Q: What are Business Valuations?
A: A business valuation establishes an estimated market value for a business entity.
A Business Valuation estimates the economic benefits that derive from combining physical assets with the intangible assets of a going concern. Net, net, a Business Valuation estimates the price that a hypothetical informed buyer and seller would negotiate at arms length for an entire business or a partial equity interest.
Q: What Are a Few Major Reasons to Do Business Valuations?
A: Anytime knowing the true value of a business is important, such as:
Transactions
Mergers and Acquisitions
Sales and divestitures
Buy/Sell Agreements
Shareholder Transactions
Capital Infusions
Collateral Valuations
Purchase Price allocations
Taxation
Estate planning
Gift taxes
Charitable Contributions
Regulatory
Employee Stock Ownership Plans
Employee benefit pans
GAAP valuations under FASB 141 and/or FASB142
Litigation
Divorce
Fairness opinions
Expert testimony/litigation support
Solvency/Insolvency opinions
Determination of net operating loss in bankruptcy
Determination of liquidation value in bankruptcy
Q: What Are The Major Focus Areas of MCOM's Business Valuation Practice?
Business Planning
Careful business owners establish how a business will be valued for the purposes of sale or increase/decrease in ownership, rights of first refusal and other common equity actions. By knowing the ongoing true value of the business on an periodic basis, owner speculation is kept to a minimum, and owners always know where they stand.
Mergers & Acquisitions
Much of our business is oriented to mergers and acquisitions. We find that many of our clients need high quality statements of business value as they proceed to acquire similar businesses or to divest operating assets that no longer fit the company strategic plan.
Exit Strategies
Our clients often use business valuations as one of the cornerstones of a long-term financial plan to enhance the value of their business. Business valuation consulting focuses on how business development activities, strategies and tactics create value for business owners. We often advise clients on how development of the business today will produce a more salable product three to five years down the road or when they plan to exit the business.
Attracting Capital
Valuations are often an important part of obtaining debt or equity financing.
Estate and Gift Planning
If an interest in a closely held company is material to a person's net worth, a valuation of that investment should be an integral part of the person's estate planning. When a person dies, a posthumous valuation of a closely held business is often done as part of the estate's tax return. These valuations are important, because the IRS audits most estate tax returns even if the value of the closely held business is of modest value.
Other Taxation and Regulatory Reasons
A smaller portion of our business deals with other regulatory and taxation issues. We service this business on an ongoing basis as required by the CPA and legal firms with which we deal.
Q: What Are The Components of a Business Valuation?
A: IRS Revenue Ruling 59-60 states that valuations should address the
following issues:
The nature and history of the business
The general economic outlook and the conditions of the specific industry
The book value of the stock
The financial condition of the company
The earnings capacity of the company
The dividend paying capacity of the company
Whether the company has goodwill or other intangible value
Previous sales of stock
The market price of publicly traded companies who are engaged in the same or
similar lines of business
Q: What Are The Steps Involved In The Valuation Process?
A: The National Association of Certified Valuation Analysts (NACVA) establishes the following sequence for any competent Business Valuation.
As Accredited Valuation Analysts and members of the NACVA organization, we follow all NACVA valuation processes, procedures and rules.