Business Valuation

Marshall & Stevens’ professionals understand the importance of determining the economic value of an owner’s interest in a business. Whether you are looking to purchase, sell, gift, or recapitalize an interest in a business, establishing an understanding of fair market value is crucial. The business valuation opinions we provide can help you to make a well-informed decision.

Our financial valuation professionals apply decades of experience to the utilization of standard industry methodologies to provide high-quality valuations of:

  • Business Enterprises
  • Buy/Sell Agreements including Fairness Opinions
  • Debt and Equity Investments
  • Financing/Recapitalization Scenarios including Solvency Opinions
  • Fractional Interests (aka “Discount Studies”)
  • Intellectual Property

Our business valuations comply with USPAP (Uniform Standards of Professional Appraisal Practices) and, depending upon the situation, other applicable standards including Internal Revenue Ruling 59-60.

A proper business valuation requires that the professional synthesize in the valuation analysis and narrative report: the unique characteristics of the subject business, its “value drivers”, its ability to pay a return to its equity holders, its historical and projected financial performance, and the potential to successfully pass the business on to others. This quantitative and qualitative analysis requires research, listening, understanding, and judgement in order to apply to the valuation analysis: what has been learned about the business, how it earns revenue and pays profits, the market it serves, and the effects the greater economy has on the business.

A complete business valuation analysis includes consideration of the three generally accepted valuation methodologies: Cost, Income, and Market approaches. In brief, these methods are defined as:

Cost Approach – measures the value of an asset by the cost to reconstruct or replace it with another of like utility. When applied to the valuation of equity in a business, value is based on the net aggregate fair market value of the entity’s underlying individual assets (“adjusted book value”).

Income Approach – measures the income-producing capability of an asset or business. The Income Approach estimates value based on the expectation of future cash flows that the asset or business will generate, such as cash earnings, cost savings, tax deductions, and the proceeds from disposition. 

Market Approach – measures the value of an asset or business through an analysis of recent sales or offerings of comparable investments or assets. The Market Approach can be applied by utilizing either the Guideline Public Company Method or the Guideline Transaction Method, or both.

The results of each approach are then reconciled and weighted in consideration of the nature of the asset or interest being valued to form an opinion of value.

When valuing a fractional interest in a business, we consider the applicability of discounts to the pro rata value of the interest in recognition of potential lack of marketability (“DLOM”) of the interest being valued and lack of control (“DLOC”) in the running of the subject business.

This is a very general overview of what it takes to provide a complete, independent opinion of value of a business.  Please contact one of the senior professionals listed below to have a more detailed conversation.

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Business Valuation Contacts

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