Business Valuation Services: Transactions

Business valuation support

 Mergers and Acquisitions

Members of the American Business Appraisers National Network often assist buyers and sellers in the sale, acquisition, or merging of businesses. We may assist you in identifying prospective buyers and sellers. Once negotiations have begun, in addition to considering price, it is essential that both parties understand the value and terms of the transaction. We can compare the stand-alone value of a company (its value if it continues independently) with its potential worth to a synergistic buyer, who could add value through increased revenue, lower costs, and/or lower risks.

Our fees are based on our time and expertise and are not contingent on your completion of an acquisition or a sale.

  1. Identification of Acquisition Targets and Target Acquisition Plus Services (TAPS)
    If you are trying to locate a company to acquire, you may want to take advantage of ABA’s research, analysis, management interview and valuation skills to identify a potential seller.
    TAPS can help you as an acquirer or a seller of a business. We can find sellers before they have “officially” decided to sell or we can locate companies that can acquire your company or division. We can help you develop an “acquisition profile” that will identify your criteria for a search. Once we’ve researched companies that match the profile, we will make recommendations on how to turn these companies into preliminary “prospects” and then final “targets.”
    Unlike a broker, the ABA does not have a financial interest in the outcome of your transaction. Our fees are based on our time and expertise and are not contingent on your completion of an acquisition or a sale.
  2. Pricing of Acquisitions and Divestitures
    For most matters involving transactions — actual purchases and sales of business interests or assets — the final price and terms will be negotiated by the parties. In these situations, an independent appraisal may be of interest to no one, since it will probably fall in the middle between what a buyer wants to pay and what an owner wants to sell for. In such cases, we can act as your consultant, helping you negotiate the best deal, as long as our advocacy role is clearly explained to everyone concerned.

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Exit/Succession Planning

An exit plan is a written outline of an owner’s business exit strategy that addresses the strategic, financial, professional, and personal issues that have been described. It also identifies and quantifies the accounting, business, insurance, legal, tax, and valuation issues involved in transitioning a private company. While the sale of a company is an event, the exit plan is a process. Exit planning is something that is done over time and may, but does not necessarily, include selling the business. The exit plan is built around the personal objectives of the business owner. As such, it is something that should be completed by the business owner, with the help of a team of outside advisors, regardless of that owner’s age and current position, and regardless of the company’s stage in its business life cycle. A successful transition will require a thoughtful and coherent exit plan.

Exit planning can be described through a proven six-step process:

  1. Plan the exit by setting the owner’s exit goals.
  2. Determine the owner’s financial and mental readiness.
  3. Identify the type of exiting owner.
  4. Learn and choose the most applicable exit option.
  5. Understand the range of values a business can have and the one applicable to the chosen exit option.
  6. Execute the exit strategy plan to reach the business owner’s goals and protect his wealth.

Many ABA members are trained and experienced in helping clients through the exit planning process as part of a team of these clients’ other professionals.

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Allocation of Purchase Price

When acquiring a business, the purchase price must be allocated to the acquired company’s balance sheet for tangible and intangible assets for certain financial reporting purposes. Members of the American Business Appraisers National Network have the expertise to value the tangible assets (i.e., machinery & equipment, or real estate), and intangible assets (i.e., goodwill, trade name, assembled workforce, patents, etc.) to allocate purchase prices and test for goodwill impairment to fulfill these requirements.

  1. 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.

  2. Real Estate Appraisals
    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:

    • Real estate appraisals are traditionally based on a “before debt basis”.
    • 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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