Business Valuation and Appraisal Services
What is a valuation? How is it developed? defended? used?
First, as a CVA and NACVA member, I follow professional standards and rules. These rules a principle-based and provide guidance regarding what can/cannot be done. See
A business valuation is a process and a set of procedures used to estimate the an owner’s interest in a business. A business valuation is used by financial market participants (competitors and other potential investors or buyers)for estate and gift tax purposes, to determine the price a party may pay for a majority or minority interest in a business, to determine if a company was insolvent at a given point in time, to develop a buy-sell agreement and fund the same, and in connection with disputes amongst founder and/or shareholders/partners/members. In addition, a valuation engagement can call for a Calculation of Value or Conclusion of Value; the former is based upon agreed procedures and will contain a disclaimer to the effect that a Calculation is not a Conclusion of Value and that the differences between the two may be material. (Attorneys in marital dissolution actions will request a Conclusion of Value given the above; they do not want to hear after-the-fact that a Calculation was prepared to save costs ... potentially someone "leaving money on the table.")
A business valuation is distinct from a calculation or broker’s opinion—we provide Broker Opinions through Murphy Business & Financial Corporation’s Pacific Northwest Region; note that Business Broker Opinions are not used in connection with litigation, tax reporting, financial reporting, SBA lending, or Purchase Price Allocation (PPA); broker opinions are less robust and are used to develop a value or range of values at which a company can sell. Typically, for small businesses, the metrics used are market multiples, such as Price/Revenue and/or Price/SDE. A valuation calling for a Conclusion of Value will use an income, market, and cost approach and address discounts for lack of control, lack of marketability, taxes, and value of intangible assets, whereas one calling for a Calculation involves agreed upon procedures and approaches.
The following is a non-exhaustive list of the reasons why a business is prepared (and the type of reports we can assist in):
- Federal Estate and Gift Tax Reporting
- Charitable Gifting
- Purchase and Sale of a Business (the Purchase Price Allocation requires a CMEA appraisal report)
- Industry work experience includes, valuation of professional practices, physician groups, dental, veterinary practices, software companies, energy, chemicals, patents, coffee shops, restaurants, consumer goods, to name a few.
- Dissenting Shareholder Suits (a report may not be prepared in these engagements under the litigation exception)
- Fair Value Reporting
- Stock Options 409A & 123R
- Employee stock ownership plans (ESOPs)
- Merger & Acquisition
- Buy-Sell Agreement
- Fairness Opinion
- Marital Dissolution
- Bankruptcy (Chapters 7, 11, 12)
- Fairness Opinions