Business Valuation Services
The process to determine value involves assimilating, interpreting and analyzing theoretical elements of accounting, taxation, statistics, economics and accepted business valuation guidance and applying the findings to a specific ownership equity or operating interest. Rules of thumb are rarely applicable to a specific business with its unique risks and financial attributes.
Our business valuations incorporate a thorough analysis of the business in question. We also examine the industry and economy in which the business operates by considering factors such as company risk profile, financial trends, cost of capital, capital structure, future growth, product mix, customer concentrations, profitability, and sustainable growth.
When necessary, we perform detailed analyses to determine appropriate discounts for lack of marketability and control. We utilize the leading methods within the profession to arrive at our discounts, which enhances the credibility of our business valuations in litigation and upon IRS challenge.
We also provide Litigation Support Services, including expert witness testimony, forensic accounting investigations and calculations used in court for marital dissolutions, lost profits and other legal matters.
Employee Stock Ownership Plans
We offer a variety of professional services for employee-owned businesses
Business Valuation Services
Our professionals have encountered, and successfully addressed, many challenging issues of value in a variety of contexts. Our team stays current on the latest developments in state and federal cases in order to employ the most relevant methods available. Learn more about our qualifications.
We have provided business valuation services to a wide variety of clients – ranging from small, privately-held businesses to publicly traded, multi-entity organizations with operations throughout the United States – for many purposes, including:
- Accounting-based valuations
- Bankruptcy and turnaround
- Buy-sell agreements
- C to S corporation conversions
- Cash flow analysis
- Charitable contributions
- Commercial activity transaction structure
- Corporate management applications
- Economic damages and lost profits calculations
- Employee stock ownership plans (ESOPs)
- Employment agreements
- Estate and gift tax reporting
- Exit and succession planning
- Expert witness testimony
- Fairness opinions
- Financial feasibility analysis
- Financial reporting
- Financial statement projections
- Income tax valuations
- Industry review and benchmarking
- Intangible assets
- Intellectual property
- IRC §83 noncash compensation awards
- IRC §409A equity-based deferred compensation plans
- IRC §1374 built-in gain analysis for electing S corporations
- Marital dissolution/equitable distribution
- Matters of civil controversy
- Merger, acquisitions and sale transactions
- Profit improvement
- Recapitalization for growth and diversification
- Restricted stock
- Shareholder disputes
- SBA loans
- Solvency opinions
- Stock options
- Undivided interest in real property
- Value enhancement services
Get in Touch with Us Today for All of Your Service Needs
Value Measurement for Accounting – Financial Reporting Requirements
Proper application of generally accepted accounting principles often calls for significant changes to the way that accounts must be prepared and presented, requiring a wider range of assets to be valued on an annual basis. Our business valuation professionals understand the specific accounting implications, as well as the wider commercial context in which those accounting valuations will apply, and can provide the independent valuation opinions required to meet your financial reporting requirements.
Our professionals stay current on the latest pronouncements and guidance produced by the relevant regulatory authorities such as the Financial Accounting Standards Board (FASB), International Financial Reporting Standards (IFRS) and the Securities and Exchange Commission (SEC), such as:
- Allocations of acquisition purchase price under ASC 805 – Business combinations require specific financial reporting procedures to recognize and allocate all identifiable assets acquired, liabilities assumed and non-controlling interests in an acquisition.
- Under IFRS, the accounting treatment for acquisitions requires that all assets (tangible and intangible) from a merger or acquisition must be included in the balance sheet of the acquirer at their current market value and be depreciated over their useful economic life.
- Intangible asset and goodwill impairment testing under ASC 350 – Goodwill is tested for impairment annually, and is marked down according to the conclusions of that process.
- Valuing stock and equity-based compensation under ASC 718 – in order to create a more “level playing field” for equity compensation design, the standard generally requires that all equity awards granted to employees and nonemployees be accounted for at “fair value.”
- A range of financial assets need to be valued under IAS, including financial instruments and insurance contracts. IFRS requires share options to be valued on an annual basis as they are charged against the profit and loss account.
Because the Sarbanes-Oxley Act prevents firms from preparing valuations for companies for which they provide attest services, we work cooperatively with other regional and national accounting firms, to prepare independent business valuations for a wide array of financial reporting applications.
Bankruptcy Consulting & Valuation
Correctly applied, valuation is critical to the overall assessment of solvency in many workout situations as well as for compliance with bankruptcy and cancellation of indebtedness rules set forth in income tax statutes. Business valuations are important for creditors and debtors in a bankruptcy proceeding.
