By Chris Reimer.
(Chris has an Advanced Valuation Certificate from NYU Stern.)
Are you considering selling your business, bringing in an investor, creating an estate plan, implementing a tax-oriented reorganization, or simply curious about your strategic options? A calculation of value could be a worthwhile first step.
With close to 40 years of experience in preparing business valuations for a wide range of companies – Walsh King can help.
WHAT IS BUSINESS VALUATION?
The value of a business depends on the size of its cash flows, and the uncertainty or risk about receiving them. A business valuation is an analysis of each of these elements to determine the economic value of a company.
APPROACHES TO VALUATION
There are three main ways to determine the value of a business.
- Relative valuation
This method, the most common, involves comparing a business’s value to that of similar assets. For private companies, this can be problematic as there is limited data available.
Yardsticks include common variables such as earnings, cash flows and enterprise value.
- Intrinsic valuation
You can determine a company’s intrinsic value by forecasting its expected yearly future cash flows—positive or negative—and calculating their worth in today’s dollars. The value of the company equals the net present value of future cash flows.
This method assumes that the business will continue to operate in a similar fashion for the foreseeable future.
- Asset-based valuation
The asset-based approach weighs a business’s individual assets, whether tangible or intangible. It’s often used to calculate a liquidation value for the company.
WHY DOES WALSH KING PREPARE VALUATION CALCULATIONS?
Corporate reorganizations and estate planning
When shares are exchanged in a reorganization or an estate freeze, the Canada Revenue Agency requires a reasonable calculation to establish fair market value.
Evaluating strategic options
We work with business owners to calculate the value of their company based on internal financial information and industry knowledge. This information is useful in setting strategic direction, and for business owners who are weighing their retirement and/or exit options.
Shareholder buyout
Buyouts often occur due to retirement, change in life plans, or disagreement among shareholders. When the relationship isn’t contentious, we work with all of the shareholders to help determine a fair value and tax-efficient methodology for a buyout.
Matrimonial discussions
In a marriage breakdown, it is important for both parties to understand the fair value of the assets held by the couple so that informed decisions can be made. Along with assisting in this area, Walsh King can also calculate the tax implications of any asset transfers.
HOW WALSH KING CAN HELP
At Walsh King, we regularly work with business owners and high-net-worth individuals to value their corporations, evaluate strategic options, and develop practical, appropriate and tax-efficient estate plans. To learn more about what we offer, contact us today. We’re here to help.
Posted in Strategic Insights
