Business Valuation

Business Valuation Services

At FairValue Advisors, we use the best practices in the valuation profession, including the most modern and accepted valuation methodologies.  Independence and objectivity are paramount to providing credible valuation advice.  Our conclusions are grounded in sound financial theory and are supported with efficient and effective research and analysis.

Reliable and well-documented valuations are essential for management and investors to make the best decisions. We provide comprehensive valuations for business and legal clients domestically and abroad in the following key practice areas:

  • Business Sales & Acquisitions

  • Buy-Sell Agreements, Buy-outs & Buy-ins

  • Corporate Tax Planning

  • Equity-Based Compensation & Stock Option Issuance

  • ESOPs & ERISA Advisory

  • Exit & Succession Planning

  • Goodwill & Asset Impairment Testing

  • Marital Dissolution

  • Owner Disputes & Shareholder Oppression

  • Purchase Price Allocations

  • SBA Loan & Financing

  • Trust, Estate & Tax Planning

  • Value-based Advisory Services

 

Business Sales & Acquisitions

FairValue Advisors has a broad range of experience in assisting buyers and sellers. While we do not provide business brokerage services, our business valuations can be used to position the business for sale and to help establish a reasonable basis from which to negotiate. A valuation can provide the owner with reasonable expectations regarding the potential price of the business to different buyers, ranging from family members, existing employees, strategic buyers or private equity firms. At FairValue Advisors, we explore these options and the potential impact on price, as well as value enhancement strategies.

Buy-Sell Agreements, Buy-outs & Buy-ins

Buy-sell agreements can be used as a succession planning tool that provides an exit strategy for owners and business continuity. Agreements that use predetermined formulas to establish a transaction price are rarely a reasonable proxy for fair market value, since business and industry conditions can change over time. In addition, formulas used in buy-sell agreements may not be accepted by the IRS as indicative of fair market. It is becoming more common for buy-sell agreements to stipulate that transactions must occur at fair market value. Other agreements with investors and creditors may involve "triggering" events that also require a fair market value estimate. At FairValue Advisors, our appraisals are used to assist with buy-out and buy-in pricing, as well as the potential obligations resulting from buy-out clauses and triggering events.

 

Corporate Tax Planning

FairValue Advisors has a broad range of experience in assisting clients with valuation needs for corporate tax planning, ranging from C to S conversion, asset v. equity transactions and establishing basis, to the tax implications resulting from the issuance of stock or stock options as compensation. For C to S conversions, our valuations are used to calculate the net unrealized built-in gain ("NUBIG") in C to S conversation, to determining tax basis and estate tax.  

In the sale of a business, the form of transaction (equity sale v. asset sale) may also have a significant impact on the net proceeds received by the Seller due to the differences in tax implications.  We assist in providing valuations based on equity transactions, as well as the valuation of the aggregate assets based on an asset sale.

Equity-Based Compensation & Stock Option Issuance

Stock options are often used as part of the purchase price in the acquisition of businesses, and are routinely issued to management as part of a stock option plan. To accurately account for the issuance of options and warrants, a fair value estimate may be required as prescribed in ASC 718 (precodification SFAS No. 123R). When nonqualified deferred compensation plans involve stock or stock options in closely-held businesses, a valuation may be required for tax purposes under 409A.
 

A common mistake in determining the strike price of an option is the arbitrary use of a company’s book value, or pricing based on a recent capital raise that involved preferred stock or favorable deal-terms. For companies planning an initial public offering, the inappropriate pricing of options in prior years may require a restatement of earnings, which is commonly known as a “cheap stock” issue.
These pitfalls can be avoided by having a comprehensive independent appraisal of the underlying stock to ensure that options are issued with a strike price that is not below fair value.  At FairValue Advisors, we provide valuations to address both the tax and financial reporting requirements associated with Stock Options and more complex derivatives.


In today’s world, capital structures are becoming increasingly complex. At FairValue Advisors, we use the most modern and accepted valuation methodologies. For valuations involving complex capital structures, we employ the option pricing model (“OPM”) and the probability weighted expected return model (“PWERM”) as prescribed by the AICPA Practice Aid, as well as Monte Carlo simulation when appropriate.


