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Business Valuations - An Art or Science- Could it be both
The Need
Valuations are needed in several instances such as:
Purchase or Sale of Businesses Liquidation of Entities Gifting and Estate Tax Planning Strategies Asset Allocations in Divorces Buy Sell Agreements Business Financing Fairness Opinions for Shareholders Litigation Support and Dispute Resolutions Choosing a Valuator
It is critical that the right professional be chosen for the project at hand. Therefore, it is essential that the following be definitely considered:
Professional needs to have the necessary experience Good presence of mind and effective communication skills are a must Professional designations and continuing education in the field are necessary Absolute independence of the professional is required and mandated Obtaining references and past industry experience would enhance the decision of choice Reviewing the professionals experience serving as an expert witness may be necessary at a later date Factors Affecting the Valuation
In coming up with a valuation report the valuator is required to come up with a value, which he or she can attest to. This takes into consideration several facets, which form the tenets of a sound valuation process.
Economic Trends have a bearing on mostly all valuations Specific Industry factors need to be considered in all situations Prevailing Competition is a critical factor Market Position such as reputation, pricing, diversification of customer base are essential components of a businesses value Intangibles and Goodwill which are the true worth of any business have to be taken account of, and by their very nature are difficult to quantify in several instances The Final Report
Conclusions of a valuator are contained in a report as a vital component of the engagement. A well documented report is always composed of the following:
The purpose of the Valuation Discussion of the Valuation process and the methodology adopted A history of the business being valued Composition of the ownership interests of the entity being valued Financial Analysis and conclusion of value The above touches on some of the very fundamentals of Business Valuations. Each valuation engagement is in itself a unique one and due thought process and consideration is key to the final determination of value.
About the Author Bertorelli Gandi Won & Behti, Partner Certified Public Accountants San Francisco, Ca 94105 415.905.0330 www.bgwbcpas.com jbgandi@bgwbcpas.com
