There are countless reasons a company may be in need of a professional business valuation service. Whether a business needs to understand value for internal purposes or external requirements–like to qualify for a loan or financing–there are solutions that fit the differing needs for a valuation. We’ve outlined a few of these below.
There are extremely varied uses for business valuations including company sale, estate planning and litigation issues. Our valuation experts take a holistic approach to ensure the valuation not only fits within the bounds of the industry, but also aligns with the goals of the valuation itself.
Valuations for Financing–Lenders are becoming increasingly stringent on their requirements to provide debt financing to privately-held businesses. In many cases, a third-part business valuation can act as a risk mitigating “gut check” for a third party lender.
Merger, Acquisition or Business Sale–Determining the fair market value of your company and/or its assets is an important first step for both buyers and sellers incident to a merger or acquisition. Addressing risk and value drivers for the business can help prepare the seller in better answering buyer questions about excess value, including areas that may justify paying for “goodwill.” In addition, buyers may require a third party valuation to justify paying a premium or to ensure they don’t pay more than the company is actually worth. Negotiators on both the buy and sell-sides of a transaction need to have as much informative information as they possibly can. M&A and corporate divestiture are one of the most common and most important uses for business valuations.
Litigation–Economic damages in business litigation will require a determination of the equitable value to be pegged on the business incident to the litigation.
Exit Planning–A formal business valuation with annual updates should be an integral piece in your exit plan. Waiting until a few months before you retire to find the value of your business may throw a kink in any retirement plan and could be eye-opening as to whether your business is at a level or size that is amicable to your retirement. Entrepreneurs looking to sell their company should have an annual assessment as to the fair market value of their business. Understanding this can also help in timing decisions on the exit.
Buy-Sell Agreements–Multiple shareholders requires a valuation and is required to determine fair market value. Value is used to determine equity distribution in the event triggers require a buy or sell of company stock. A valuation of the business also enables management to know how much life insurance may be needed in the event a death triggers the need for life insurance to purchase company stock.
Insurance–General corporate insurance and life insurance updates are increasingly requiring independent valuations on the company.
Gift and Estate Tax--As of the date of death, estate tax returns are required to include independent third party valuations of all portions of the deceased estate, including any business or business assets. Estate transfer or gifting requires an independent valuation of the company.
IP Valuation–Accurate valuation of your company’s intellectual property is essential in today’s rapidly changing and fluid business environment.
Corporate Conversion–Companies that convert from one type of corporation to another require a valuation at the time of change. If the business is sold prior to the 10 year holding period, build-in gain tax is due based on the value (performed by an independent valuation firm) pegged on the business at the time of conversion. This is used in calculating the built-in gain tax for the IRS when the business is eventually sold.
Employee Stock Ownership Plans–Qualified, independent valuation services are required for both financial and tax reporting for all Employee Stock Ownership Plans. For more information, click here.
Foreclosures & Liquidations–Determining the fair market value of assets involved in a company that is in foreclosure or requires asset liquidation is necessary to appease creditors and lenders.
Divorce or Estate Settlements— Volunteer or court appointed business valuations are often included in divorce and estate settlements to ensure equitable distribution is made between both spouses.