The Purchase and Sale of businesses is of great interest to our firm. The determination of the appropriate purchase and sale pricing is done through business valuation.
The Washington Valuation Group answers specific questions in its process of determining the value of the company or interest. Some of these questions include but are not limited to:
What is the standard of value? For example, are we analyzing the interest at Fair Market Value? Or are we pricing in synergistic opportunities and analyzing Investment Value?
Are there premiums or discounts involved? For instance, is there a block of shares of a non-controlling interest? What discount is appropriate?
What is the benefit stream? In every engagement we recast the financial statements of the company to more closely reflect the company's true economic financial position and results of operations. This process is known as "Normalization and Adjustments."
Furthermore, WVG is committed to providing a thoroughly reasoned and well supported valuation report that shows not only the value calculated, but also the framework and underlying assumptions that were used in the development of value. Some of the common types of Purchase and Sale valuations we perform include:
Purchase or Sale
A Buy-Sell Agreement is a legally binding document that determines how a partner or shareholder in a closely held business may purchase the interest of another partner or shareholder who withdraws from the business.
Integrating a business valuation into a buy-sell agreement is often critical to ensuring that all shareholders are treated fairly and equitably if one executes the agreement. Likewise, the absence of a buy-sell often triggers a valuation during partnership disputes.
Buy-Sell Valuation Scenarios
Some of the most common scenarios include:
• Buy-Sell Agreement requires a Valuation. In many agreements that documents call for an independent, third party valuation. (Think it might save some money to just include a predefined formula and skip the valuation? This might scare you straight).
• No Buy-Sell Agreement. Often times we wind up working to establish value when one shareholder wants out of a partnership. Those situations can be either friendly or litigious.
There are many types of events that trigger the need for a valuation for shareholders. Those may include:
• Shareholder disputes
• Death of a shareholder
• Insurance requirements
With regards to valuations of these types, our engagement is often guided by the terms laid out in the agreement when one exists. For instance, does the agreement provide for the application of Discounts for Control and Marketability?
In other cases, we are calculating value on a control marketable basis regardless of the characteristics of the block of shares valued.