Shareholders’ value: Enterprise value reduced by interest-bearing debt and increased by independent yield-bearing assets.

Adjusted Present Value (APV): A variant of the DCF valuation method, where the value of a company is first determined assuming it is financed exclusively with equity. Subsequently, by substituting equity with interest-bearing debt, the value of the company can be increased, provided that the interest paid on the interest-bearing debt is tax-deductible (the so-called tax shield) and the capital structure has not yet reached its optimal ratio. The advantage of this method over DCF is that the value (creation) through financing with interest-bearing debt is shown separately.

To determine the economic value of equity, the economic value of interest-bearing debt is subtracted from the enterprise value.

Arbitration: Arbitration is a form of alternative dispute resolution. It involves legal decisions made by arbitrators and replaces a judicial process. Arbitral awards are binding on all parties and can be enforced through a court order.

Asset-based valuation methods: These methods are based on the value of assets and liabilities on the balance sheet. Intrinsic value and liquidation value are included in these methods.

Business Succession Facility (BOF): Tax facility in the Dutch Inheritance Tax Act that applies to the succession of a business or shares that constitute a substantial interest, through inheritance or donation. The gift of a business or private limited company up to EUR 1,000,000 in business assets is conditionally exempt from gift or inheritance tax upon request, and the excess is subject to a 17% tax rate. Certain conditions must be met for this exemption to apply.

Business Valuation: The process of assigning a value to a company or business using valuation methods and techniques.

Embodied Goodwill (legal): Goodwill that is inherently linked to the assets of the business, such as a property’s location, a brand name, or a trade name.

Beta: Beta is a statistical measure that indicates the extent to which the return of a stock or investment portfolio can rise or fall when the benchmark’s return increases or decreases. In other words, it is a measure of the correlation between the return of an individual stock or fund and a benchmark, expressing the risk relative to the benchmark. Beta can be positive or negative, and the benchmark’s beta is always 1 by definition.

Appraiser: The person from whose perspective the value of the company is determined.

Market Value: The stock price of freely tradable shares multiplied by the number of outstanding shares.

Binding Advice: Binding advice is a form of alternative dispute resolution. A binding advice procedure replaces the court process, but does not result in a judgment that can be enforced. Binding advisers issue a binding opinion, which the parties have agreed to abide by.

Gross Working Capital: Inventories and (non-interest-bearing) receivables.

Build-up method: A method to determine the cost of equity by adding or subtracting components to the risk-free rate. The formula is: E(r) = Rf + Rpm + Rps + Rpu

where:

E(r) = Expected cost of equity.

Rf = Risk-free rate, usually the return on government bonds with a maturity of at least 10 years.

Rpm = Market risk premium, the return demanded for investing in stocks above the risk-free rate.

Rps = Premium for investing in smaller companies.

Rpu = Premium for non-systematic risk. This is the premium for the specific risk associated with the investment in the company. This premium can consist of multiple elements, for example:

– Owner dependency
– Industry risk
– Unfavorable fixed/variable cost ratio
– Dependency on a limited group of customers

Capital Asset Pricing Model (CAPM): A model from financial investment theory used to determine the required rate of return. It assumes that a higher return can only be achieved by accepting more risk. The measure of risk is beta, which represents systematic risk. The formula is: E(r) = Rf + ß x Rpm

where:

E(r) = Expected return for a specific stock (cost of equity)

Rf = Risk-free rate (usually long-term government bonds)

ß = Beta for the specific stock

Rpm = Market risk premium

Cash Flow Based Valuation Methods: Valuation methods where expected cash flows are discounted at a cost of capital that reflects the risk associated with those cash flows. Examples include Discounted Cash Flow (DCF), Adjusted Present Value (APV), and Cash Flow to Equity (CFE).

Cash Flow to Equity (CFE): Cash flow available to shareholders after servicing other capital providers. Free cash flow after changes in interest-bearing debt and post-tax interest.

Collaborative Divorce: An agreement reached through collaboration between spouses, often involving lawyers, coaches, and financial experts, to create a divorce settlement.

Present Value: The value of a future cash flow calculated to the present day.

