DMJ Services

We deliver each of our services through a team of financial professionals who adhere to the highest standards of our industry. And when you become a DMJ client, everyone on our team works for you.

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DMJ Services

We deliver each of our services through a team of financial professionals who adhere to the highest standards of our industry. And when you become a DMJ client, everyone on our team works for you.

Business Valuations

Do you know what your company is worth? A company is not worth a single estimate of value, but several estimates of value, each correct in its respective purpose.

Privately-held companies are valuated for a number of reasons:

  • Mergers and Acquisitions
  • Gift and Estate Tax
  • Divorce
  • Stockholder Disputes
  • Buy/Sell Agreement
  • Business Planning
  • Employee Stock Ownership Plans
  • Economic Damages
  • Goodwill Impairment

Each of the various reasons has specific valuation objectives, procedures, and risks – risks that could have serious consequences if not properly addressed. An independent, objective, and well documented valuation can help meet your needs and reduce the risks.

Business appraisers estimate the value of a company through three general approaches – income, market, and asset. Under each approach, various valuation methods are available. Generally, for businesses that sell goods or services, the income and market approaches are the most appropriate, in that the value of these companies is captured in the cash flows from operations. For holding companies, companies that own real estate or marketable securities, the asset approach is the most appropriate, in that value of those companies is in their underlying assets.

However, a business valuation is much more than just running the numbers; It requires an in-depth analysis of factors such as industry, economic, and company operations in order to quantify risks – risks that could have a material impact on value.

Valuing a privately-held company is no different from valuing any other asset – it is an assessment of risks and returns. As a frame of reference, Ibbotson Associates reports that the highest average total return securities investments between 1926 and 2003 is the small company stock asset class at 17.5%. That class also had the highest risk, as defined as variation of returns. Privately-held companies have additional risks over their publicly-traded counterparts. They generally do not have the following – SEC oversight, the level of sales or total asset size, or the diversity in both product lines and geographic areas. All of these are additional risks that must be considered. Additionally, unlike their publicly traded counterparts, privately-held companies do not have access to national public stock exchanges to buy or sell their interests. This lack of national markets translates into the additional risk that an investor may not be able to liquidate their investment without delay or loss in value.

Other important parameters in business valuations are the valuation date, the premise of value, and the ownership interest being valued. The importance of the valuation date is quickly apparent when considering the impact on value of companies in the travel industry post 9/11. Premise of value is that the company is either going to be valued as a going concern or in liquidation – is it worth more dead than alive? Ownership interest is extremely important in that a minority interest is generally worth less, usually substantially less, than its pro-rata amount. That is because, as a minority interest stockholder, you cannot compel management to act in any way as to increase your return on investment – higher salary if you are an officer, to start or increase dividends, or to liquidate assets and distribute the proceeds. The market recognizes this, and discounts the minority interest accordingly.

For more information, please call us to schedule an initial consultation at 336.275.9886.