Preparing for a Business Valuation

February 2024

You signed the engagement letter to have a valuation prepared for your business.  So what information should you have assembled so the valuation process runs as efficiently and quickly as possible?  The following is a non-inclusive list of information that is generally needed to have a business valued. 

1) Five years of annual financial statements

2) Latest interim financial statements, with a
    comparison to the same period in the prior year

3) Budgets and projections as of the valuation date

4) Appraisals and estimates of business owned assets
    needed to calculate net asset value

5) List of intellectual capital such as patents,
    trademarks, copyrights and goodwill

6) Five years of business tax returns

7) Organization chart

8) Estimate of owner compensation that would be
    necessary to pay someone to perform the same
    services as the current owner

9) Industry information

If the interest being valued is less than 100%:

1) Articles of organization

2) Owner agreements

3) List of owners

4) Prior transactions of interests

Other information will likely be needed, but the above will give the valuator a good start in getting the necessary information. 

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Relevant Court Cases

• Paul v. Rockpoint Group, LLC, Chancery Court of the State of Delaware, C.A. No. 2018-0907-JTL, decided January 9, 2024
  
  
• Fredericksburg Ambulatory Surgery Center, LLC v. C. Rosser Massey, III, M.D., Court of Appeals of Virginia, Record No. 1589-22-2, opinion on January 30, 2024
  
  

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Recent Business Valuation Articles

• “Asset Pricing in the Resource-Constrained Brain,” by Hammad Siddiqi, dated February 2, 2024
  
  
• “Salience Theory and Equity Option Returns,” by Raymond H.Y. So and Xuanchen Zhang, posted February 13, 2024
  
  

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Recent Engagements

• Valuation of the non-voting common stock of a specialty contractor on a minority interest basis for gift tax reporting purposes.
  
  
• Valuation of the common stock of an agricultural-based business on a minority interest basis for estate tax reporting purposes.
  
  
• Consulting for the purpose of calculating the fair market value of various ownership interests in several privately-held holding companies for the purposes of updating values of trusts that own the subject interests.
  
  
• Valuation of the common stock of a niche equipment dealership on a minority interest basis for gift tax reporting/sale purposes.