Corporate Litigation: Preventing and resolving disputes between shareholders, between shareholders and corporations, or between corporations in terms of management and/or finance.

Cost of Equity: The rate of return required by shareholders.

Debt to Equity Ratio: The debt to equity ratio provides insight into the relationship between interest-bearing debt and equity, both based on market value.

Discounting: Discounting individual annual cash flows at a cost of capital to calculate their present value.

Discounting Factor: A factor by which a given cash flow is multiplied to calculate its present value, calculated based on the reciprocal of the cost of capital associated with the respective cash flow.

Earn-out: That part of the purchase price whose amount and liability depend on certain parameters agreed upon by the buyer and seller (e.g., results achieved by the target company in the period after acquisition).

EBIT: Earnings Before Interest and Tax, i.e., operating profit.

EBITD: Earnings Before Interest Tax and Depreciation, i.e., operating profit before depreciation of tangible fixed assets.

EBITDA: Earnings Before Interest Tax, Depreciation and Amortization, i.e., operating profit before depreciation of tangible fixed assets and amortization of intangible fixed assets.

Economic Damage: Lost profit, suffered loss, lost goodwill, financial damage.

Economic Profit: NOPLAT minus capital costs over invested capital, in formula:

NOPLAT – WACC x Invested Capital

Economic Value: Present value of incoming and outgoing cash flows associated with the object, taking into account the timing of these cash flows and the risk associated with them.

EVA: Economic Value Added, a valuation methodology developed by Stern & Stewart, based on the present value of economic profits.

Enterprise Value: (i) The sum of the discounted free cash flows using a weighted average cost of capital, (ii) the sum of the discounted free cash flows using an unlevered cost of equity, plus the sum of the discounted tax shields using an unlevered cost of equity.

Excess Cash: Cash that is not necessary for the company’s operations.

Forensic Valuation: Determining the economic value of interests in companies and/or determining the extent of economic damage in cases of harm due to non-performance or wrongful acts in civil, administrative, or criminal matters.

Free Cash Flow: The cash flow available to providers of equity and interest-bearing debt, consisting of the sum of Net Operating Profit Less Adjusted Taxes, changes in provisions, investments in net working capital, and net investments in fixed assets.

Excess Cash: Cash resources not essential for conducting business operations.

Forensic Valuation: Determining the economic value of interests in companies and/or assessing the extent of economic damages in cases involving civil, administrative, or criminal matters due to breach of contract or wrongful actions.

Free Cash Flow: The cash flow available to providers of equity and interest-bearing debt, comprising Net Operating Profit Less Adjusted Taxes, changes in provisions, investments in net working capital, and net investments in fixed assets.

EBIT (Earnings Before Interest and Taxes)

– /- Taxes on EBIT

—————————————————————————————–

= NOPLAT (Net Operating Profit Less Adjusted Taxes)

+/+ Depreciation

-/- Investments in Fixed Assets

+/- Change in Net Working Capital

+/- Changes in Provisions

—————————————————————————————–

= Free Cash Flow

Invested Capital: The total of equity and interest-bearing debt (invested in operational assets), measured by market value, economic value, or book value, depending on the purpose for which it is used.

Dispute Resolution: Legal framework for addressing the expulsion or withdrawal of a shareholder (see Expulsion Regulation and Withdrawal Regulation).

Weighted Average Cost of Capital (WACC): The average of the weighted cost of equity (based on market value) and the cost of debt, expressed in the formula:

WACC = Ke x EV / TV + Kd x (1-T) x BV / TV

where:

WACC = Weighted Average Cost of Capital

Ke = Cost of Equity (Unlevered)

Kd = Cost of Debt (Interest)

EV = Market Value of Equity

BV = Market Value of Debt

TV = Total Value of Equity and Debt

T = (marginal) Tax Rate

Goodwill: (i) Difference between transaction price and book value of equity, (ii) Difference between economic value and book value of equity.

Prenuptial Agreement: Written agreements made before or during marriage regarding the distribution of wealth and income of both spouses.

Internal Rate of Return (IRR): The return on investment in a (perpetual) project where the present value of cash flows equals the initial investment. It assumes reinvestment of freed cash flows in projects with comparable returns. However, the reinvestment rate is generally lower than the IRR.

