9th Sep, 2025| 5 Min read.
How fixed assets can be valued while takeover of business?
Valuation of fixed assets is important aspect in takeover
When a business is taken over, valuing its fixed assets
(like land, buildings, plant, machinery, furniture, vehicles, etc.) is a key
part of determining the overall purchase price. The valuation depends on the
purpose of takeover, industry, and negotiation between buyer and seller.
Generally, fixed assets can be valued using the following methods:
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1. Book Value Method
- Based
on the asset values recorded in the seller’s balance sheet.
- Value
= Original cost – Accumulated depreciation.
- Limitations:
May not reflect current market or realizable value, especially for older
assets.
2. Market Value Method
- Assets
are valued at the price they would fetch in the open market.
- Suitable
for land, buildings, and other assets that have an active market.
- Often
determined by independent valuers or appraisers.
3. Replacement Cost Method
- Value
is based on how much it would cost to replace the asset with a new one of
similar capacity and utility, adjusted for depreciation.
- Common for plant & machinery and specialized equipment.
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4. Realizable Value Method
- Value
is estimated at the price that could be realized if the assets were sold
today (after deducting selling costs).
- Useful
in liquidation or distressed takeover situations.
5. Earning Capacity / Utility Value Method
- Some
assets are valued based on their ability to generate economic benefits.
- For
example, a machine that contributes significantly to production efficiency
may be valued higher than book or scrap value.
6. Valuer’s / Expert’s Opinion
- Professional
valuers (chartered engineers, real estate valuers, etc.) may be appointed
to assess the fair value.
- This
is especially important in regulated takeovers, mergers, or when disputes
may arise.
✅ In practice:
- A mix
of methods is used. For example, land & buildings may be valued
at market value, machinery at replacement cost, and furniture/fixtures
at written-down value.
- The
chosen method depends on the negotiation between buyer and seller, and the
accounting/legal framework governing the takeover.