The Value Of An Independent & Unbiased Appraisal
Examples: Here are just a few examples of typical business appraisal case studies covering sale of a business, tax filings and dispute/divorce resolution:
Selling A Business: Stalled Over Value – $300,000 Gained
The owner of a $1.1 million service business was in negotiations to sell the business to another company in the same industry. The negotiations had stalled over the value of the business (the buyer’s CPA firm had valued the business at $800,000) and the ability to secure financing. MBA was retained to determine the fair market value of the business. The report substantiated the $1.1 million value and the deal closed at the appraised value, a significant gain for the seller.
What The Seller’s Attorney Said:
“Your appraisal really helped close the deal! The quality and content of your appraisal virtually eliminated buyer due diligence and convinced the lender to forego SBA loan guarantees. This resulted in significantly reduced costs and an expedited closing. It’s a pleasure working with you.”
C Corp Double Taxation Risk: $216,000 Saved
The service business, above, was an asset sale of a C Corporation and the seller was at risk of significant double taxation on the proceeds. MBA was retained to do a second appraisal for tax filing that clearly identified and separated the personal goodwill of the seller, and greatly reduced his tax liability. As a result, the seller saved approximately $216,000 in potential unjustified taxes.
Divorce: The Value Of Personal Goodwill – Saved $500,000
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. The report identified and substantiated that $1 million of the business value is attributable to personal goodwill of the managing owner, and not a marital asset. As a result, the owner saved approximately $500,000 in unjustified allocation.
Divorce: Fair Market Value – Accurate Allocations
The owner of a $3.7 million technology company was going through divorce proceedings. MBA was retained to determine the fair market value of the business and related marital asset. The report documented that the owner had started the business before the marriage, and substantiated that the value of the business had increased only marginally during the time of the marriage. MBA valued the business as of the start of the marriage and as of the end of the marriage. The two values allowed the family court to identify the change in value of the business during the time of the marriage, which is the value attributable as a marital asset. As a result, both parties received an accurate allocation.
Partner Dissolution: Saving The Cost Of Litigation
A mid-sized manufacturing company was owned by two partners that no longer wanted to work together. MBA was retained by both parties to determine the fair market value of a 50% ownership interest in the business so that one partner could buy out the other. The report fully documented the value, and both parties accepted the value without further negotiation, saving the clients the cost of litigation.
Selling A Business To An Employee: Equitable Deal Structure
The owner of a small medical practice wanted to retire and had discussed selling the business to an employee. MBA was retained to determine the fair market value of the business and advise the parties on an equitable deal structure. Use of an independent appraiser was important in this situation so that all related family members of both the buyer and seller were assured that a fair price was paid and received for the business.