At FairValue Advisors, our appraisals are used to assist with the issuance of stock options and for the accounting for complex capital structures.

ESOPs & ERISA Advisory

An Employee Stock Ownership Plan (ESOP) may provide a favorable vehicle for selling a business to its employees.  Since the value of ESOP shares is based on the performance of the Company, an ESOP can provide employees with the opportunity to share in the future performance of the business.  An ESOP can provide the seller with liquidity and diversification, while in many cases still maintaining control of the business. Depending on the structure of the ESOP transaction, the seller may gain favorable tax treatment on the proceeds from the sale of the stock and the ESOP Company may enjoy the tax-deductibility of principal payments.


Since an ESOP can pay no more than adequate consideration for the Company's stock, the Department of Labor and the Internal Revenue Service require an appraisal of the ESOP shares for the initial ESOP transaction and at least annually.  Our ESOP appraisals are specifically designed to comply with DOL and IRS requirements.

Exit & Succession Planning

How much is your business worth?
 

A closely-held business is often the most valuable asset contributing to the net worth of a business owner. A business valuation can be the critical first step in the exit planning process or transitioning a business to the next generation.  FairValue Advisors helps business owners establish reasonable expectations regarding the potential sales price for the business to different buyers, ranging from family members, existing employees, strategic buyers or private equity firms.  Planning early with an initial business appraisal can help develop strategies to increase business value.

Goodwill & Asset Impairment Testing

A primary requirement of ASC 350 (precodification SFAS 142) is an impairment test of goodwill, as well as intangible assets having indefinite remaining useful lives.  These tests must be performed at least annually for both publicly-held and privately-held companies, and may be required more often if events or changes in circumstances indicate a potential impairment.  All testing is performed at the reporting unit level.


In some circumstances, a qualitative assessment (Step 0) may be permitted in determining whether impairment exists.  FairValue Advisors provides management with the critical capital market data and financial analysis for management to use in this qualitative assessment.
The quantitative goodwill impairment test requires a fair value determination for each reporting unit that has goodwill (Step 1).  If the carrying value of the reporting unit is below the fair value determined, no impairment charge applies and the test is concluded.  If the carrying value of the reporting unit exceeds its determined fair value, then a second step is required to accurately assess the magnitude of the goodwill impairment.  This second step involves a hypothetical purchase price allocation (under ASC 805) and the related valuation of assets in order to determine the residual value of goodwill.  


Accurate fair value estimates can be critical in determining whether goodwill or intangible assets are impaired as required by ASC 350.  At FairValue Advisors, we work closely with corporate officers and the auditors in determining the specific valuation needs for impairment testing.  Our appraisal process and reports are specifically designed to satisfy the auditor’s requirements and fully comply with FASB’s financial reporting standards.

Purchase Price Allocations

The need for third-party appraisals has continued to increase, resulting from a heightened awareness of independence issues and the complex nuances associated with fair value financial reporting requirements.  Accurate fair value estimates can be critical in accounting for the acquisition of businesses and intangible assets.


FairValue Advisors assists management with the identification and appraisal of intangible assets during the purchase price allocation process for compliance with ASC 805 (precodification SFAS 141).  We also provide management with an estimated remaining useful life of the intangible asset for purposes of amortization.


ASC 805 defines the procedures required for the financial accounting and reporting of goodwill and other intangible assets acquired in a business combination at acquisition. This accounting standard establishes specific criteria for the recognition of intangible assets separately from goodwill and requires a fair value determination for individual intangible assets acquired.  These fair value estimates and allocations can significantly affect the financial reporting of current and future operating results.


A critical step in the valuation process is testing the purchase price to determine if it reflects fair value from a typical market participant’s perspective.  For deal terms that include non-cash consideration such as earn-outs, a note held by the seller or roll-over equity, a cash equivalent purchase price must be estimated.


FairValue Advisors assists corporations and their auditors in satisfying these fair value requirements, by providing independent and comprehensive appraisals of the intangible assets and estimating a cash equivalent deal price.  Our appraisal process and reports are designed to satisfy the auditor’s requirements and fully comply with FASB’s financial reporting standards.

