Valuation of a Convertible Bond issued by an IT infrastructure colgomerate for investor's reference. We utilized multiple valuation techniques, including discounted cash flow and market-based approaches, to determine a fair purchase price of the bond.

IT infrastructure investment is often valued by some mainland investors especially State-owned enterprise (SOE) as a good industry to invest in Hong Kong, due to its stability and importance to territory. Our team was approached by a local leading IT infrastruture development colgomerate to value a convertible bond to be issued to a mainland's SOE as investment.

Valuing a convertible bond could mainly be divided into 2 parts, i.e. the bond and the share purchase option (Value of straight bond + Value of call option on the issuer's shares) . The bond part is a straight-forward discounted cash flow calculation with expected payout schedules according to the contract terms and an appropriate discounted rate after reseaching the latest bond market information. The option part involves research and due diligence on the industry to verify the projected cashflow of the bond-issuing company ("Target Company") for valuing the equity value of the Target Company which is the most significant component in the option pricing model.

Besides understanding the terms of the convertible bond flawlessly, the valuation process involves large amount of business documents scrutinization, in-depth company interviews and independent market research effort to ensure correctness and reasonableness of every figures adopted in our valuation. The reason of our hard work is to provide the highest accuracy and client satisfication for every valuation tasks we did. 

Purchase Price Allocation for a Property Developer  - We assisted a developer with the purchase price allocation process after their acquisition of a smaller competitor ("Target Company"). Our team provided a detailed analysis and valuation of the to-be-valued assets and liabilities for the purpose.

The general process of a purchase price allocation after engagement could be summarized as below:-

1. Understanding the Valuation Subjects: The first step in our valuation process was to thoroughly understand the to-be-valued assets and liabilities on Target Company's balance sheet. The assets and liabilities to be valued are usually advised by the financial advisor and accountant but the information provided is usually insufficient for a competent valaution exercise. Therefore, we would investigate each valuation subjects to understand their details and request for additional information. Continuous discussions are carried out between the accountant, financial advisor, client and us to proceed the task. In some cases, on-site inspection would be required, especially for tangible assets like real estate, plant and machinery.

2. Gathering Market Financial Information: To accurately value the assets and liabilities, we needed to gather core financial information of both the subjects and the relevant market to decide the appropriate valuation method for each subject, namely asset-based approach, income approach or market approach. Depending on the importance of the asset/liabilities, the availability of the subject and market information, we will decide on the approach and further our information gathering direction and effort on each subject.

3. Concluding with the Purchase Price Allocation Process: After gathering the required information, we will carry out detailed calculation of each individual subject. After the valuation of individual subjects, a holistic overview and comparison of all valuation results will be conducted to check with reasonableness and consistency. Detailed explanation to client and relevant parties on the results will be provided. After that, a goodwill (i.e. the difference between the value of the net assets acquired and the price paid for the net assets) would be concluded by the accountant for financial reporting.