Business Valuation Services: Specialty

Business valuation support

Business Appraisal Review

Appraisers who have obtained the accreditation Accredited in Appraisal Review (ABAR) from The Institute of Business Appraisers or Accredited Senior Appraiser (ASA) in Appraisal Review and Management from the American Society of Appraisers have a heightened focus on professional responsibility in their and others’ practices. They are considered “Experts’ Experts” and are able to articulate the elements of business valuation reports that credibly meet the required professional practice standards. Such appraisers are able to constructively criticize the oral and written testimony of other business valuation experts in order to help triers of fact and juries reach appropriate verdicts.

A business appraisal review comments on matters such as the appropriateness of the valuation assumptions made, methods used, conclusions reached, and compliance with professional analysis and communication standards as well as numerous other factors that speak to appraisal quality. A business appraisal review does not include an opinion of value.

American Business Appraisers National Network professionals can provide rebuttal testimony regarding the opinions of opposing experts and others concerning the values of business interest. This service is available on an independent (non-advocacy) basis or on a consulting (advocacy) service basis.

If you are in need of a business appraisal review, please contact one of American Business Appraisers National Network’s appraisers who are accredited in business appraisal review to discuss your situation and how we can be of assistance.

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Machinery & Equipment Appraisals

Machinery & equipment appraisals (M&E appraisals) are specialized appraisal services conducted for a variety of purposes to substantiate equipment values. An appraisal completed by a Certified Machinery & Equipment Appraiser (CMEA) is a comprehensive and detailed report including photographs, model numbers, serial numbers, and other descriptive information. Value conclusions are based on extensive research, personal inspection, and contact with manufacturers and suppliers to determine the real worth of various machinery and equipment assets. M&E appraisals conducted by a CMEA are:

  • Certified reports
  • Follow the Uniform Standards of Professional Appraisal Practice (USPAP)
  • Meet compliance standards of financial institutions
  • Withstand the scrutiny of lenders, CPAs, courts, and others

Contact one of American Business Appraisers’ Certified Machinery & Equipment Appraisers today for further details.

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CFO/COO Advisory

ABA members offer a breadth of experience in a variety of operational and financial disciplines and situations. Working together with your existing resources, practical solutions to the challenges and opportunities you face will be formulated and implemented.

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Distressed Company Advisory

From time to time, organizations are presented with challenges that require specialized assistance or at least additional resources.  Partnering with business leaders, key areas requiring change are identified and proactive plans are developed to initiate rapid change to lead a turn-around and recovery effort.  Many ABA members are well-suited to assist you in a variety of capacities.

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Fractional Interests in Real Estate Holdings

An undivided interest in real estate is an interest in real estate held by two or more people, each of whom has an undivided interest. This interest is also referred to as a common-tenancy interest, tenants in common and fractional interest.

The fair market value (FMV) of an undivided interest is less than its pro-rata share of the value of the property because the owner of the undivided interest does not have control over the management and disposition of the property. This makes the interest less desirable to a potential buyer and consequently less marketable for the owner. This is an unusual valuation problem, and the concluded discount can be contentions. Working with specifically qualified appraisers is important for estate planning, partner buyouts, and other situations where such fractional interests are commonly found. ABA provides its members with unique training and support for this type of valuation which is not normally found in business valuation organizations.

The entire property is first valued by a real estate appraiser. ABA member appraisers are specifically qualified to integrate the real estate facts with the discount analysis to produce supportable opinions of value. Their reports integrate the real estate appraisal’s facts and provide an unusually high level of assurance to the client.

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Real Estate Appraisal Services

Although business valuation and the appraisal of real estate are frequently viewed as separate disciplines, the underlying principle for each is the same: value is the present worth of anticipated benefits.

Both business appraisers and real estate appraisers base their opinions on the income stream generated by the subject asset (except when the real estate is land only). Each discipline has its own label for the income stream. The real estate appraiser labels it “net operating income” (NOI) and the business appraiser calls it “net income before or after tax”. Both use the same approaches to value (cost, market, and income) as well as the same standard of value (market value). In real estate valuation, tangible assets, such as land and buildings, provide the basis for value.

There are two notable differences:

  1. Real estate appraisals are traditionally based on a “before debt basis”.
  2. Capitalization and discount rates for real estate valuations tend to be lower than those for business valuations.

A quality appraisal is supported by evidence found in the marketplace. The methods and standards of value employed are the same regardless of the intended use of the appraisal: marriage dissolution, financing, gifting, tax appeals, and so on. The more unique the appraisal project, the more qualified and experienced the appraiser must be. Examples of unique (special purpose) properties include: landfills, mineral rights, lakeshore, radio towers, and major shopping malls. If the real estate to be valued also includes a business owned by the same individual, the real estate appraiser and the business appraiser should work together to measure value.

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Shareholder Agreements

It is essential to address critical valuation issues at the inception of a business. Every business with multiple owners should have an agreement that defines what happens when shareholders die, become disabled, depart the business, or disagree. ABA professionals can help you and your attorney define the terms of such agreements and review them to adjust for changes in your business.

Examples of issues that need clarification include, but are not limited to, the following:

  • How to value a minority interest.
  • How financial statements will be referenced (month- or year-end, number of years) and whether they will be averaged or weighted.
  • Whether book value represents unadjusted balance sheet values or market values.
  • Whether to use book value or market value for real estate, marketable securities, or other assets acquired by the business.
  • Agreeing on the definition of “assets” as tangible or intangible assets.
  • How earnings will be referenced, either as shown on the income statement or adjusted earnings that are managed to minimize taxable income.

Businesses change over time. You should review your existing shareholder or buy-sell agreement at least annually and consider these questions:

  • Does the agreement still seem appropriate and fair?
  • Will its stipulation for finding value produce a reasonable and fair outcome for the shareholders?
  • Will it produce a value which can reasonably be expected to be accepted by the IRS for gift or estate tax purposes?
  • Have separate entities been formed to own and lease assets such as buildings, equipment or other items to the corporation?
  • If your agreement’s stipulations regarding value are unclear, contact an ABA professional to discuss a valuation and to work with your attorney to amend your agreement.

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