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.
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