Bankruptcy or restructuring actions can often be uncharted territory for management. We understand the need for responsiveness in bankruptcy and turnaround scenarios and can produce a quality work product in a timely fashion. We work with our clients’ legal and other advisors to help bring clarity and focus to the process. These services can significantly improve the chances of making a bankruptcy an efficient and positive business strategy.
Our advisory services in this area include, but are not limited to:
- Business valuation for debt restructuring purposes
- Business valuation in bankruptcy
- Design and implementation of spin-off strategies
- Fairness assessment of offers to buy or sell the company or its assets
- Financial feasibility analysis
- Fraudulent conveyance analysis
- Identification, quantification and analyses for fraudulent conveyances
- Liquidation analysis
- Litigation support within bankruptcy proceedings
- Organization structure issues
- Preferential payment analysis
- Protection analysis
- Reorganization plan analysis
- Restructuring strategy development
- Review of opposing expert’s reports and analyses for proper application of technical guidance and conceptual propriety
- Solvency analysis
- Valuations for minority investors in entities that are in the process of restructuring or are in liquidation
Buy-Sell & Equity Owner Agreements
The use of buy-sell agreements has become commonplace in conjunction with the formation of a business. They are important documents, as they represent an agreement between the company and its owners regarding how future transactions contemplated by the agreement will occur. The process of drafting a buy-sell agreement forces all parties to have an understanding of the nature of the agreement, its provisions, how certain mechanisms will work in the future, and how it impacts each party.
A detailed and clearly written buy-sell agreement will largely benefit business owners. At the time of executing the agreement, no one knows who will be the buyer and who will be the seller, but many factors should be addressed in a buy-sell agreement to avoid future struggles in interpreting the document. Critical considerations include outlining the purpose of the agreement, identifying triggering events and determining possible valuation methods to be used.
One of the most crucial issues to address in the agreement is how value is established upon a triggering event. It is important to determine the valuation mechanism utilized to accomplish the objective of providing a price for the company’s stock at the level the partners/shareholders agree to be reasonable.
We are often engaged to assist legal counsel and business owners with the development of the provisions in the agreement and to determine value of the ownership interest according to the terms of an agreement. Download our continuing education materials for more information about Buy-Sell Agreements.
Commercial Activity Transaction Structure
The scope of valuation needs in commercial operations can span a wide spectrum of transactions. We recognize that the process of enhancing the value of your business, finding an appropriate buyer, structuring the transaction to minimize taxes and/or maximize economic benefits, or transferring wealth to the next generation can be overwhelming.
We utilize our knowledge, expertise and resources to help our clients make well-informed, objective decisions throughout the transaction process. Many operational issues can be addressed with a valuation solution, and our professionals have extensive experience in a variety of commercial activity valuation projects. Some of our recent work has included:
- Valuation of contract rights, business names, technical “know how” and other intangible assets for purposes of transfer to a Delaware Investment Holding Company as part of state income tax minimization strategies
- Valuation of intellectual property for purposes of developing economically appropriate royalty rates for expatriation and repatriation of earnings between a U.S. company and foreign-related party
- Valuation of company equity at prescribed dates, given alternative labor force wage levels and allowing for management understanding of long-term effects of labor negotiations on value
- Valuation regarding buy-sell agreements
Corporate Management & Equity Value Enhancement
There is a striking dichotomy between management of privately held and publicly traded businesses regarding the focus on underlying equity value. With many privately held companies, it seems that management effort is primarily exerted to achieve short-term or single-year operating results. Generally, little attention is paid to equity value enhancement.
Equity/owner value is the single performance metric that maximizes overall company efficiency and allows all business stakeholders to optimize their positions within the company’s operational parameters. For many privately held business owners, the value of their company equity is the most significant asset in their investment portfolios.
All too often, the value of this equity interest is not what the owner expects. Unfortunately, the reality of the lower value is not usually identified until the date of sale, when it is too late to do anything to increase value. As a result, the owner must face a retirement or post-sale lifestyle that does measure up to his/her anticipated standards. This unfortunate outcome can be prevented by determining the value of the business as part of the exit planning process and taking action to enhance it.
In theory, planning for value enhancement is no different than trying to maximize the worth of any other asset. The significant advantage in a privately held business is the ability for the owner to directly control the process.
