programme includes law and valuation modules.
Intangible asset‐rich business valuations
As mentioned earlier, Singapore’s economy has many businesses whose value resides in intangible assets (brands, IP, software, data). These require a hybrid approach: segment value into tangible business operations and intangible asset value, often using methods like relief-from-royalty, excess earnings method, multi-period excess returns, etc. The development of local guidelines is underway.
Emerging trends and the future of business valuation in Singapore
The increasing prominence of intangible assets & IP
As Singapore moves toward a knowledge economy, intangibles are becoming key value drivers. The IVAS/IVSC consultation on intangible asset valuation guidelines in Singapore is geared to provide greater consistency and comparability.
ESG, sustainability, and valuation
At the BV conference in Singapore, one of the key themes was how ESG considerations impact business value. Valuers are increasingly asked to assess the effect of sustainability, climate risk, governance quality, and regulatory shifts on discount rates, cost of capital, and terminal growth.
Artificial Intelligence and valuation modelling
The updated IVS (to take effect 31 January 2025) states that while AVMs and AI tools can be used, they are only compliant if they are used under the exercise of professional judgement by a competent valuer. Singapore practitioners need to keep pace with this development.
Singapore as a hub for valuation excellence
With the IVSC Asia office in Singapore, and strong support from professional bodies and regulators, Singapore is well placed to become a regional centre for valuation excellence – not just for real estate or tangible assets but for business valuation, including intangible-rich enterprises. ivsc.org
Practical tips for businesses and valuers in Singapore
- Define the purpose of the valuation clearly from the outset (transaction, reporting, ESOP, litigation) because the basis, model, and reporting requirements differ.
- Ensure engagement terms include the standard of value, premise of value, scope, deliverables, assumptions, limitations, and reporting format.
- Choose an appropriately qualified valuer (consider CVA certification, professional body membership), who has relevant Singapore/ASEAN experience and is independent (particularly for transactions involving listed entities).
- Provide full historic financials, business plans, forecast assumptions, market data, ownership structure and details of intangible assets (IP, brand, contracts) so that the valuer can perform robust analysis.
- Have internal challenge of key assumptions (growth, margins, discount rate) – especially if management has a bias toward optimistic projections. Boards must do this under SGX guidance.
- Recognise intangible assets early: identify them, assess if they should be valued separately or included within the business operation value.
- Incorporate sensitivity/scenario analysis (e.g., what happens if growth is lower, or regulatory risks materialise) – in Singapore, a valuation report should highlight key assumptions and uncertainties.
- For listing or significant transactions, check disclosure requirements – many of Singapore’s listed companies must disclose valuation methodology, assumptions, date, and valuer identity.
- Keep abreast of emerging standards (IVS updates, intangible asset guidance, ESG/AI modelling) – practitioners in Singapore must adapt to these developments.
Conclusion
Business valuation in Singapore is a mature, professional discipline underpinned by international standards (IVS) and local institutional support (IVAS, CVA programme). The Singapore market presents specific features, including a regional hub dynamic, a growing intangible-asset dimension, rigorous disclosure expectations for listed companies, and emerging trends such as ESG and AI in valuation modeling. Businesses, valuers, and users of valuations in Singapore must therefore not only master traditional valuation approaches (market, income, and cost) but also be vigilant about assumptions, governance, disclosure, and the changing value drivers of modern businesses. When executed rigorously, business valuation is not merely a numerical outcome; it functions as a strategic tool for decision-making, investment, exits, reporting, and growth.
For any clarifications or queries, please feel free to reach out to us at admin@fintracadvisors.com
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