Selling a Business to an Employee

Situation

The owner of a small medical practice wanted to retire and had discussed selling the business to an employee. As a nationally recognized expert in developing highly defensible business valuations for small and mid-sized privately held companies, Merrimack Business Appraisers President Lou Pereira was retained to determine the fair market value of the business and advise the parties on an equitable deal structure.

Merrimack Business Appraisers’ Approach

Pereira conducted a methodical and through detailed qualitative and quantitative analysis of the practice, applying an income approach and market approach. The income approach used a discounted cash flow analysis that fully explained and substantiated the value conclusion. Use of Merrimack for an independent business appraisal was important to assure all related family members of both the buyer and seller that a fair price was paid and received for the business.

Valuation Outcome

This equitable deal structure facilitated the sale of the business.

Selling a Business Stalled Over Value

Situation

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.

Merrimack Business Appraisers’ Approach

As one of the nation’s foremost authorities on valuations, Merrimack Business Appraisers President Lou Pereira was retained to determine the fair market value of the business. Pereira’s highly detailed and complete business valuation report substantiated that the business was worth $1.1 million, a full $300,000 more than the original company valuation. Pereira leveraged his proven process to complete a thorough qualitative and quantitative analysis to identify and document the primary drivers of the value of the business.

Valuation Outcome

The quality of Merrimack’s valuation substantiated the $1.1 million value and the deal closed at the appraised value, which was a significant gain for the seller. This process helped close the deal at an expedited pace, minimizing further buyer due diligence and reducing costs.

THE SELLER’S ATTORNEY MADE THE FOLLOWING COMMENT

“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.”