Business Valuation Overview and Reasons for Business Valuation

Business Valuation Overview and Reasons for Business Valuation

In simple terms “VALUATION” is a process to establish a value for an entire company or partial interest in a closely held business or professional practice, taking into account both quantitative and qualitative tangible and intangible factors associated with the specific business/interest being valued. Business valuation is a complex process and it involves a multitude of factors ranging from financial matters to historical perspectives.

The valuation is performed in a variety of contexts and for a variety of purposes. The word value means different things to different people and the result will not be the same, should the context change. A valuation is not an exact science. The value is a subjective term and can have a different connotation. Valuation involves the use of involves professional judgment, knowledge of business, analysis of facts, interpretations, and use of different methods and procedures, which may result in different values in each given situation. This implies the business value must be measured and defined by a ” Standard of Value” that is relevant, meaningful, and reliable.

Business Valuation primarily focuses on compliance and litigation. Whereas, Transaction Valuation focuses on buying and selling a business. Similarly, whereas, Business valuation focuses primarily on minority ownership interests, Transaction valuation focuses primarily on 100% or control interest.

Reasons For Business Valuation

Valuation of businesses, business ownership interests, securities, tangible or intangible assets( Collectively referred to as Business Valuation) may be performed for a variety of purposes and reasons including the following

Valuation For Financial Transactions

  • Acquisitions and Mergers
  • Leveraged buyouts
  • ESOP( Employee Stock Ownership Plan)
  • IPO( Initial Public offering)
  • Partner and Shareholder Buy-Ins or buy-outs
  • Negotiating Technology Licenses and sales
  • Rewarding Inventors
  • Obtaining VC /PE Investment
  • Using IP & Technology as collateral for loans
  • Business Buy and Sell agreements
Business Valuation Overview and Reasons for Business Valuation

Valuations For Financial Reporting & Compliance

  • Fairness Opinion
  • Purchase Price allocation including Intangible Assets
  • ASC-805- Business Combinations & Other Intangible Assets
  • ASC-350 Goodwill & Other Intangible Assets
  • Goodwill Impairment Reviews
  • ASC 718 & 305-Accounting for Stock-based compensation
  • IRS regulation relating to 409A nonqualified Deferred

Valuation For Litigation/Dispute Resolution

  • Economic loss computation due to business interruption
  • Damage Quantification
  • Shareholder disputes, Minority interest, and oppression
  • Matrimonial disputes
  • Personal injury loss quantification
  • Intellectual Property disputes
  • Misrepresentation
  • Breach of Contract
  • Assistance and support with preparation for trial

Other Purposes (For Internal Use)

  • Strategy Formulation
  • Business Planning
  • Repairing Capital Structure
  • Corporate Finance
  • Tax Planning


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