Reasoning function

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Austin Wright's argument . Bronze cast 2013.

The functional company valuation is mainly divided into a decision-making function, a mediation function and an argumentation function . The result of the argumentation function is the argumentation value. The argument value is the negotiation tactics to strengthen serving partisan value that serves the parties to before buying or selling a business or shares in a company, either their own position or to weaken the negotiating partner. In the broadest sense, the argumentation value encompasses the entirety of all the reasons that buyers or sellers put forward in conflicting negotiations in order to resolve the negotiation conflict in their own way. In order for this purpose to be achieved, the argumentation value must be disclosed. In this sense, valuation reports that are announced by the buyer or seller are arguments.

The enterprise value is determined by the lower price limit of the seller and the upper price limit of the buyer. The area between these two thresholds is the negotiating parties' room for maneuver. This range of options for action and restrictions on action by the parties is specifically referred to as the area of ​​agreement or generally as a decision-making area. The conflicting parties must be aware of their own price limit , they have to observe it and they need a sufficiently precise idea of ​​the price limit of their respective negotiating partner.

Totality of all arguments

As a rule, the argumentation value is not a single value variable, but the totality of all subjective arguments of a negotiating party. When using appropriate justifications, pragmatic aspects are in the foreground, such as the possibility of linking up with one's own arguments or the refutation or weakening of opposing arguments. In the context of functional company valuation, there is still largely a lack of a theoretical model for the argumentation function.

If the arguments brought into the negotiation process change the decision-making field, they are relevant to conflict resolution. A distinction is made between original and derivative factors. Matters that are the content of the settlement solution between buyer and seller are considered original. Usually they have a direct impact on the amount of the price to the company. Derivative factors are used to explain or define original facts. In simply structured negotiations, the price level is the only original issue that is relevant for resolving the conflict. But in general, the totality of all arguments that the buyer or the seller can use in his negotiation determines the value of the argument.

criticism

The argumentation function of the company valuation can be viewed as advice-oriented and is therefore a basic function of the valuation in the context of corporate transactions. The auditing profession sees its valuation task in advice, but essentially as a neutral expert, "because auditors often work in the context of valuation events that are independent of the will of the owners concerned and are bound by special legal norms, such as cases of the Determination of adequate compensation or severance payments. Such occasions require a certain objectivity of the company value, since the value to be determined should do justice to different interest groups in the same way ”. Because of this concept of the objectified company value pursued by the Institut der Wirtschaftsprüfer , the argumentation function is seen as incompatible with the profession. Especially if the argumentation value is viewed as an instrument to influence the negotiating partner. In his advisory role, the auditor restricts himself to determining the upper or lower limit of willingness to conclude for his client: What his client as an investor should pay for a company or what he as a seller must at least demand.

Argumentation values ​​are not introduced into the negotiation process recognizable as such, but rather as supposed decision-making or arbitrium values . In this context one speaks of the feature of camouflage. The partial value of a company determined by the argumentation function does not represent an instrument of overreaching, as long as the buyer and seller know and observe their own decision-making values. The intention to influence the argumentation function means that the negotiation partner strives for a change in behavior through the argumentation value. This is done with the aim of finding a mutually acceptable solution to the negotiated conflict. Argumentation values ​​have three main properties: camouflage, party orientation and conflict resolution orientation.

When making business decisions, arguments can serve as security and justification. This becomes particularly clear in the context of the fairness opinion .

Argumentation values ​​based on evaluation models

Within the system of functional company valuation, the argumentation value is determined from the perspective of a buyer or seller in three steps:

  1. Determination of one's own decision value and development of an idea of ​​the decision value of the opponent.
  2. Selection of arguments (justifications) and determination of the corresponding argumentation value.
  3. Use of the arguments in the negotiation process.

An argumentation strategy can consist of underpinning one's own proposal for resolving the negotiation conflict by means of an evaluation procedure developed based on model theory. This presupposes that the party to the conflict knows exactly the procedure chosen and in particular knows how concessions affect the amount of the price bid in the case of a derivative issue. The basis of the argumentation function are the income value method according to IDW S1, the various discounted cash flow methods, as well as the methods of plausibility checking of comparative values, for example the multiplier method.

