More to Business Valuation than Meets the Eye

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business-valuationValuing a business requires more than merely dropping numbers into a “black box” and waiting for the answer to be spit out. Using their professional judgment and specialized training, appraisers consider a broad range of internal and external factors before arriving at reliable conclusions of value. Business owners and professional advisors who understand what happens “behind the scenes” can facilitate the business valuation process.

 

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How Elements of Control Affect the Valuation of a Business Interest

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Control is important to investors.  And they usually will pay less for a business interest that lacks control over key decisions. As a result, the old adage “the whole is greater than the sum of its parts,” can — and often does — apply to business valuations. This article provides an in-depth example to explain how control affects the valuation of a business interest.

 

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How the New Tax Law Will Affect Business Valuations

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The Tax Cuts and Jobs Act is expected to have far-reaching effects that will vary significantly from company to company. In general, the new law lowers business tax rates. But it also reduces or eliminates various business tax breaks, while expanding others, either permanently or temporarily. Here’s a brief summary of the changes and how they affect business valuations. Continue Reading →

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The Shareholder Agreement – Preparing for the Unexpected

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shareholder_agreement small_business“The best laid schemes o’ mice and men go oft awry,” wrote Robert Burns, and this certainly applies to even the best-run family businesses. A shareholder agreement helps prepare for the unexpected and lays out the ground rules of a small business in terms of governance, succession, the transfer of assets, liquidity and other issues. Think of it as a prenuptial agreement for a family business — a mechanism to reduce hard feelings and provide for an equitable distribution of assets.

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Why Is the Business Valuation Date so Important?

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When one considers how the value of an asset will be determined, it’s common to think about which method the appraiser will use or whether discounts may apply. A critical factor that might not immediately come to mind is the valuation or appraisal date. This article explains why the “as-of” date matters and how the purpose of the valuation guides this decision.

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Contracts with Contingent Consideration Provisions – Stallone Fights Studio’s Accounting Methods

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Contracts_contingent consideration provisions

Contracts that include contingent consideration provisions can lead to disputes regarding key definitions, as well as the amount and timing of payouts. Here are the details of a high-profile accounting dispute that started more than two decades ago between Sylvester Stallone’s production company and a major movie studio involving the 1993 movie Demolition Man.  Gryphon Valuation Consultants has specific experience in analyzing the value ramifications of contingent consideration provisions and conditions precedent.

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Reliable Experts Are Independent Experts

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Valuation Expert WitnessA valuation expert witness builds on a solid foundation constructed by a reputable source — or multiple sources — to reach a reliable conclusion. These are the assumptions and sources underlying the expert’s opinion. But when an expert isn’t given the opportunity to question assumptions provided by management or the attorney or to perform independent analyses and research, he or she might not survive a Daubert challenge in federal court.

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Business Valuations Are Not Commodities

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Business Appraiser Magnifying GlassWhen hiring a business appraiser, you typically get what you pay for. Some business owners may be tempted to seek the offering with the lowest price tag. After all, a business valuation is just a formality, isn’t it? Many owners perceive formal appraisals as something required by an outside party — such as the IRS, a judge or a lender — in order to obtain approval or comply with a regulatory requirement. But a valuation actually provides insight into a company’s current market value, as well as key value drivers to enhance value going forward. A valuation can also serve as a wake-up call for business owners with unrealistic expectations. Continue Reading →

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