What's My Business Worth? Business valuations are essential for a wide variety of business activities including capital generation, acquisitions, and divestitures. A professional business valuation should provide the business owner and his or her professional advisors with an accurate, defensible conclusion that is consistent with the purpose of the valuation.
APEX Mergers & Acquisitions business broker works closely with financial analysts, accountants, and other advisors to generate expert valuations for private middle-market companies. A business valuation is exhaustive in detail and comprehensive in coverage, presenting financial, marketing, intellectual property, and other pertinent data to give a clear, concise valuation picture.
APEX Mergers & Acquisitions experience in mergers and acquisitions imparts proprietary knowledge gained from a wide range of transactions to our business valuations, ensuring a broad perspective and results that are consistent with the purpose of the valuation. Our reports are prepared according to generally accepted valuation guidelines and enjoy credibility with attorneys, accountants, buyers, banks, and institutions.
Why Business Valuation?
The business valuation (or business appraisal) can be used for many reasons. There are typically very specific legal or tax-related reasons. Professional buyers, be the companies, Private Equity Groups, or Private Investment Groups have their own methods to determine values that work for their specific situation. APEX Mergers & Acquisitions business brokers understand those methods and use a very similar analysis to help you understand how your company is viewed in the marketplace.
When a formal valuation is required, APEX can assist with obtaining an unbiased, independent third party valuation of your company. Some instances you may need a formal valuation include:
- Business Sale
- Shareholder Agreement
- Shareholder Disputes
- Divorce
- Litigation
- ESOPs
- Insurance Claims
- Mergers
- Partnership Buyout
- “C” Corp to “S” Corp Conversion
- Allocation of Purchase Price
- Valuation Reports
- Obtaining Financing or Debt Recapitalizing
- Gift Tax
- Buy/Sell Agreements
- Estate Tax Planning
How is Value Established?
Remember, a business is only truly worth what the market will pay and the seller will accept. Although an appraiser looks at many valuation methodologies, these are four common methods:
- Multiple of earnings/cash flow
- Comparable transactions analysis
- Asset-based valuation
- Discounted cash flow analysis
Valuation experts, mindful of the strengths and weaknesses inherent in each approach, will value a company with more than one of the methodologies, simultaneously comparing results to determine a correct valuation. Included in the process is an analysis of growth potential, risks, industry factors, and other variables that may impact the value of an enterprise.
The Valuation Process
Initial consultation – A highly trained APEX valuation consultant will meet with you to determine the following:
- Whether a valuation is necessary for your situation and the purpose of the valuation
- Which one of our full range of services are appropriate, including which valuation method will be used
- An overview of the process along with a timeline for the valuation.
After the initial consultation, an engagement letter will be drawn up documenting our mutual understanding of the valuation to be completed and the information we’ll need from you to complete the work.
Gathering Pertinent Information – APEX Mergers & Acquisitions valuation consultant will walk you through the process of gathering the necessary business financial documents needed to complete your valuation. These documents may range from tax returns and financial statements to a list of assets and risk/value drivers.
Research and Analysis – Once we have the necessary documentation, we set out to fully understand all the financial and operational aspects of your company. We will tour your business and its surroundings, learn your sales approach, and analyze your market position and your competition. APEX Mergers & Acquisitions valuation consultants research relevant economic factors, industry trends, revenue, and earnings over recent past years as well as expectations for the future, potential risk factors, and comparable industry transactions.
Valuation Report Preparation – Using a variety of valuation methodologies, weighing the purpose of the valuation, and analyzing the data collected, APEX Mergers & Acquisitions valuation consultants will create a comprehensive report delineating our findings. You and your consultant will review the report to make sure you fully understand the independent objective and supportable conclusions outlined and to ensure that the report meets its intended purpose. All APEX valuation reports adhere to the Institute of Business Appraisers standards and Uniform Standard Professional Appraisal Practices.
What factors are considered when performing a Formal Business Valuation?
There are many factors to consider, both internal and external when performing a Formal Business Valuation. An in-depth analysis of all the factors is necessary to determine an accurate opinion of value. Some of the factors to consider are as follows:
Internal Factors
Historical Performance
Financial Strength
Profitability & Earnings
Ownership & Management
Operational Structure & Controls
Size of Operation
Forecast/Future Projections/Budget
Business Plan (whether written or formal)
Condition of the Operation
Duplicative Nature
Barrier of Entry
External Factors
Size of Operation
Within its Industry
Within its Market
Industry Trends
Competition
Environmental Factors
Economic Factors
Legal Protection of Products and/or Services
Government Regulation
There are numerous components that must be analyzed when performing a formal valuation. Whether it is internal or external factors that are positively or negatively affecting the value of the company, the valuation must be performed from an independent, investigative approach as to the opinion of value.
The use of an independent, qualified third party is essential.
