Business Valuation and M&A Services for Estates and Trusts

Al StatzThis 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 discounts. We also value intangible assets such as patents, trademarks and copyrights.

For estates containing closely held business interests, we can determine the value of a decedent’s interest, and we can provide input to the estate attorney or CPA on whether an alternative valuation date should be considered.

For trust administration, when a privately held business interest is placed in trust, our business valuation can help the fiduciary or trustee establish a baseline value and enhance their understanding of the asset’s prospects and marketability. Subsequent valuations may be ordered to assess the investment’s performance over time. An independent business valuation can also avoid potential conflict of interest, when trustee fees are based upon the value of assets managed.

When an owner gifts shares in a business, we determine value as of the date of gift. When closely held business interests are donated to a Charitable Remainder Trust, our business valuation can support the charitable deduction by the donor taxpayer.

In estate planning where a family business is one of the owner’s major assets, a valuation is often the starting point for estate planning professionals as they consider various estate planning techniques. Valuations provide a basis for the owner to evaluate potential ownership transfers and gifts; and can safeguard against future IRS challenges.

Our appraisers adhere to professional valuation standards, perform appropriate due diligence, and meet or exceed accepted reporting requirements. We are prepared to defend our work in the unlikely event of an IRS audit. Between us, we hold all major U.S. business valuation credentials (ASA, CBA, CVA and ABV).

When drafting entity agreement terms, attorneys have to balance flexibility and efficiency of operation with restricting control and marketability. During this stage, we can identify problem valuation situations or problem assets, identify the effects of estate planning alternatives on fair market value, and make recommendations on operating, shareholder and buy-sell agreement terms that impact valuation.

Part of estate planning  is business succession planning, which is emotionally charged and usually meets with resistance. Business valuation provides an objective look at many aspects of a business, including its management, marketability, inherent risks, and future prospects. The very act of going through the business valuation process with an experienced, knowledgeable and independent appraiser often provides the catalyst that owners and their families need to embark on developing succession and wealth transfer plans.

M&A Brokerage Services

In many instances, an inter-generational transfer or management buyout of a business is not the best option for business owners and their families. In some cases the children aren’t qualified or they simply aren’t interested. In others, the industry may be consolidating or an opportunity exists to sell the business for significantly more than fair market value and/or create substantial liquidity for the family to reinvest or use to pursue other interests.

Accordingly, Exit Strategies markets and sells businesses. Our professionals advise owners throughout the evaluation, prospectus preparation, confidential strategic marketing, negotiation and due diligence phases. We lead the M&A sale process and work alongside our client’s tax, legal and financial advisors to maximize proceeds and preserve wealth.

Feel free to contact us for more information on business valuation and M&A brokerage services for estates and trusts, or to discuss a current need.