Estimate of Business Valuation

What Is My Business/Company Worth? And Why?

We all want to know what our business is worth. Instead of a singular valuation or EBITDA multiple (which can be mis-leading) , several different price outcomes can be realized for a business depending on who the buyer is. Emerge Dynamics will provide you with a comprehensive report detailing an Indication/Calculation of Value of your business or a target company and gives a realistic value range of your business. This range can be used as a starting point for negotiation with a buyer (or seller if you are buying a business and evaluating a target) or a base metric to be driven upward as we work with you

M&A Valuation / Market Value

The standard definition sought by those conducting a certified valuation is that of Fair Market Value, which is defined by the IRS as:

The price at which the property would change hands between a willing buyer and a willing seller when the buyer is not under any compulsion to buy and the seller is not under any compulsion to sell and when both parties have reasonable knowledge of the relevant facts. The hypothetical buyer and seller are assumed to be able and willing to trade and to be well-informed about the property and concerning the market for such property.

This definition is used in a legal environment by the IRS and tax courts, and thus the process of arriving at Fair Market Value is understandably rigid and important.

Instead, Emerge Dynamics focuses on finding Market Value/Valuation, which can be defined slightly differently as:

The highest purchase price available in the marketplace for selected assets or stock of the company.

Instead of following IRS regulations or court guidance, the method captures actual transaction circumstances to arrive at a feasible transaction range that is both finance-able and accounts for the numerous balance sheet nuances that would affect a valuation. Instead of working with a “willing buyer and seller” most lower-middle market transactions negotiations begin with buyers and sellers not being willing to agree to each other’s price, but also not far enough apart to walk away from the table. These transactions often require working through balance sheet and transaction structure details in order to close the gap between buyer and seller and solidify a mutually beneficial transaction.

Indication/Calculation of Value

An indication of valuation is not bound by certification or legal standards, but instead focuses on finding a market range at which a transaction would be finance-able and properly account for the seller’s balance sheet nuances.

This indication of business valuation can often be completed at 50-70% of the cost of a traditional certified valuation (which is only necessary for IRS or court ordered reasons) and is often a much more reliable indicator of the price at which your company might transact. Emerge Dynamics can conduct an indication of valuation range either as an independent project or as part of the initial steps in creating a road map for a business to increase its valuation methodically.

We are often able to deliver an indication of your business valuation within one to two weeks. Our team operates out of multiple regions in the United States and can often be on site at your facility anywhere in the United States, Caribbean, Latin America, Australia, or Pacific Rim within days of a confidential initial consultation.

Items We Consider That Traditional Valuation Usually Doesn’t

Will this be an Asset purchase or a Stock purchase?

Will the buyer receive Accounts Receivable as part of the value consideration?

Will the buyer assume the seller’s debt? Can the buyer assume the seller’s debt?

Which seller’s liabilities will be assumed?

What Capital Expenditures will be needed for the business in the near future?

What is the Company Specific Risk and how does it affect how much should be paid?

Will there be a non-compete agreement?

Which of the seller’s assets will the buyer be able to borrow against in order to make this transaction finance-able? How will different financing scenarios affect the value at which a business might transact?

How much working capital will there be at closing?

What is the seller is factoring receivables? How will that affect cash at close?

What are the tax impacts of purchase price allocation?

Will only part of the business be sold?

What is the company’s financial forecast?

How can a company’s inventory accounting affect valuation?