A business valuation can be your greatest ally to avoid expensive litigation affairs! In fact, more and more Toronto business owners are using business valuation to avoid litigation purposes.
Why is business valuation important? Oftentimes in partner, shareholder and matrimonial legal disputes, the value of a business is a major area of contention. The court may summon Chartered Business Valuators (CBVs) as experts to provide expert testimony on the value of a business, or minority interest in a business.
In the case of a potential shareholder dispute, a business valuation report offers unbiased and independent insights into the value of shares. This is instrumental in helping business owners and their attorneys draft clauses in buy-sell agreements to resolve potential disagreements. In essence, expensive and lengthy legal battles are kept to a minimum as the matter gets settled out of court.
Without further ado, let’s delve into some of the biggest benefits that a business valuation offers in terms of litigation support:
Valuation For Marital Dissolution
Divorce is a contentious and emotional affair. The last thing you need is a drawn-out legal process that drains your finances.
Matrimonial proceedings can get messy as one partner may seek to inflate or deflate the value of the business out of their own interests. At VSP, we recommend that all business owners obtain an independent business valuation periodically. Our team understands how to assess the current and future operations of a business to arrive at an independent, reasonable and supportable value for the company.
Valuation For Shareholder Disputes
These disagreements can arise when a minority shareholder believes that they have received the short end of the stick as a result of decisions made by the controlling owner. There are times when these disputes might be too complex to settle in a peaceful manner.
When shareholders have the business independently valued on a regular basis and are able to discuss and agree to such valuation conclusions as a normal course of financial reporting, this will greatly reduce the likelihood of a dispute over the value in the event that the shareholder(s) should choose to go their separate ways.
Valuation For Partner Disputes
It’s never easy when one partner expresses a desire to leave the business. A crucial part of the buy-sell agreement is to know the value of the exiting partner’s stock. This is where valuation comes to the rescue! It will aid the remaining owners by establishing a proper value and process so that the shareholder leaving is fairly compensated.
What Will Your Valuation Report Include?
No two valuation reports are the same. Their result will vary based on the valuator who prepares the report, the factors taken into consideration and resources available, and the date on which the valuation was conducted.
However, drawing broad strokes, a standard valuation report includes:
- The purpose and scope of the valuation
- The methods used and the premise of the business value to be implemented
- An overview of the market and local economic conditions that affect the value
- An in-depth review of the business including operational, financial, sales and marketing, and human resource aspects
- The conclusion that includes compiling the results from all valuation methods used
- A passage that details how the report complies with professional appraisal standards
- A passage detailing the main assumptions made and the credentials of the valuation expert.
The Benefits of Getting a Business Valuation Ahead of Time
There are so many benefits of a valuation! You can:
- Get a better knowledge of your company assets
- Understand its resale value
- Enter into more profitable mergers and acquisitions
- Gain access to higher quality investors
- And, of course, avoid costly legal battles
VSP offers professional, independent and supportable valuation services that will help you make smart and informed business decisions.
Contact us today to protect your business and your finances!