Intrinsic Value: Shareholder value determined by the visible equity of a company according to the financial statements, possibly adjusted for hidden reserves.

Capitalization: Discounting a cash flow perpetually.

Ke (Levered): Cost of Equity (Levered). Cost of equity when the company is financed with both equity and interest-bearing debt.

Ke (Unlevered): Cost of Equity (Unlevered). Cost of equity when the company is fully financed with equity (without interest-bearing debt).

Price/Earnings Ratio: The price of a share divided by the net earnings per share.

National Register of Judicial Experts (LRGD): An independent foundation aimed at improving the quality of expert evidence in legal proceedings by managing a public register of judicial experts who are adequately qualified to participate effectively in legal proceedings.

Liquidation Value: Determined by the expected net proceeds from individual assets of a company in case of (assumed) liquidation, after deducting debts and liquidation costs.

Market Value (IVSC): The estimated amount at which an asset or liability would be transferred between a willing buyer and a willing seller in a fair market transaction after proper marketing efforts on the valuation date, with both parties having knowledge, acting prudently, and not under duress.

Market Risk Premium: The premium (return) investors demand above the risk-free rate for investing in shares of listed companies. This market premium is used for determining a cost of equity using the CAPM and Build-up methods.

Majority Interest: Ownership of (shares in) a company with more than 50% of the voting rights.

‘Mid-year’ Convention: A convention in the discounted cash-flow method assuming that expected cash flows occur on average midway through the year and can be discounted on that basis.

Minority Interest: Ownership of (shares in) a company with less than 50% of the voting rights.

Minority Discount: A discount applied to the pro rata value of (shares in) a company for a minority ownership stake.

Valuation Date: (i) The period during which valuation activities are conducted, (ii) The date when the last valuation activities are completed.

Multiple: A ratio between two numbers used to express the valuation of a company, often based on a price and a result (price/earnings ratio, enterprise value / EBIT(DA)).

Multiple-Based Valuation Methods: Valuation methods based on multiples of (i) comparable (listed) companies, (ii) realized transactions in (listed) companies.

Netherlands Institute of Register Valuators (NIRV): Professional association for experts in business valuation.

Net Present Value: The value of a future net cash flow calculated at the valuation moment.

Net Working Capital: Inventories and (non-interest-bearing) receivables minus non-interest-bearing liabilities.

NOPLAT (Net Operating Profit Less Adjusted Taxes): Operating profit after deducting taxes on that profit.

Intangible Goodwill (Legal): Intangible goodwill typically associated with the person and often referred to as personal goodwill. It pertains to the earnings potential of a business or profession attributable to the personal attributes of the entrepreneur or professional, is not transferable upon their death, and terminates with their demise.

Enterprise Value: (i) The sum of the discounted cash flows using a weighted average cost of capital, (ii) the sum of the discounted free cash flows using a cost of equity unlevered, plus the sum of the discounted tax shields using a cost of equity unlevered.

Tort (6:162 Dutch Civil Code): A tort is (i) a violation of a right, or (ii) an act or omission contrary to a legal obligation, or (iii) an act or omission contrary to what is generally accepted in society. If damage is caused by a wrongful act of a person and is attributable to them, they must compensate the damage.

Opportunity Cost of Capital: The expected return of the best alternative not chosen with a similar risk profile.

Excess Liquidity: Cash resources not necessary for conducting business operations.

Forecast Period: The period during which specific forecasts of results, balances, and resulting cash flows are made at regular intervals (yearly, quarterly, etc.).

Profit-Based Valuation Methods: Valuation methods based on expected net profits, such as the (enhanced) profitability value method.

Report Date or Valuation Date: Date on which the valuation report is prepared.

Required Rate of Return or Cost of Capital: The percentage reflecting the risk profile associated with the cash flows of the object.

Rate of Return Value Method: Valuation method based on the present value of a constant, perpetual dividend stream. The required rate of return is based on the dividend yield of comparable listed shares. This method is particularly suited for small minority interests or shares held as an investment where limited information is available.

Profitability Value: Shareholder value determined by dividing the expected (normalized) future net profit by a required rate of return. Accountants often use an average of (normalized) past net results as an approximation for this future net profit.

