Public company data often is used to value private businesses. But there are important differences in how public and private entities operate. This article explains what’s different and how experts adjust their business valuation methodology to account for the differences.
The merger and acquisition (M&A) market is currently hot in many industries. But, before merging with another business, it’s important to do your homework. This article explains how a business valuation professional can help with buy-side due diligence. In addition to evaluating historical and prospective financial statements, an expert can help identify potential hidden liabilities and misrepresentations. A sidebar discusses the recent withdrawal of the proposed regulations on liquidation restrictions when valuing interests for gift and estate taxes.
The market approach is based on a straightforward premise: The value of a business can be derived from the prices others are paying for similar businesses. But, in practice, this valuation technique isn’t nearly so simple. This article identifies several common mistakes that experienced business valuation experts have learned to avoid when applying the market approach.
Asking the right questions and obtaining clarification up front can help business owners, attorneys and other interested parties get the most from a business valuation expert’s expertise and avoid costly mistakes. This article suggests several points to investigate when engaging a business valuation expert, including their credentials and professional experience as well as their ability to explain the appropriate standard of value and the valuation’s purpose. The article states that the more clients understand about the valuation process, the better able they will be to ask the right questions.