Business owners and shareholders cannot adequately plan for a sale or merger unless they understand the price that the business will bring in a fair transaction. In order to know this price, an appropriate valuation is required.
- Clearly indicate the value and value drivers of the business, arming sellers with the tools necessary to negotiate the best possible price.
- Identify how to support a higher value prior to the sale by adjusting for related-party transactions and/or expenses (e.g., owners’ compensation, related-party leases, and other perks).
- Help determine the optimal time for a sale by gaining an understanding of general M&A trends and specific trends in your industry.
- Show expected future wealth and returns under multiple scenarios: hold for now, sell all or some, recapitalize with debt or new equity partners, bring in a strategic partner, invest new capital for growth, etc.
- Help with retirement planning by structuring a transaction to minimize estate taxes.
- Help determine optimal transaction terms, lowering risk and improving returns.
- Show you how your business compares to your peers. This will help identify areas to increase the value of the business.
- Show the “intrinsic value” of the business under current ownership and the “fair market value” of the business to others.
- Assess and demonstrate synergies to a specific-buyer, supporting that they could pay a price above the fair market value, and still earn above-market expected returns.
- Help identify the segments of your business that are most valuable, allowing management to focus on those areas that will most impact the overall business’ value.
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