Terminal Value: Value of cash flows according to the Discounted Cash Flow method calculated for the period following the forecast period, assuming a stable situation (no or constant sustainable growth of

cash flows) in the so-called ‘terminal period’.

Risk Premium: The additional return that a capital provider expects due to investing with higher risk.

Risk-Free Rate of Return: The return that a capital provider expects on a risk-free long-term investment. As a proxy, the 10- or 30-year government bond is commonly used.

Return On Invested Capital (ROIC): Return on invested capital, defined as

NOPLAT / Invested Capital,

where:

NOPLAT: Net Operating Profit Less Adjusted Taxes

Invested Capital: Capital invested in operational assets

Tax Shield: Amount of taxes that can be recovered due to the deductibility of costs of interest-bearing debt.

Scenario Period: The period during which specific forecasts of results, balances, and resulting cash flows are made at regular intervals (yearly, quarterly, etc.).

Damage Assessment Procedure: If a court awards compensation for damages, it estimates, to the extent possible, the damages in the judgment. If estimation in the judgment is not possible, it awards compensation for damages to be determined subsequently. Execution of the judgment awarding compensation for damages to be determined subsequently starts with serving a statement on the counterparty specifying the amount of the damages claimed.

Systematic Risk: The distinction between systematic and unsystematic risk is captured by the CAPM model. The model relates the performance of the entire market (the total stock market) to the stock price of a specific company. The sensitivity of the company to the market’s performance is expressed as Beta and is thus a measure of systematic risk. The model further assumes that investors are able to build diversified portfolios, so they are not compensated for bearing unsystematic risk.

Buyout Regulation: Legal regulation allowing majority shareholders (>95%) to buy out small shareholders.

Expulsion Regulation: Part of the legal dispute resolution framework. If a shareholder’s behavior harms the company’s interest to the extent that it is not reasonable for them to retain their shares, they may be compelled to sell their shares to fellow shareholders.

Withdrawal Regulation: Part of the legal dispute resolution framework. If a shareholder’s rights or interests are harmed by actions of fellow shareholders to the extent that it is unreasonable for them to retain their shares, they may require fellow shareholders to purchase their shares.

Value Drivers: Factors that significantly determine or influence the value of a company, whether financial or non-financial.

Enhanced IRR: Enhanced IRR calculations assume that freed cash flows are invested at a so-called reinvestment rate (usually the project’s cost of capital).

Enhanced Profitability Value: Profitability value adjusted for a shortage/excess of equity with interest expenses related to the normalized equity.

Cost of Capital or Required Rate of Return: Percentage reflecting the risk profile associated with the cash flows of the object.

Offsetting Clause: An agreement between partners to offset income and/or wealth with each other.

Preliminary Expert Opinion: The preliminary expert opinion can be prepared at the request of a party prior to an ongoing procedure, for example, to assess the prospects of a case before it is filed. A preliminary expert opinion may also be requested if one cannot wait until the judicial procedure reaches the stage where the court appoints an expert or if one of the parties wants a counter-expertise.

Free Cash Flow: The cash flow available to providers of equity and interest-bearing debt, comprising Net Operating Profit Less Adjusted Taxes, changes in provisions, investments in net working capital, and net investments in fixed assets.

Fair Market Value: A concept used in various laws. According to the Court of The Hague (June 15, 1981), it is the price of an object that would have been offered/paid by the most willing buyer in the most suitable manner after the best preparation by the most competitive bidder/buyer on the valuation date.

Valuation Moment: Date of the valuation.

Valuation Object: Denotation of an object to be valued, such as a company, project, shareholding, or other assets, or otherwise legally and economically identifiable object.

Breach of Contract: The debtor’s attributable failure, incorrectness, or untimeliness in fulfilling contractual obligations.

Weighted Average Cost of Capital (WACC): See Weighted Average Cost of Capital.

‘Year-end’ Convention: A convention in the discounted cash-flow method assuming that expected cash flows occur at the end of each year and are discounted on that basis.

Tangible Profit Centers: Assets in a company that are not essential for business operations and thus not business-related.