The GYF Business Valuation team can assist business owners in understanding how managing equity value can enhance long-term net worth. More importantly, we can help to identify the value drivers within your business and develop and implement value enhancement strategies to grow the value of your company. These strategies will be specific to each business as well as each owner’s goals and exit time-frame.
Do not let another year pass without focusing on increasing the value of your business! Contact our team for assistance.
Economic Damages & Lost Profits Calculations
The calculation of economic damages to assist with recovery of unrealized revenue can be required for many different types of cases including breach of contract, torts, and intellectual property infringement. Lost profits are not an independent cause for litigation, rather, they are the measure of a monetary remedy for a business that has suffered a financial detriment due to the wrongful act of another.
Each lost profits situation is different and unique. The specific facts and circumstances govern the approach and methods deployed. The goal of an economic damages calculation is to restore the individual or the company to the position it would have been in if the damaging conduct or act had not occurred. It is critical to provide well-developed, documented evidence of the damages incurred.
Our valuation professionals can serve as consultants and/or testifying financial experts to assist in the determination and support needed to enable the recovery of lost profits. Download our continuing education materials for more information about Damages and Lost Profits.
An Employee Stock Ownership Plan (ESOP) is a special type of qualified retirement plan, which is similar in some ways to a profit-sharing plan. However, a very important difference between an ESOP and other types of qualified retirement plans, is that an ESOP can invest primarily in the sponsoring corporation’s capital stock. The many unique aspects of an ESOP provide additional benefits over other types of qualified retirement plans.
ESOPs work well to facilitate and accomplish diverse and valuable business strategies that can benefit not only the corporation itself, but also its equity ownership groups, management and employees. An ESOP can be utilized as a tool to address many challenging business goals, including:
- Tax-favorable equity owner transition
- Effective and efficient business succession
- Creation of employee wealth and retirement security
- Expansion of equity ownership to employees, establishing the mindset of “employee owners”
- Alignment of corporate and employee goals to accomplish together objectives that neither could achieve alone
Download our continuing education materials for more information about ESOPs.
GYF has extensive experience in the development and implementation of ESOP-based business strategies to accomplish the goals noted above…and more! Learn more about our ESOP expertise.
Click on the links below to learn more about the services we provide to ESOP-owned companies:
Learn more about ESOPs:
- “What Is an ESOP?” – information from the ESOP Association, a national organization that educates and advocates for employee ownership
- “Who Should Own the Business After You? – A Guide for Business Owners” – publication from the National Center for Employee Ownership (NCEO)
- “The Tax Cuts and Jobs Act and ESOP Valuations” – article written by Bob Grossman, published in the October/November 2018 issue of Financial Valuation and Litigation Expert
- “Navigating Aggressive ESOP Enforcement” – article written by Bob Grossman, published in the January/February 2015 issue of Valuation Strategies
Estate, Gift and Inheritance Tax Strategies
A focus on planning for estate, gift and inheritance taxes can potentially save significant dollars for many privately held business owners and other high-net-worth taxpayers. Wealth preservation strategies are often built around a foundation of asset valuation. Download our continuing education materials for more information about Valuations for Estate Planning.
At GYF, we work collaboratively with the region’s best estate planning professionals. Our work often involves valuation of privately held business interests with an emphasis on valuation adjustments reflecting premiums and discounts for control and marketability issues.
Our professionals have extensive experience in preparing valuations for family limited partnerships (FLPs), S corporation recapitalizations and ownership sales to irrevocable trusts in exchange for long-term annuity payment streams. Such sophisticated devices can be used advantageously by many individuals. The keystone for each strategy is very often a defendable valuation.
We have prepared many valuations for estate, gift and inheritance tax purposes and have successfully defended our reports under tax authority audit. Our valuators have also navigated through the Internal Revenue Service Appeals division, with little or no adjustment to values contained within our reports.
All reports are prepared to meet the Treasury Department’s “adequate disclosure” regulations and “qualified appraiser” rules. Similar reports have been prepared by our professionals on numerous occasions to assist legal counsel with the appropriate compliance requirements for decedents’ estates.
Exit planning is an integration of many complex disciplines, and the entire process will be as diverse as the facts and circumstances attendant to the business owner. Advisors must be attentive to the ongoing dynamics surrounding the business owner, while ensuring that the strategies are properly developed and implemented. The business owner’s motivations and desires set the core mission to be accomplished through the exit. Download our continuing education materials for more information about the Exit Planning Process.
