Reasons for a Valuation

Understand the specific reason or purpose for a valuation can impact the approaches used and value conclusion.

• Who is the client: individual, attorney, executor or company?



• What is being valued:
  - Voting common stock, non-voting common stock, preferred stock?
  - General and limited partner interests, debt, the entire business, option to buy or sell?



• What is the level of value:
  - Control, non-marketable?
  - Non-controlling (minority), non-marketable?
  - Gather market evidence to support discounts for lack of control and marketability, if applicable.



• Desired outcome: higher or lower value conclusion?



• Who will use and rely on the valuation: tax authorities, lender, court, owners?



• A misunderstanding on valuation purpose could jeopardize the assignment.



• The same study/valuation may not be applicable for a variety of purposes:
  - Different approaches and methodologies are employed depending on the specific purpose of the study.
  - Sale/M&A transaction may strive for higher value, gifting/tax transaction may strive for lower value.