WHY IS A BUSINESS VALUATION NECESSARY ?
Interests Often Represent a Significant Asset
Business valuations are performed because ownership interests
in privately held companies often represent a significant portion of one's estate and/or portfolio. The value, or worth, of
an interest in a privately held company, as opposed to stock in a public company, is usually unknown because there is no active
market to sell or trade that interest from which to ascertain or approximate value. Value determinations are most commonly
needed to calculate estate and gift taxes, divide family assets in a divorce, prepare for charitable contributions, set up
succession planning or negotiate value in a purchase, sale or merger of a business enterprise.
Are Valuators the Premier Litigation Consultants ?
Professionals with a valuation background have come
to be known as the premier litigation consultants because their knowledge of business value - and what drives value - perfectly
situates them to counsel business owners and their legal advisors on a myriad of litigation issues. We offer the unique capacity
to assimilate financial information from a variety of complex situations and - more importantly - articulate and communicate
the relevant meaning of this information for the audiences involved in a litigious setting. Simply put, we pull together the
numbers and the data, and we make sense out of them. It is this ability to complete the picture that makes us such a valuable
addition to the legal team.
Scope of Litigation Consulting Services
of information in areas related to litigation requires expertise, experience, and training as never before. Our firm can provide
invaluable benefits to both you and your clients regarding:
Disruption of a business
Dissenting shareholders actions
Economic loss analysis including personal injury, wrongful death or
A Value Added Service
Possibly one of the best reasons for obtaining
a business valuation is to use it as a management tool. A prime objective for every business enterprise, large or small, is
to improve and maximize its value to the owners. This is a necessary business requirement in order to justify the investment
of time and, more particularly, capital.
A properly prepared business valuation provides management with insightful
information that helps them identify company strengths and weaknesses that affect value, allowing management to more effectively
focus their energies in places that really count. A business valuation, prepared periodically, also serves as a measurement
tool that helps owners assess overall success and management effectiveness.
Accurate Value Determination
The result of an inaccurate value determination, regardless of whether it is high or low, generally leads to undesirable
consequences. For instance, if the value is too high, estate taxes will be too high; savvy investors or prospective buyers
will usually disregard a value that appears too high. If the value is too low, you can be sure savvy investors or prospective
buyers will recognize it and take advantage. Likewise, if you are on the other side of the dispute in a dissenting shareholder
action or divorce, you certainly want to know you are receiving a fair value for your interest.
Determining the true value of a business enterprise requires a careful analysis of two primary
components that make up value: tangible assets such as real estate, machinery, and furniture used by the business and intangible
assets such as the business goodwill, customer lists, trademarks, copyrights, distribution rights, a superior management team,
non-compete agreements, physical location, special processes, and name recognition. Quite often, the value of a company's
intangible assets is much greater than the tangible assets.
Understanding the Business
To properly value intangibles, the valuator must acquire a thorough understanding of every aspect of the enterprise
dynamics, including management capabilities, company strengths, weaknesses and vulnerabilities, the competitive environment,
overall expectations for the marketplace, and future economic prospects fro the industry. Additionally, the valuator must
analyze the financial health of the enterprise and assess its future profit potential. All of these elements affect the risk
of an ownership interest in a particular enterprise, and risk affects value.
Understanding How Value
Most clients seek a business valuation in order to determine an appropriate value of their
business or personal assets. Different approaches must be used to determine values of businesses and property, depending on
the specific purpose for the valuation. Value is usually expressed in terms of fair value, fair market value or investment
value. Business valuators are specifically trained to identify and determine the most appropriate standard of value for the