Exit Strategies Insights

Industry insights, knowledge base and announcements for business owners and professional advisors

Business Valuation Insights

Update on Estate and Gift Tax Changes Coming in 2016

Proposed rule changes would limit the practice of discounting the value of stakes in family businesses for estate and gift tax purposes—an update regarding IRS timeline. The U.S. Treasury Department and the IRS are planning to introduce new regulations aimed at estate and gift transfers of closely held family businesses. The new rules would limit the practice of discounting minority stakes in closely held family owned businesses because of restrictions on an owner’s ability to …

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Buried in the Corporate Archives – a Valuation Case Study

A lot of our valuation work is done for the purpose of internal share transfers of private businesses, or buy-sell transactions. In doing this work, we often see that owners have overlooked or neglected to keep important documents up to date. One such document is the buy-sell agreement, which articulates important legal, tax, valuation and financing issues that are important to ensuring smooth share transfers and business continuity. We recently evaluated a holding company with a fair …

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Estate and Gift Tax Changes Coming in 2016?

New rules would limit the practice of discounting value of minority stakes in family businesses. The Wall Street Journal, Wednesday August 3, 2016, page A3 reported that the U.S. Treasury Department and the IRS are planning to introduce new regulations aimed at estate and gift transfers of closely held family businesses. The new rules would limit the practice of discounting minority stakes in closely held family owned businesses because of restrictions on an owner’s ability …

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Dental Practice Valuation Insights

It seems that every time I value a dental practice the industry has undergone or is going through significant changes. Patients and the medical community are rapidly recognizing dentists as oral health specialists which is expanding the services being offered by the dental industry. The dental professional is looking beyond the mouth. Connections between oral health and whole body health are allowing for more collaboration around sleep problems, oral cancer, facial esthetics, and periodontal health. …

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Risk and its Effect on Enterprise Value

Investors have choices in how to allocate their investment dollars across the risk and return spectrum. Whether it be bonds, public company equity, or private company equity, an astute investor will evaluate the risk of return and expect to be compensated according to this risk. Business valuation, whether for public or private companies, has three key variables: growth, profit margins, and risk. Growth and profit margins are more easily understood by most business owners and …

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Business Valuation and M&A Services for Estates and Trusts

This article takes a look at the various situations in which trusts and estates (those that hold private business interests) need business valuation or M&A brokerage services. Business Valuation Services Our firm, Exit Strategies Group, regularly provides fair market value appraisals (a.k.a. valuations) of closely-held corporations, FLPs and LLCs for estate planning, gifting, estate tax, charitable donations, buy-sell transactions and succession planning. We value fractional interests in operating companies and asset holding companies using appropriate …

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Business Values: Labyrinth or Maze?

In Greek mythology, the Labyrinth (Greek λαβύρινθος labyrinthos) was an elaborate structure designed and built by the legendary artificer Daedalus for King Minos of Crete at Knossos. Its function was to hold the Minotaur eventually killed by the hero Theseus. Daedalus had so cunningly made the Labyrinth that he could barely escape it after he built it. In English, the term labyrinth is generally synonymous with maze. As a result of the long history of …

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Necessary Components in Business Valuation

Business valuations (a.k.a. appraisals) come in many shapes and sizes depending on who has done the work and the process they have followed.  Here’s a brief checklist of what to look for in an appraiser’s engagement letter and CV prior to hiring him or her: 1. Is the appraiser competent to perform your business valuation?  Verify that he or she has a current certification from one of the accrediting organizations, such as ASA, NACVA or IBA, as …

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Interest Rates Likely to Rise After December FOMC Meeting

It is widely believed that the Federal Reserve will raise the rate it charges banks for overnight deposit lending, commonly called the federal funds rate at the December 15-16 meeting of the Federal Open Market Committee. The Federal Reserve controls the three tools of monetary policy–open market operations, the discount rate, and reserve requirements. The Board of Governors of the Federal Reserve System is responsible for the discount rate and reserve requirements, and the Federal …

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Terminal Value Meets the Butcher and the Skilled Craftsmen

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% …

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