WHY IS A BUSINESS VALUATION NECESSARY ? Business 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. Why 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 The proliferation 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 Partner disputes Dissenting shareholders actions Divorce Economic loss analysis including personal injury, wrongful death or termination 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. Careful Analysis 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 Is Determined 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 valuation engagement.