Selecting a Business Valuation Expert
When you need a business appraiser or an expert witness, you want to know that you are hiring the best qualified person. As business valuation professionals, we are committed to providing you with the highest levels of expertise available. We have completed rigorous education, training, testing, and peer review to stand with the most competent, credible experts in the industry.
ABA professionals are often hired by attorneys to value a client’s business interest or to provide expert witness and litigation support services. Legal rules allow experts to testify in court and it is estimated that 80% of civil cases use them. Whether you need general appraisal, consulting or litigation services, you can expect that the expert you retain is truly qualified if they are an ABA member, and we will match you with the ABA member who has the appropriate expertise and experience for your matter.
ABA professionals are also often hired by clients to value businesses, equity interests, and intangible assets for various tax and financial reporting compliance purposes. When needed, ABA professionals have defended their opinions of value with the IRS and other governmental authorities.
As individuals, some of us hold multiple credentials. As a consortium, we hold more than 80 credentials. For a brief explanation of the initials you’ll see after our names, see our list of credentials.
For almost all taxation, litigation, and compliance engagements, we issue complete reports which are comprehensive, detailed, and thoroughly documented so that they can withstand tough adverse scrutiny. A complete report gives an unambiguous, independent, objective, and specific opinion of value.
In some circumstances, mostly involving actual transactions, something less than a complete report may be all that is needed. ABA professionals will explore this possibility with you if it appears to be appropriate. Anything less that a complete report will have limitations on its conclusions, scope of work, readership, and other parameters. As such, a less than complete report cannot be a substitute for a complete report.
Business valuation experts must consider discounts and premiums that affect the value of a partial business interest and determine whether or not it is appropriate to apply them. The primary discounts and premiums are:
- Discount for lack of marketability
This reduces the value of interests that cannot be quickly or easily converted into cash. For an in-depth article on this topic, please see “The Controversy over the Discount for Lack of Marketability.”
- Discount for lack of control
This discount reduces the value of interests that do not provide the owner with prerogatives of control.
- Control premium
When appropriate, this premium is applied to recognize the enhanced value associated with a controlling interest.
- Other discounts
Occasionally, discounts such as key person, portfolio, and blockage are relevant.
The standard of value is the most fundamental aspect of an assignment. It is almost always dictated by the reason for the appraisal (taxation, transaction, litigation, or regulatory compliance), but sometimes can create confusion. Your ABA professional will be sure to clarify the appropriate standard of value for your assignment and explain it carefully.
The premise of value is also extremely important. In most cases, there are two possible states for a business to be in: going concern or liquidation. A profitable business with prudent debt, reasonable risk, competent management, and other “normal conditions” will almost certainly qualify as a going concern, valued on the basis of the economic benefits it provides to its owners. On the other hand, a business that is in distress due to any number of reasons might be better off liquidating; i.e. ceasing operations, selling its assets, and paying off its obligations. The premise of value depends on the standard of value, the purpose of the appraisal, the business situation, the type of ownership interest to be valued, and many other case facts and circumstances. Your ABA professional will be sure to clarify the appropriate premise of value for your assignment and explain it carefully.