Situation
A mid-sized manufacturing company was owned by two partners who no longer wanted to work together. As a valuation firm, Merrimack Business Appraisers 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.
Merrimack Business Appraisers’ Approach
- Leveraging a proven and painstaking business valuation process, Merrimack President Lou Pereira prepared a thorough and detailed qualitative and quantitative analysis of this manufacturing business, including its history, products, services, customers, management, employees, facilities, capital structure, and competitors. Pereira completed a detailed financial analysis for the past five years with a peer group and trend analysis.
- Pereira then constructed a forecast of expected future operations including income statements, balance sheets, and cash flows. An income approach and market approach were used. The income approach using a discounted cash flow analysis allowed the parties to understand the basis of the value and why it was reasonable and credible.
Valuation Outcome
Pereira’s detailed business valuation report fully documented the value of the manufacturing company and both parties accepted the company value without further negotiation, which saved the clients the cost of litigation.