 
 
 
 
 
 

SBA Loan & Financing

Depending on the loan amount and whether it pertains to a business ownership transfer, a business valuation may be required to satisfy the underwriting process of the SBA.  This requirement is determined by your lender and the specific SBA loan program.  The business valuations performed for these purposes must comply with the SBA's operating procedures (SOP 50 10 5J, Chapter IV, Section E), which requires a business appraisal completed by a "qualified source," an individual who regularly receives compensation for business valuations and is accredited by one of the professional organizations recognized by the SBA.  The business appraisers at FairValue Advisors hold the necessary credentials to perform these business appraisals. 

For larger (non-SBA) loans, a business valuation can be used by the lenders considering a cash-flow based loan whereby the business itself is used as collateral.  In many cases, the lender may also receive warrants in the Company, which can also be appraised. This is more typical for entities that have a low tangible asset base that can be used as collateral.


At FairValue Advisors, we provide business valuation reports that specifically comply with the SBA loan requirements and our experts hold the necessary certifications. 

Trust, Estate & Tax Planning

A fair market value appraisal can be a critical first step in the estate planning process or transitioning a business to the next generation.  FairValue Advisors has a broad range of experience with valuation issues pertaining to estate tax and related planning.


There are many estate planning tools that involve the sale, gift, or contribution of an equity interest in a closely-held business. Depending on the value of the transfer, the Internal Revenue Service requires the taxpayer to report the fair market value of the closely-held business interest. Upon death, a taxpayer's estate may include closely-held stock or other illiquid securities, which may also require a fair market value determination for Federal Estate tax purposes or to determine basis. 


Guidelines for determining the fair market value of closely-held business interests are included in IRS Revenue Ruling 59-60, which defines fair market value as:


“the price at which the property would change hands between a willing buyer and a willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, both parties having reasonable knowledge of relevant facts. Court decisions frequently state in addition that the hypothetical buyer and seller are assumed to be able, as well as willing, to trade and to be well informed about the property and concerning the market for such property.” - Rev. Rul. 59-60 (159-1 C.B. 237) 


At FairValue Advisors, our appraisals are specifically designed to comply with the IRS valuation guidelines described in Revenue Ruling 59-60 and the Adequate Disclosure Rules.

 
 

Value-based Advisory Services

We enable you to identify, select, and implement value-creating initiatives, transactions, strategies, and projects. FairValue Advisors provides advisory services for a broad range of clients, but especially in situations with a mix of tangible property and intangible property such as patents, trademarks, and copyrights, or a mix of domestic and international operations.


The goal of investors, business managers, and technology owners is to create and capture economic value.  However, this goal proves elusive in actual practice to a large percentage of business participants. Through our advisory services, we enable you to identify, select, and implement value-creating initiatives, transactions, strategies, and projects.

Our advisory services assignments typically relate to decisions, negotiations, resource allocations, and investments for:

  • Growth Options: To enable you to generate alternatives, and identify value-maximizing, long-term strategic growth options.

  • Fair Transactions: To ensure value is maximized in third-party transactions and dealings.

  • Business Optimization: To enable you to optimize value within existing businesses, including operating tactics, ongoing programs, and recurring decisions that maximize value.

  • Risk Management: To maximize value by properly quantifying and reducing risk.

  • Benchmark Reports:  To compare company performance to the industry, identify key changes in financial performance, industry outlook and research for similar businesses sold.

 

FairValue Advisors has the resources and expertise to address your valuation needs.

Atlanta:  The Pinnacle Building, 3455 Peachtree Rd NE, Suite 500, Atlanta, Georgia 30326 

Coastal Georgia: 301 Sea Island Road, Suite 6, St. Simons Island, Georgia 31522

Jacksonville: 4651 Salisbury Road, Suite 400, Jacksonville, Florida 32256

Orlando: Bank of America Plaza, 300 South Orange Avenue, Suite 1000, Orlando, Florida 32801

Tampa: 610 S. Albany Avenue, Tampa, Florida 33606

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