In the Year 2030… Succession Planning

There are four types of valuations used to understand middle market transactions and helpful with succession planning:

  • Fair market value, hypothetical concepts, most commonly used in estate, income and gift tax planning or litigation support.
  • Preliminary estimate of value in the market-place; will include strategic values recently paid in an industry.
  • Investment value, value particular to potential buyers.
  • Final transaction value, actual value paid in a closing transaction.

The use of a valuation may be the catalysts for business owners to operate their companies in the most value-enhancing manner. In the future, the market may be over-crowded with companies for sale; the opportunity to create significant owner-value should begin immediately. Experienced investment bankers should be able to advise sellers as to general price ranges, and identify positive and negative value drivers so as to maximize the final transaction value of the business.