Argumentation values ​​based on expert opinions

Negotiating parties often justify their bid by submitting an appraisal report in order to increase the credibility of the company value brought into the negotiations. An empirical analysis related to the argumentation function from 2007 came to the following results:

  • More than 75% of the responding companies justify their offers “often” or “very often” with expert opinions.
  • More than 65% stated that the opponents' offers should "often" or "very often" be supported by expert opinions.
  • Almost 95% of those questioned answered that with regard to the argumentation function “often” or “very often” their own employees carry out company evaluations or prepare valuation reports.
  • Almost 40% of the companies surveyed stated that they "often" or "very often" have an auditor prepare valuation reports.

According to § 17 Wirtschaftsprüferordnung, auditors must submit expert reports impartially. With regard to this professional principle, the party who uses an auditor's appraisal report for argumentation combines the expectation that their negotiating partner will recognize the evaluation result as factually correct.

literature

Individual evidence

  1. ^ A b Manfred Jürgen Matschke: Principles of proper company valuation. (PDF) (No longer available online.) March 12, 2003, archived from the original on September 24, 2015 ; accessed on August 12, 2015 . Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. @1@ 2Template: Webachiv / IABot / www.rsf.uni-greifswald.de
  2. ^ Christian Schmitz: Company valuation theory and practice. Validity of practice-relevant company evaluation procedures. (PDF) In: Dissertation. December 2010, p. 23 f , accessed on August 12, 2015 .
  3. ^ Stefan Thiele: Company valuation. (PDF) In: Lecture, slide 34, 2013, accessed on August 12, 2015 .
  4. ↑ Xenia Matschke: Functional company valuation in the light of contract theory. (PDF) In: Economics discussion papers, University of Greifswald. 2008, p. 5 f , accessed on August 13, 2015 .
  5. ↑ Gerrit Brösel, Heiko Buchert: The acquisition of companies in Eastern Europe and the importance of soft factors. (PDF) 2004, p. 352 f , accessed on August 12, 2015 .
  6. ^ Adolf G. Coenenberg, Wolfgang Schultze: Company valuation conception and perspectives. (PDF) In: DBW 62 (2002). 2002, p. 599 f , accessed on August 13, 2015 .
  7. ↑ Thomas Hering, Gerrit Brösel: The argumentation value as a "stowaway" in the IDW S 1 - criticism and remedy. (PDF) In: Die Wirtschaftsprüfung, Volume 57, Number 17. September 1, 2004, p. 939 f , accessed on August 13, 2015 .
  8. ↑ a b IDW Standard: Principles for carrying out company evaluations - IDW Standard S1 in the version dated April 2nd, 2008. (PDF) (No longer available online.) In: Institut der Wirtschaftsprüfer. 2008, p. RN 12 , archived from the original on April 13, 2015 ; accessed on August 13, 2015 . Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. @1@ 2Template: Webachiv / IABot / www.prof-skopp.de
  9. ↑ Handbook of Company Valuation , p. 228.
  10. ^ Manfred Jürgen Matschke, Gerrit Brösel: Company Valuation . Functions - Methods - Principles . 4th edition. Springer-Gabler, Wiesbaden 2013, ISBN 978-3-8349-4052-0 , pp. 622 ff .
  11. ^ Pascal Gantenbein, Marco Gehrig: Modern company valuation. Achieve assessment goal with a mix of methods. (PDF) (No longer available online.) In: Der Schweizer Treuhänder (09.2007). 2007, archived from the original on March 4, 2016 ; accessed on August 13, 2015 . Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. @1@ 2Template: Webachiv / IABot / wwz.unibas.ch
  12. ↑ Manfred Jürgen Matschke: The argumentation value of the company - company evaluation as an instrument of influencing the negotiation . In: Business research and practice . 1976, p. 517-524 .
  13. ↑ G. Brösel, R. Hauttmann: Empirical analysis. Use of company valuation procedures to determine concession limits and in negotiation situations. In: FB, Volume 9, 2007, p. 306 (Part II).