Business Valuations
Business Appraisals, Professional Appraisals, Business Valuation Process
National Business Valuation Services of Dallas offers a wide range of business valuation services for a variety of purposes. The following is an overview of the services offered:
BUY-SELL TRANSACTIONS (Buying or selling a business or practice):
To help define the value for buying and selling of a business or professional practice. Also beneficial in establishing value for a partial sale or purchase of an ownership interest. Our valuations also describe, when requested, the anticipated transaction deal terms (e.g. normal down payment, seller financing, contingent earn-outs, and available bank financing in the current marketplace). We are one of the few valuation firms who have the transaction experience and national network to provide this market-based, timely information.
ESTATE AND GIFT TAX:
To develop and support the appropriate level of discount metrics to help minimize or eliminate problems with the Internal Revenue Service. NBVS complies with the Pension Protection Act of 2006 which imposed new requirements on individuals who provide appraisals for income tax (charitable donations) or transfer tax (estate or gift) purposes. Appraisers must have earned: 1) an appraisal designation from a recognized appraisal organization such as the American Society of Appraisers or the American Institute of CPA’s; 2) Regularly performing and receiving payment for appraisals; and 3) Demonstrate verifiable education and experience in valuing the type of property appraised.
PARTNERSHIP AND CORPORATE DISSOLUTIONS:
It is often necessary to perform an appraisal to determine the “Fair Market Value” of an enterprise so that the equitable parties can divide the tangible and intangibles assets to resolve their particular dispute.
BANK FINANCING AND SBA LOANS:
Loans are dependent on the value of the ongoing enterprise’s income and cash flow generating capacity as well as its identifiable tangible and intangible assets such as:
- trademarks
- trade names
- service marks
- Internet domain names
- customer lists
- customer contracts and related customer relationships
- franchise and royalty agreements
- advertising
- supply and vendor contracts
- lease agreements
- books
- magazines
- advertising jingles
- pictures & photographs
- video and audiovisual material
- patents
- commputer software
- databases
- trade secrets
- secret formulas
- other intellectual property
Most of the time, individual intangile assets are not specifically identified in the asset purchase agreement. An independent business valuation and/or machinery & equipment appraisal is required for most SBA loan packages. NBVS’ reports comply with the SBA’s Standard Operating Procedure (SOP) guidelines 50 10 5(d) effective September 15, 2011 and the Uniform Standards of Professional Appraisal Practice (USPAP) requirements.
BUY-SELL AGREEMENTS/PARTNER BUYOUTS:
The Fair Market Value is established to avoid potential future problems for stockholders and partnership buyouts. This valuation process can greatly simplify negotiations during the term of the operating or partnership agreement. A common issue is the definition of the value of the enterprise interest: is it on a pro-rata basis or after applying discounts for lack of control (minority discounts) and/or lack of marketability.
EXIT AND TRANSITION PLANNING:
Typically used when family owned businesses wish to keep the business in the family but require distribution of shares to family members with an attached “Fair Market Value” for each shareholder.
EMPLOYEE STOCK OPTION PLANS (ESOP’s):
These plans must be independently appraised annually to establish fair market value for purchase price and or contributions.
FAIRNESS OPINIONS:
The fairness opinion is a black/white finding, stating whether the deal or transaction as presented, seems fair and justified. Important items include basic due diligence, analysis of risk factors, deal structure and/or potential conflicts.
INTANGIBLE ASSETS VALUATION FOR PURCHASE PRICE ALLOCATIONS:
For economic analysis and purchase price allocation purposes, it is often necessary to distinguish between tangible and identifiable intangible assets, as well as between real property and personal property assets. These distinctions are important for a variety of accounting, legal, financial and taxation reasons. A valuation report must be able to distinguish, value and support the purchase price allocations to such identifiable intangible assets as:
- Marketing-Related intangible assets (trademarks, trade names, service marks, Internet domain names)
- Customer-Related intangible assets (customer lists, customer contracts and related customer relationships)
- Contract-Related intangible assets (franchise and royalty agreements, advertising, supply and vendor contracts, lease agreements)
- Artistic Related intangible assets (books, magazines, advertising jingles, pictures & photographs, video and audiovisual material)
- Technology-Related intangible assets (patents, commputer software, databases, trade secrets, secret formulas, and other intellectual property.
FINANCIAL REPORTING (Intangible Assets and Goodwill):
Financial Accounting Standards Board (FASB) requires valuation services for allocation of the acquisition purchase price among tangible assets, identification and classification of any intangible assets, such as patents, copyrights, trademarks, trade secrets, workforce in place, covenants not to compete, etc. for compliance purposes.
PERSONAL GOODWILL IDENTIFICATION
The Martin Ice Cream case, as well as other personal goodwill cases, support the fact that a seller’s personal goodwill is separate personal property that may be carved out, or partitioned, to the seller outside of the overall purchase price, as well as outside of the corporation (especially outside of C-corporations in order to avoid double taxation) – if the facts and circumstances support it. A careful and considered valuation analysis is a must to justify and support a personal goodwill partitioning. Whether you are involved in an asset sale or a stock purchase, partitioning the purchase price into personal goodwill as well as other identifible intangible assets, may create tax parity between the buyers and sellers, creating tax benefits for both buyers and sellers (currently long term capital gain treatment for the seller and amortization by the buyer). Identification and partitioning personal goodwill is also an important consideration when changing or converting legal organization types, e.g., changing from a C-corporation to an S-corporation. Besides personal goodwill, other identifible intangible assets that are usually partitioned with personal goodwill are workforce in place, Non-Competition Agreements, among other identifiable intangible-related assets, such as: Marketing, Customer, Contract, Artistic, and Technology.
