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Business Valuation Insights
Terminal Value Meets the Butcher and the Skilled Craftsmen
November 9, 2015 / in Business Valuation / by Exit Strategies
I got involved in a friendly debate with a business intermediary the other day. He was talking cynically about how easy it is to manipulate valuation results by playing games with the cost of capital and the growth rate. “It’s easier to slap an industry multiple to it, without all the fiction of precision,” he said. Specifically, he was objecting to “terminal value” for growth companies. In growth companies, terminal value can often comprise 50%-70% …
Monday Morning Quarterbacking in Business Valuations
September 2, 2015 / in Business Valuation / by Jim Leonhard
Is hindsight appropriate in retrospective valuations? As business valuation experts, we are often retained to provide a conclusion of value as of a date that is in the past. For example, valuations for estate tax filings often use the date of death, which can be as much as a year in the past. Valuation dates for litigation cases can be even further in the past. Normally, using hindsight is discouraged in business valuations — the expert …
Asset Appraisals May be Needed to Support a Business Valuation
July 26, 2015 / in Business Valuation, Sell a Business / by Jim Leonhard
I recently valued a number businesses that required the appraisal of certain tangible assets, such as real estate and equipment – in one case its was an extensive library of manuals and maintenance specifications for a service business. At what point do we look for a appraisal specialist with particular expertise to value such assets? The simple answer is, it depends on materiality. If it is clear that the business enterprise value is well …
Vaguely Right or Precisely Wrong about Cash Flow
June 3, 2015 / in Business Valuation, Exit Planning / by Al Statz
Warren Buffet once quoted the economist John Maynard Keynes, “I would rather be vaguely right, than precisely wrong,” in describing how he determines the appropriate cash flow measure of a company. Indeed, determining the value of a business is not a precise exercise. However, neither is the process random guesswork. After assessing the facts and circumstances of the business, the appraiser’s goal is to find a value that represents what hypothetical or actual market participants …
Business Valuation: Step one in the sale process.
May 5, 2015 / in Business Valuation, Exit Planning, Sell a Business / by Louis Cionci
If you are considering selling your business, I would like to let you in on an M&A (merger and acquisition) professional’s insight. I have been involved in initiating and managing M&A transactions for over 15 years and have handled deals representing over $250 million in transaction value. Those transactions ranged from $2.6 mm to $90 mm. In addition, I was on a team that helped an international client acquire a $2.6 billion industry rival back in …
Valuation: Theory, Practice and Reality
March 11, 2015 / in Business Valuation, Exit Planning / by Exit Strategies
I attended a luncheon last week where a private equity firm’s panelist claimed that business valuation is too theoretical and inappropriate in the transactional world. I instinctively question broad-based statements like this, when I hear them; however I listened attentively. The panelist correctly asserted that most valuation firms focus on compliance and litigation work as opposed to transactions. However, his criticism of valuation work was illogical and inconsistent, and offered no better alternative. To make …
Your Buy-Sell Agreement: In good shape? Needs a tune up? Or Disaster waiting to happen?
February 25, 2015 / in Business Strategy, Business Valuation, Buy-Sell Agreements / by Bob Altieri
An Ounce of Prevention is Worth a Pound of Cure I can’t tell you how many times I’ve heard from business owners and their spouses that a key person became disabled or died and left an operating closely-held business in turmoil. What, no Buy-Sell Agreement? Ask anyone who has been selling and appraising business for a number of years and they will tell you this sort of thing is common. All businesses with more than one shareholder should have …
Court Chastens Expert Over Deficient Business Valuation
February 18, 2015 / in Business Valuation / by Al Statz
Sometimes courts face a hard choice, having to decide between equally compelling and competent valuations. Not so in a recent fair value proceeding in which the skills gap between the testifying experts made it easy for the court to pick the winner. Use of the Valuation: Business Divorce The petitioner and the respondent were the two owners of a New York company that installed solar energy panels on buildings. Business boomed, and the company enjoyed …
Upcoming Event: Valuing a Business for Estate Purposes
November 17, 2014 / in Business Valuation, News / by Al Statz
Society of California Accountants North Bay Chapter Annual Estate & Trust Update At the Sheraton Sonoma County Click here for enrollment information. My background as a business valuation expert, M&A advisor, corporate development executive and business owner allows me to bring a wealth of knowledge and first-hand experience to closely held and family business owners as they consider their exit options and plan successful ownership transfers. I enjoy educating business owners on these topics, and sharing my expertise with accountants, attorneys, lenders …
The Importance of a Credible and Competent Valuation Expert
September 30, 2014 / in Business Strategy, Business Valuation / by Al Statz
The need for business valuation arises in many circumstances ranging from dispute resolution, to estate planning, to the sale of a business to name only a few. As in all professional disciplines, it is important to hire a practitioner who is fully trained, able to discern relevant facts, and abreast of current best practices. Consider the following New York Supreme Court case.* Adelstein v. Finest Food Distributing Co Two brothers and their uncle each owned …
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