A Study On Coprporate Valuation Methods In Private Equity

Private equity investment (PE) refers to an investment behavior that investors raise fund and invest the non-listed developing firms which are chosen by them. This behavior can obtain a certain stake by investing some money into the firm, and then promote the firm to be listed and help the company get some growth momentum.In the entire investment process, the investors also need to focus on ways to exit the investment activities, such as taking corporate management buybacks, mergers or acquisitions and other forms of corporate equity investment activities, and then they can get some income based on the equity ratio.It is necessary to do a detailed analysis of enterprise value before making an investment business. Therefore it is important to choose a reasonable and practical value evaluation method. To some extent, the evaluation method of enterprise determines the investment behavior success or failure. Because of our private equity investments in research work carried out late, the theoretical basis of enterprises conducting private equity investment is not very solid. But unreasonable assessment methods may lead to the failure of investment, which rely on the value of the cost assessment to determine their access to private equity investment institutions is undoubtedly a major loss. At present, in our private equity investment process, the method of discounted cash flow or earnings and other methods are used frequently. Although the majority of investors adapt these methods because they are classic and simple, but these methods are difficult to apply to all businesses. It is difficult to assess the firms based on cash flow and other methods, which are lack of the financial basis or under the management of non-standard. Since China is on the process of the market economic reform and development period, some of the institutional system and economic management practices are not quite perfect, which requires researchers to study the development prospects and the main features comprehensively. And then according to China’s actual level of economic development of the market, map out appropriate methods, and continue to promote the value of the evaluation system communion to the other countries, which is a key research direction.Firstly, this paper analysis the related research abroad, develops the main research contents and methods, and expounds the private equity investment comprehensively, And then this paper analysis business valuation at the stage of the private equity fund entering the firm. Combined with enterprise life cycle theory, the theory of enterprise development and the theory of options, the paper assess the value of the company at the start-up and growth stage respectively. In the assessment of enterprises in the start-up period, the paper divides the period into real options theory, creative business start-up period will be divided into research and development stage, production stage and marketing stage creatively, and then according to compound option model, we can have a more accurate assessment of a enterprise value than the direct use of single-phase. At the growth stage, according to the characteristics of growing businesses, the paper introduce the growth index and the flexible exponential index and have a more comprehensive judgment, rather than just considering the relevant financial indicators, while ignoring Some enterprises soft targets. Based on the analysis of the operating characteristic and investment management characteristic of the newly established enterprises, we find that private equity investment is applicable to such companies. Meanwhile, based on the theory of private equity, this paper establishes a reasonable and practical value assessment approach, and it has a certain reference value.