Valuation Services for Privately Held Businesses

Several situations that may require a business valuation, including:

• Sale or purchase of a business
• Debt financing support
• Mergers and acquisitions
• ESOPs
• Estate and gift taxes
• Liquidations
• Buy-sell agreements
• Property settlements in divorce
• Stockholder or partner buyouts
• Goodwill impairment
• Litigation related to bankruptcy, contractual disputes, and a variety of other issues

Yes. CPAs perform business valuations under professional standards issued by the AICPA. CPAs are required to adhere to those stringent standards when performing business valuations. Additionally, CPAs can bring their broad perspective of business operations and understanding of financial statements and the underlying value drivers to the table in business valuations.

The AICPA valuation standards permit two types of valuations:

• Valuation Engagement.  The highest level of service is the valuation engagement. The valuation engagement requires more procedures than the second type described below and results in a conclusion of value (or a range of values). The valuation engagement permits the valuation analyst freedom to choose the valuation approaches and methods they consider appropriate in the circumstances to issue a conclusion of value.
• Calculation Engagement. A calculation engagement does not include all the procedures required for a valuation engagement. For a calculation engagement, the valuation analyst and the client agree on the approaches and methods and the extent of the valuation analyst’s procedures. Then, based on the limited procedures performed, the analyst will arrive at a calculated value (or range of calculated values). Often, an engagement that begins as a calculation engagement will be restructured to a valuation engagement if it appears advisable.

It depends primarily on the subject matter of the valuation and the reason for the valuation. In most cases, a valuation engagement better serves the client’s needs. However, we will work with you to assess the situation and scope our work to fit your needs and budget.

A valuation requires considerable fact-finding related to the entity, industry, and the local, regional, and national economies, including:

• Personnel interviews and site visits
• Review of the entity’s history and entity records
• Analysis of the entity’s financial performance over several years
• Analysis and comparison to similar companies
• Forecast of future earnings
• Analysis of the economic environment in which the entity operates and other factors.

A valuation report is typically valid for a maximum of one year. After that, updating the report to reflect subsequent company performance and current economic/industry conditions may be necessary. However, there could be some extreme subsequent events, such as a natural disaster or a plant fire, which, while not invalidating the valuation as of the valuation date, could make it less valuable to the end-users.

No. Our valuation work is directed to ownership interests and intangible assets. However, if your engagement requires an appraisal of real or tangible property, we will work with independent property appraisal professionals to develop our conclusion of value or calculated value.

Yes. Our firm adheres to the professional standards of the American Institute of Certified Public Accountants (AICPA) and the Tennessee State Board of Accountancy. Our valuation services comply with the Statement of Standards for Valuation Services (SSVS) as promulgated by the AICPA.