Tender Valuation
Tender and customer contract valuation is a strategic process aimed at determining the financial value of long-term business agreements and economic rights arising from tenders held by companies. Under International Valuation Standards (IVS) Section 210, such contracts are considered separately identifiable intangible assets and are valued using methods such as the income approach, market approach, or cost approach, taking into account their revenue-generating potential, contractual terms, market advantages, and duration. This type of valuation is highly important for mergers and acquisitions, financial reporting, investment planning, and corporate balance sheet management.
At Dilum, we analyze your tender-based contracts and customer agreements from both technical and financial perspectives and provide professional valuation services in compliance with IVS 210.
What Is Tender and Customer Contract Valuation?
The valuation of intangible assets plays a critical role in corporate financial analysis and in merger and acquisition processes. Within this context, tender rights and customer contracts are considered separately identifiable intangible assets that provide economic benefits to businesses. International Valuation Standards (IVS) Section 210 establishes the fundamental principles for defining and valuing such assets.
Definition and Scope of Intangible Assets Under IVS Section 210
Under the “Intangible Assets” section of IVS 210, detailed guidance is provided regarding the valuation of customer-related intangible assets, including customer relationships, customer lists, customer contracts, and backlog orders.
Section 20.3 states:
“Customer-related intangible assets include customer lists, backlog orders, customer contracts, and both contractual and non-contractual customer relationships.”
In line with this definition, contracts obtained through tender processes that generate future economic benefits are recognized as separately identifiable and measurable intangible assets.
Section 20.5 further states:
“In valuing an intangible asset, the valuer must fully understand what is being valued and the purpose of the valuation.”
Accordingly, customer data, existing contractual agreements, and future customer relationships may each represent different forms of economic value.
Therefore, when valuing a tender-based contract, the following factors must be considered:
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Contract duration and terms
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Expected revenue streams arising from the contract
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Opportunity cost of alternative options
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Market conditions and competitive advantages
Valuation of Tender and Customer Contracts Under IVS 210
International Valuation Standards recognize that customer contracts obtained through tenders represent separately identifiable intangible assets that are expected to generate future economic benefits for the business. These contracts are typically valued using one of the following approaches:
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Income Approach (Discounted Cash Flow – DCF)
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Market Approach
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Cost Approach
However, in practice, the most commonly used method is the income approach, which involves discounting the expected cash flows generated by the contract over its term to their present value. This requires estimating future cash flows and applying an appropriate discount rate.,
Tender and customer contracts are explicitly recognized under Section 210 of the International Valuation Standards as intangible assets, and valuation methodologies are clearly defined. Valuing these assets is essential for both financial reporting and investment decision-making. Valuations conducted in accordance with IVS 210 ensure transparency, reliability, and international comparability.