Advisory and expert services

Business valuation in France: methods and scope of work

Selling a business, passing it on, bringing in an investor or settling a dispute between shareholders all depend on answering a question that looks simple: what is the company worth? A business valuation gives a reasoned answer, built on recognised methods.

When is a valuation needed?

• Sale or transfer of the business, within the family or to a third party, to set a reference price.
• Entry or exit of an investor, shareholder or executive in the capital.
• Shareholders' agreement or Dutreil pact (pacte Dutreil, a French tax arrangement for passing on a business), to determine the value of the shares transferred.
• Disputes between shareholders, particularly on an exclusion or a compulsory buyout of shares in the context of an expert determination under article 1843-4 of the French Civil Code (Code civil).
• Capital transactions (contribution in kind, merger, capital increase), in addition, where applicable, to the report of the contribution auditor (commissaire aux apports) or the merger auditor (commissaire à la fusion).
• Tax returns: real estate wealth tax (impôt sur la fortune immobilière), gifts, inheritance.

Valuation methods

Three main families of methods are used, alone or in combination. The asset-based method values the company on its revalued net assets: what it owns, less what it owes. The comparables method compares the company with similar transactions or listed companies, using multiples of turnover, gross operating profit (excédent brut d'exploitation) or earnings. The discounted cash flow method (DCF) projects future cash flows and brings them back to their present value using a discount rate that reflects the risk of the business.

A rigorous valuation does not consist of mechanically applying several methods and taking the arithmetic average. It means identifying the approaches that are truly relevant to the company's business model, setting out their limits, then comparing the results obtained to assess whether they are consistent.

A service distinct from regulated audit engagements

Unlike the work of a contribution auditor, a merger auditor or a special benefits auditor (commissaire aux avantages particuliers), a business valuation is not, as such, a statutory engagement required by the French Commercial Code (Code de commerce). It is an advisory and expert service, commissioned on the initiative of the management or the shareholders, or required by a judge as part of a court-ordered expert assessment. It can nevertheless inform or supplement a regulated engagement, for example to substantiate the value used in a contribution auditor's or special benefits auditor's report.

Independence rules

Since the PACTE Act of 22 May 2019, the list of services prohibited for statutory auditors (commissaires aux comptes) of entities that are not public interest entities (PIE) has been abolished. A statutory auditor may, subject to conditions, provide clients with services other than the audit of the financial statements, provided they create no self-review risk or threat to the auditor's independence that appropriate safeguards could not address, in accordance with article L.821-28 IV of the Commercial Code. For PIEs (in particular listed companies, credit institutions and insurance undertakings), by contrast, valuation services remain expressly prohibited for the statutory auditor in office, including for the parent company and controlled entities, under article 5 of Regulation (EU) no. 537/2014. In practice, audit france never values a company whose financial statements it also audits, to rule out any self-review risk, whether or not the entity is a PIE.

Our approach at audit france

audit france carries out reasoned business valuations, adapted to the context of the transaction and the business sector, with the same methodological rigour as its audit engagements. The signing partner remains the single point of contact throughout the engagement.

Why choose audit france

A 100% digital firm dedicated solely to statutory audit, registered with the Haute Autorité de l'Audit (H2A) and a member of the Compagnie Nationale des Commissaires aux Comptes (CNCC) and working across mainland France and the French overseas territories.

This page is a practical guide in English, for information only. It is not legal advice, and only the French texts have legal force. Check the version in force for your own situation.