Reasons for a Business Appraisal

The purpose of the appraisals that we prepare at MBA and the consultations we provide fill many different needs. Some of the most common requirements include:

  • Estate Planning
    Information that may be needed to either plan for tax issues or for potential sale of interest to an arms-length buyer.
  • Gifting of Stock
    Gifting stock of a closely held business to immediate family needs to be supported by an independent valuation of the closely held business.
  • Mergers, Consolidations, and Conversions from C to S corporations
    The establishment of fair market value of a business at the time of the transaction.
  • Litigation Support
    Litigation Support may include expert testimony, preparation for deposition, critical examination of others’ reports.
  • Divorce
    The determination of the value of marital property involving more than one date in time as well as conformity to the specific precedence of the jurisdiction involved. Professional practices have unique factors that need to be considered in the context of legal precedence.
  • Shareholder Disputes
    Shareholder Disputes need not be adversarial to require an independent opinion of value. In some cases there is a need to define value according to different interpretations of an unclear set of instructions.
  • Buy Sell Agreements
    Buy Sell Agreements often call for the appraisal by an accredited unrelated third party.
  • Economic Damages Calculations
    Economic Damages calculations can be provided for quantification of the loss incurred due to breach of contract, wrongful death, personal injury, wrongful termination, sex or age discrimination, patent infringement or any other type of litigation requiring this type of service
  • ESOP – Employee Stock Option Plans
    Employee Stock Option Plans require not only an independent initial valuations but regular annual valuation for the protection of the stock holders. Special provisions of the Department of Labor are a mandatory part of the valuation process..
  • SFAS 141 & 142 Goodwill and Impairment
    SFAS 141 & 142 Goodwill and Impairment is of concern not only to public traded companies but to those presenting financial statements to lenders for consideration when there is present on the balance sheet a value for the goodwill of acquired assets or stock of another business.

Did You Know?

Appraisals are done for specific purposes with specific assumptions.

Using an appraisal that was developed under the assumptions intended for one purpose would likely be misleading if used for another purpose.

The Moral Of This Story:
Don’t use a restricted use” appraisal that was prepared to obtain a bank loan when you actually need a “formal” appraisal for your partner dissolution proceedings.

Case Study

The owner of a $1.8 million professional services business was going through divorce proceedings. MBA was retained to determine the fair market value of the business and related marital asset.

MBA’s report identified and substantiated that $1 million of the business value was attributable to personal goodwill of the managing owner, and not a marital asset.

The Result:
The owner saved approximately $500,000 in unjustified allocation.

Certified Business Appraisals