Valuations: To Sell or To Grow?

The uses of business valuations are almost unlimited: buy/sell agreements, fairness opinions, purchase price allocations, estate planning, gift taxes, charitable contributions, shareholder transactions, Employee Stock Option Plans (ESOPs), solvency and insolvency opinions, collateral valuations, litigation support, etc.

In the context of selling one’s business, clarifying the seller’s goals, and measuring those goals’ financial needs with the proceeds from selling the business may best be determined by a valuation of the business. An impartial sell-side valuation may determine the need for the owner’s further preparation of the company for sale or give the “green light” to proceed with the sale of the company.

Buyers in most acquisitions attempt to acquire companies at a price no greater than its fair market value. The buy-side valuation of a target company may result in a quick decision to proceed with the acquisition or move to a new target.

Valuation analysts use two types of engagements, a Valuation or a Calculation, to estimate a company’s value. The analysts may render his or her conclusions in a verbal or written report; a valuation report communicates results as a conclusion of value, and a calculation report communicates results as a calculation of value.