Generally, the sale of the owner’s business or equity ownership therein is the most significant event in the exit planning process. Any plan that includes a sale must consider the many technical, quantitative and qualitative facets of each possible alternative transaction. It is also important to allow time to enhance the value of the business prior to a sale.
GYF’s experienced professionals can assist business owners in evaluating the various options and formulating an exit plan to meet the owner’s desired timeline and goals.
Expert Witness Testimony
Forensic accounting has become a vital facet of litigation. Increasingly, attorneys must document the numbers they rely upon to substantiate their damage claims. The growing partnership between CPAs and the legal community is evidenced by the diversity of situations requiring the calculations and expert testimony of forensic accountants. Download our continuing education materials for more information about Utilizing Financial Experts.
All expert witness testimony related to business valuation and civil controversy is provided by the partners who lead the Business Valuation Services Group. Bob Grossman and Melissa Bizyak have been qualified as experts in several states and carry all major professional accreditations in valuation. They have earned impeccable credentials and have achieved national prominence in the discipline of business valuation. Click here to view their professional qualifications.
Bob and Melissa have performed hundreds of business valuations and authored numerous technical articles and training materials. Their explanations of the valuation and reporting positions as well as their responses to questions on the witness stand afford clients and legal counsel an opportunity to defend positions brought to trial.
They can provide expert witness testimony and depositions in family law matters concerning spousal support, child support and property division as well as business law matters concerning shareholder disputes, partnership disputes, business valuations, economic damages, lost profits, insurance claims, breach of duty, alter ego and fraud.
Fairness opinions rendered by our business valuation professionals will assist Boards of Directors and other entity fiduciaries in making decisions that are based on the best information available. Whether an acquisition or divestiture is being planned or consideration is being accorded to a recapitalization, an employee stock ownership plan (ESOP) or a leveraged buyout, our reports will include financial, industry and economic analysis second to none. We also prepare fairness opinions for related party transactions and exchange transactions.
If you find yourself questioning the propriety of an opportunity, contact our business valuation team to help evaluate the fairness of the transaction value.
Income Tax Valuations
The proper reporting of income under the U.S. Internal Revenue Code requires value measurement under numerous provisions. Our valuation team works in conjunction with our experienced tax professionals to ensure that our clients receive tax-related valuation services of the highest quality.
Some examples of income tax valuations performed by our professionals include:
- Measurement of company value and per-share price in conjunction with the provision of non-cash compensation, including non-qualified stock options or warrants, as well as shares of stock provided as compensation for personal services
- Measurement of value of property distributions to shareholders in corporate entities – appreciation and corresponding gains are taxed at the corporate level as if the property had been sold
- Measurement of company value in conjunction with the corporate liquidation or an election to convert from C to S status – proper measurement of gain in these situations is critical to documenting value and paying the proper income tax
Understanding the value of an enterprise’s intangible assets can be crucial to strategizing and achieving the resolution of a business dispute, the settlement of a patent or copyright infringement, allocating the purchase price of an acquisition, and many other issues. Download our continuing education materials for more information about Valuations of Intangible Assets.
We strive to provide value conclusions that are accurate, supportable, and meaningful. Our professionals help clients define project scope and timelines, manage all aspects of execution, and take a hands-on approach during potential third-party review process. In a typical engagement, we help identify intangible assets, determine the most appropriate valuation methodology, collect necessary internal and market data, and calculate economic values. Our clients receive detailed calculations and a narrative report supporting our analysis.
We build consultative relationships with our clients by helping them understand our valuations relative to regulatory standards and numerical procedures required to capture intangible values. Our valuation professionals have helped clients value a variety of intangible assets such as software, patents, customer lists, business names, work forces, customer relationships, financial instruments, leasehold interests and franchises.
Some of the intangible asset valuation and consulting services offered by GYF’s Business Valuation Services Group include:
- Acquisitions and sales
- Damage calculations
- Dispute advisory and negotiations
- Expert testimony
- Franchise agreements
- Goodwill and intangible asset impairment
- IP holding companies
- Joint ventures
- License and royalty compliance testing
- Merger transactions
- Patent licensing
- Royalty rate determination
- Technology transactions
- Trade names
Marital Dissolution & Equitable Distribution
GYF provides specialized valuation and litigation support services in dissolution and equitable distribution matters for marital estates of all sizes and complexity. Our professionals have experience in valuing businesses, identifying and tracing assets, apportionment and reimbursement calculations, fair property distribution allocations, expense and/or lifestyle quantification, as well as cash flow, income and stock option analyses.
