Business Valuation

Business Valuation

Most business owners understand the importance of knowing the value of their business. However, many business owners do not know the current value of their business, which can represent a significant portion of their overall wealth.

Obtaining an independent, professional business valuation is a critical step in wealth management and succession planning. There are many other reasons to have your business professionally valued by an independent Chartered Business Valuator, including:

Purpose of Valuation
VSP Offers
1 Exit or succession planning Provides a basis for planning and assessing exit options General decision making
2 Wealth management / enhancement Identifies key value drivers and provides a benchmark for measuring value enhancement
3 Pre-sale planning Buyers will only pay top dollar for the most attractive businesses. With a valuation the business becomes more liquid and more easily monetized
4 Sale of business to third party Used as a basis for negotiations with potential purchasers (determine asking price or assess unsolicited offers)
5 Internal transfers of business Establishes a price for a shareholder buy-out, management buy-out or employee share ownership plan
6 Tax and estate planning Provides support for the value transferred and acts as insurance for potential disputes with CRA (estate freezes, reorganizations, related party transactions, etc.)
With the CRA and other authorities scrutinizing tax structures and reorganizations, a professional valuation is now becoming the standard norm before implementation of a strategy.
7 Life insurance coverage Provides support for amount of life insurance (key person, buy-sell) coverage to obtain.
8 Shareholder disputes Can help to avoid legal disputes over value (i.e. full disclosure to all shareholders)
SH agreements
9 Matrimonial separation Provides support for value of the business to be included in net family property (NFP) statement (division of net family assets)
10 Trustee / executor protection Protection against possible estate administration tax (EAT) reassessments

Business valuations are also required for financial reporting purposes. We assist management through the external audit process by providing the necessary independent audit evidence required by external auditors in accounting for a business acquisition with a purchase price allocation or the ongoing asset impairment testing (e.g. goodwill impairment).

Valuations are required for purposes of an actual transaction (e.g. purchase, sale, shareholder buyout, donation, etc.) or in situations where an actual sale is not being contemplated (i.e. tax planning, share reorganization, insurance coverage, matrimonial dispute, etc.).

A business valuation is also required for planning purposes in the context of a planned transaction or a non-transactional scenario. Click here for an illustrative summary of the scenarios that require valuation support.

 

The Process

A summary of the process we typically follow with our valuation support matters is as follows:

Planning Phase
Execution Phase
Reporting Phase
  1. Initial meeting to discuss background information, scope and timing of engagement
  2. Obtain signed engagement letter
  3. Provide preliminary information request
  4. Conduct preliminary research
  1. Additional research – company, industry, etc.
  2. Additional information gathering including follow-up meeting/interview of management
  3. Valuation analysis and draft report
  1. Meeting to discuss preliminary findings and draft report
  2. Refine analysis and, if necessary, gather additional information
  3. Obtain signed representation letter
  4. Issue final report

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