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CS Professional · Corporate Restructuring, Valuation and Insolvency · Overview of Business Valuation

Mehra Foods Ltd wants to know the value of its brand to a specific strategic buyer, Anand Beverages Ltd, which expects cost savings of Rs 12 crore from the combination that other buyers could not obtain. The price Anand would pay including these savings is best described as which of the following?

This is investment value. Investment value measures worth to a particular buyer based on its own benefits, such as the Rs 12 crore of synergies only Anand Beverages can realise. Fair market value assumes a hypothetical market participant and would not include buyer-specific synergies.

  1. AFair market value, because it reflects a price in the open market
  2. BInvestment value, because it reflects benefits specific to a particular buyerCorrect
  3. CLiquidation value, because it involves a sale of a business
  4. DBook value, because it is based on recorded figures

Explanation

Investment value is worth to a particular investor given its individual requirements and synergies. Fair market value assumes a hypothetical buyer and seller without buyer-specific synergies, so it would not include the Rs 12 crore savings only Anand can obtain.

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