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Business Valuation

A valuation is a fundamental part of the business life cycle.

  • Early stage – a valuation can provide suggestions for enhancing the business and therefore offer strategic ideas for an owner to pursue to grow value.
  • Growth stage – a valuation helps ownership position the business for greater profitability and this can enhance its marketability when it is time for a transition.
  • Transition phase – an estimate of value enables owners to project the expected proceeds they may receive if the company were sold at this point in time. This generally involves businesses that have matured.

It is a good idea to get an accurate picture so good decisions can be made. Our valuations factor in current market conditions, as well as historic data for related business entities.

We provide several levels of service based on the needs of the client. A phone consultation or meeting with the BTS team of advisors can help select the right direction.

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Formal CVA Valuation

A valuation performed by a Certified Valuation Analyst (CVA) provides an objective report that gives the business owner a solid defensible basis for making decisions.  It is a report that is generally requested by lending sources considering business financing. It also is the type of report needed when there are owner disputes, there is a divorce and assets must be divided, or a valuation is needed for an estate, among other things. Below are some circumstances where CVA written valuations might be employed.

Transferring Interests:

  • Selling to heirs or third parties
  • Gifting to heirs
  • Succession planning

In conjunction with any transfer of interest it may be useful for the seller or the buyer or any applicable heirs, to have an independent view of the value of a business as part of any exchange.

Corporate Finance: 

  • Acquisitions
  • Obtaining third-party financing
  • SBA loans
  • Stock buy-back programs
  • Stock offering

As part of any capital raising, whether debt or equity, or in dealing with third-party financing institutions it is helpful to have an independent view of a business’s value to make optimal financing decisions.

Accounting Considerations:

  • Fairness opinions
  • Goodwill impairment
  • Purchase price allocation
  • Fair value assessment

Independent valuations may be required to conform with generally accepted accounting principles (GAAP) and accounting pronouncements. This may be the result of periodic accounting requirements or as the result of a business combination.

Disputes:

  • Partner disputes
  • Dissenting shareholder actions
  • Divorce settlement

Cases may arise where an understanding of the income generating capacity or value of a business is essential to the settlement of disputes.

Estimate of Value

This report will give a preliminary estimate based on financial data from the business and market data generated through research. The report also explains the types of buyers in the market now for related entities, and outlines the process and methods that would be used to sell the business now or down the road. It is a great way to get a discussion going about the best transition pathway to consider.

Intermediary Opinion of Value

As part of our sales engagement process, we generally create an Intermediary’s Opinion of Value. This is a comprehensive report targeting the market value range of the business, and is used as a way to make sure all parties are on the same page as to the expected transaction value. 

The IOV measures businesses against completed transactions in the specific industry in which you operate. The four most important metrics that are considered are: Gross Sales, Gross Profit, Earnings before Interest, Taxes, Depreciation, Amortization (EBITDA) and Discretionary Earnings. The importance and weight given to each metric varies depending on the industry, and can also vary depending on the type of acquirer. Various other methods such as comparisons to public companies, discounted cash flow and asset-based valuations will sometimes be used as a verification or double check.

There is a lot of information in the public domain that can mislead about true market potential. It is not uncommon for exceptional, one-of-a-kind value ranges to be repeated as though these results will play out in all situations. The IOV uses a consistent process, based on data sources, to provide a clear and realistic value range.

The IOV can also help an owner highlight potential areas of improvement, based on comparisons with other industry peers or with similar industries. After an in-depth review of the financials the Intermediary may also suggest areas where the financial presentation can be adjusted to clarify and define expenses. The process helps make the true financial performance easier to understand for an acquirer, as well as facilitate the due diligence process.

Not sure which type of valuation is right for your circumstances? Contact BTS and a member of our team can answer your questions.

Any fees for the IOV are credited towards a success fee if the client goes to market with the BTS team.

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Case Studies

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    Initially, liquidation was a serious consideration. It would offer a quick exit but would hurt loyal employees and disrupt the customers who had come to rely on its quality production.

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  • Green Product Company

    Our client owners could dig in for the long haul…However, this would take five years or more. Owners simply lacked the horsepower to do it.

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  • Water Purification Company and Young Buyers

    Owners decided they wanted to retire. They also wanted to be fair to the staff who had been loyal to them. Could the company be sold, the staff retained and the facility remain in use?

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  • Magnetics Company with High Profile Customers

    (T)he manufacturer would need to focus on growing EBITDA to capture interest from major strategic buyers and achieve a higher multiple of earnings.

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