Valuation: What Is the Value of My Company?
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.
When selling one’s business, clarifying the seller’s goals and measuring those goals’ financial needs with the proceeds from selling the business may be determined by a valuation of the business. The 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.
The business buyer in most acquisitions attempts 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.”
The valuation analyst uses two types of engagements, a Valuation or a Calculation, to estimate a company’s value. The analysts may render his conclusions in a verbal or written report; a valuation report communicates results in a conclusion of value; and, a calculation report communicates results in a calculation of value.