Business Valuation Service
A Business Valuation (or stock valuation) is an appraisal that
determines the fair market value of a business enterprise or its equity. Fair market
value represents the price at which a willing buyer and a willing
seller, both being informed of the relevant facts about the business,
could reasonably conduct a transaction, neither person being under compulsion to
do so.
What are the approaches to value?
A business valuation should examine these three
approaches to value: the Income approach, the Asset Build-up or
Cost approach, and the Market approach. An explanation of the relevance
of each of these approaches to the business being appraised should
be part of the business valuation.
What are the uses of a business valuation?
A business valuation might be performed in order to comply with
the goodwill impairment testing requirements of SFAS
142, in the establishment of non-compete and buy-sell agreements,
in the securing of financing or additional capital, in merger and
acquisition endeavors, in divestitures, to provide boards of directors with fairness
opinions or solvency opinions, for estate planning and gift tax planning, fresh start
accounting, for dissenting shareholders, for litigation support, and in dissolution
of marriage.
What types of businesses benefit from business
valuation?
Most businesses can benefit from an up-to-date business valuation.
The appraisal may allow the business to satisfy the requirements
of a third party. Some of these third parties might be auditors, assessors,
insurers, attorneys, lenders, the IRS, or others.
How long is a business valuation considered
up-to-date?
Because of dynamic and fluctuating market conditions, which affect
various businesses differently, no exact answer can be given to
this question. Normally, updating a business valuation
requires a total review of the original appraisal in order to re-examine
each of the three approaches to value. The appraiser must also reassess
the economic outlook in general as well as the economic outlook
for the company’s specific industry. The busienss valuation
that was made during difficult economic times would more than likely
be different than an appraisal that was made during prosperous times.
For this reason, an up-to-date appraisal is always the best indicator
of value. As stated in FAS 142, Goodwill of a reporting unit shall
be tested for impairment on an annual basis and between annual tests in certain
circumstances.
In the context of valuation of minority or fractional
ownership interets in FLP and LLC partnerships, does appraising family limited partnership interests differ from appraising a business?
Yes. Because the stock of many businesses are owned by individuals who form partnerships,
the value of a majority or minority interest in the underlying partnership
assets are affected. Among other variables that affect the partnerships
value are: size of the interest being appraised, restrictions laid
out in the family limited partnership or LLC agreement, the historical
dividend payments paid and expected future dividend paying capacity of the entity, the historical
profitability of the partnership, the future outlook of the enterprise,
the net asset value of the underlying assets, etc.
Cambridge Partners appraises fractional ownership interests and partnership interests for a
variety of purposes, including: estate planning, gifting, divorce, FASB 141, for buy/sell
agreements, joint venture contribution, SFAS 142 and SFAS 144, etc.
|
