Whether for purchase, sale, investment, gifting, recapitalization, or equity/option grants, establishing an understanding of value is crucial for decision makers.
WHAT WE DO
Our financial valuation professionals apply decades of experience to the application of standard methodologies to provide independent valuations of:
A proper business valuation requires that the valuation team synthesize the unique characteristics of the subject business, including its:
- historical and projected financial performance,
- how it earns revenue and pays profits,
- the market it serves,
- the effects the greater economy has on the business
- value drivers,
- ability to pay a return to its equity holders,
- the potential to successfully pass the business on to others.
A complete valuation analysis includes consideration of the three generally accepted valuation methodologies (Cost, Income and Market):
Cost /Asset 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 is applied by utilizing either the Guideline Public Company Method or the Guideline Transaction Method, or both.
Reconciliation – The results of each approach are reconciled and weighted in consideration of the nature of the business or interest being valued to form an opinion of value.
Our valuation analyses comply with USPAP (Uniform Standards of Professional Appraisal Practices) and, depending upon the situation, other applicable standards including Internal Revenue Ruling 59-60.
FRACTIONAL INTEREST ANALYSES (aka “DISCOUNT STUDIES”)
When valuing a fractional interest in a business, we may 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.