A&C has the experience to deliver to clients an independent, objective, and accurate estimate of a company’s value at a specified point in time. A&C’s Certified Valuation Analyst’s (CVA’s) have experience in a variety of industries to complete a fair assessment of value. The assessment is based on accepted industry guidelines and relevant assumptions to determine the value of a business.
Business valuation reports are required for a variety of purposes, including: business exit planning, estate and gift tax, buy-sell agreements, marital dissolution, family limited partnerships, and charitable donations among many others.
- Buy/Sell Agreements
A buy-sell agreement is a legally binding document that controls how a partner, member or shareholder in a closely held entity may purchase the interest of another partner, member or shareholder who withdraws from the entity. Mandating a business valuation within a buy-sell agreement safeguards fair and equitable treatment of all shareholders.
- Business Exit Planning
Business Valuation is necessary for a business owner in order to acquire a company, raise capital, or to plan for eventual exit.
- Fairness Opinion
A fairness opinion from an independent business valuation expert protects a company’s board of directors when acquiring another business or when selling a business segment or an entire company. A&C’s fairness opinions are supported with in-depth research, detailed financial analysis and documentation, providing clients with the guidance needed to move forward.
- SBA Loan
An independent business appraisal by a qualified appraiser is required for certain SBA loans. The primary objective of such a report is to help the financial institution determine if the business can viably repay the proposed loan amount. An accurate appraisal benefits both parties: the business owner(s) avoid assuming more debt than they can afford and the SBA lender gains reasonable assurance of the loan being repaid.
Financial Reporting Valuations
1. Purchase Price Allocation
When your company is on the buy-side of an acquisition, you are burdened with the responsibility of reporting all items related to the transaction in your financial statements. ASC 805 requires that purchase price allocations be determined by recognizing the costs of acquisitions and liabilities as tangible assets, separately recognizing intangible assets at fair value. Allocation of the purchase price both for financial reporting and for tax purposes is inevitable in business acquisitions.
2. Goodwill impairment testing
ASC 350 requires that after the initial recognition of goodwill and other intangible assets through a business combination or other acquisition, these assets be periodically tested for impairment. These impairment tests are the result of ASC 805 which prohibit pooling of interest and eliminated goodwill amortization.
Under U.S. GAAP, goodwill impairment testing is conducted at the reporting unit level. The process is to identify potential impairment by comparing the fair value of a reporting unit to its carrying amount, including goodwill. If the fair value of the reporting unit is greater than its carrying value there is no goodwill impairment. If there is a goodwill impairment, the implied fair value of goodwill is compared to its carrying amount. An impairment loss is recognized for the difference if the carrying amount of goodwill exceeds its implied fair value.
3. Intangible Assets
An intangible asset lacks physical properties and represents either legal rights or competitive advantages; there assets can be developed or acquired by an owner. Intangible assets may consist of copyrights, trade secrets, patents, trademarks, etc., representing a competitive advantage of knowledge activities and know-how. A valuation is necessary when wanting to determine the value of an intangible asset.
Litigation Support Valuations
1. Divorce Cases
A business valuation is often an integral part of both contentious and mediated divorce cases as these proceedings are often complicated by the ownership of a closely held business. In order to determine a fair and equitable distribution of martial assets the value of the business must first be known.
2. Shareholder Disputes
Business partners do not always agree on the best course of action for a company. In case of separation, a reasonable sale price should be determined. In the absence of a formal buy-sell agreement, an independent business valuation is recommended to settle disagreements on the “Fair Value” of the shares in question.
3. Lost Profits/Economic Damages
A&C provides economic damages and valuation related litigation services and expert testimony for lost profit cases. A&C’s valuation professionals can testify regarding maters of economic damages and business valuation concerns.
1. Charitable Contributions
Business owners may desire to donate a portion of their privately held business to charity. As such, a tax deduction in the amount of the gifted stock can be taken in the year that the donation is made. Per IRS requirements, substantiation of the amount of gifted stock must be made by a business valuation that has been completed by a qualified appraiser. Since these tax deductions are carefully monitored by the IRS, A&C provides accurate, thorough, and defensible valuation reports that will stand up to IRS review.
2. Estate & Gift Taxes
The IRS requires a business valuation when a business owner desires to gift an interest in their company to a friend or family member. Additionally, in the event that a business owner dies, the beneficiaries of the estate must know what the fair market value of the business in order to determine their estate taxes.
3. Family Limited Partnership
A business valuation is often necessary to determine an interest in a family limited partnership. A family limited partnership is a nontaxable entity that holds appreciable assets, and whose partners consist primarily of family members.
4. C to S Corporation Conversions
Upon conversion from a C Corp to an S corporation, the IRS requires the company to be re-valued in order to determine potential built in gains tax that may be applied if the company were to sell or have any change in control event during the next 10 years.