We assist counsel and their clients through all phases of the financial aspect of the dissolution process, including discovery and disclosure, document and data accumulation, financial analysis, mediation presentations, settlement assistance, and when necessary, reporting via written or oral expert testimony. Our professionals also provide expert testimony in Family Courts throughout Pennsylvania, and in proceedings before private mediators and judges.
Our professionals hold specialized professional credentials relevant to analyses in marital dissolution engagements. Our team also includes professionals with special expertise in handling and analyzing large amounts of electronic data, a skill which is often advantageous in our marital dissolution practice.
Matters of Civil Controversy
In matters of civil controversy intended to provide monetary relief to harmed parties, the calculation of economic damages is critical to a fair and accurate resolution. Propriety and defensibility of these calculations are paramount, whether the matter is ultimately settled or goes to trial.
Our Business Valuation Services Group has provided extensive assistance to clients in each of the following areas:
- Business-owner splits — difficulties over interpretations of buy/sell agreements, the non-existence of such an agreement and owner departures under adversarial circumstances
- Minority shareholder lawsuits — oppressed or minority shareholder actions (for and against) alleging harm imposed by controlling owner actions
- Lost profits calculations — lost profit calculations for contract breach, non-competition agreement breach, patent and know-how infringement and unauthorized transfer of employees’ know-how with employment change
- Economic damages calculations — determination of past and future income losses, fringe benefit values, life and work-life income expectancy and personal consumption calculations
Our services in these matters often include assisting legal counsel with discovery and development of direct and cross examination techniques and questions as well as strategy formation to illustrate key case components at trial.
If you are buying or selling a business, you only get one chance to do it right! If the buyer pays too much or the seller asks too little, the ability to recoup the difference is gone forever. Understanding value in entering a transaction to merge, acquire or dispose of a business or a business interest is critical to the success of the deal. Download our continuing education materials for more information about Valuations for Transactions.
In addition to the various complexities related to a non-acquisition valuation, a transaction often presupposes an “investment or strategic” standard of value which must consider synergistic advantages for the acquiror. Such advantages can, and should, influence transaction pricing. Another critical aspect that will influence transaction pricing is the tax structure. Whether the transaction is a stock purchase or an asset purchase or any number of possible variations, influences transaction pricing greatly.
Our valuation professionals have extensive experience in this area as well as expertise in corporate and business tax matters, including acquisitions, dispositions and mergers. This experience allows for careful consideration of appropriate tax structures and the influence of each on the pricing of the deal.
When a purchase or sale is being contemplated, it is absolutely necessary to understand the value of a business. Don’t find yourself paying too much or selling for too little. Contact us to help you understand the value of your subject company and advise you on how to structure the best deal.
Recapitalization for Business Growth and Owner Diversification
A recurring issue common to many businesses is the lack of diversification in the owner’s investment portfolio. It is not unusual to find the value of the business comprising as much as 90% or more of the owner’s total net worth. In such a case, the owner’s wealth is at great risk if the business should encounter operating problems or experience an economic downturn.
Another issue facing business owners is fund-raising for capital acquisitions or business expansion. Such opportunities can often be financed through traditional lending institutions. However, depending on specific circumstances, it may be necessary to go beyond traditional sources into private placement or equity markets. In both cases, a recapitalization can be used to obtain the desired outcomes. Utilization of an employee stock ownership plan (ESOP) or the addition of an external equity investor can serve to accomplish current owner diversification goals or alternatively, to raise needed equity to pursue capital acquisition or business expansion opportunities.
Solid business valuation services are at the core of all successful recapitalizations. Our professionals have worked on numerous recapitalization projects and have played a vital role in assisting management with key value-based decisions and feasibility analyses. We can also provide valuation services and reports where necessary to meet Department of Labor and Internal Revenue Service compliance requirements or outside investor needs.
A sample of recent projects include:
- Feasibility analysis and valuation report preparation to transfer 40% of business ownership to an ESOP on a tax-free basis, allowing for significant owner diversification
- Valuation services relating to the issuance of nonvoting shares in exchange for voting shares in an S corporation to partition value and voting rights for equity investor capital infusion
- Valuation services relating to the issuance of warrants, preferred stock and Class B common stock shares to partition value and voting rights for equity investor capital infusion for business acquisition