Business Valuation: Who does the Valuation Analyst Represent?

Most business valuation analysts belong to associations (such as the AICPA for CPA’s, the NACVA for CVA’s, USPAP for ASA’s) that require certain standards be followed in preparing a business valuation.  These business valuation standards tend to be quite rigid for a Conclusion or Opinion of value and more flexible for a Calculation of value.  Valuators doing work to these standards (which are required by any group the valuator belongs to and can be voluntarily agreed to by anyone who understands the standards) always represent only their findings (the Opinion found or the Calculation estimated).  This means they do not represent you or any other party even though you pay them and you may retain them.

Third party obligations when performing a business valuation require the valuation analyst to be impartial.  An example is the bank’s interest in having a fair and impartial business valuation if the analyst is preparing a valuation for a prospective loan and those obligations override allegiance to you.

If the valuator has a conflict of interest that must be stated in the report and it will cause the opinion to not be fully compliant.

Finally, if your purpose is for litigation or potential litigation such as divorce or partnership disputes all experts (including valuation experts) must be impartial or they can be disqualified by the court.  Court expert witnesses represent the court to allow the court to better understand a matter.  Having said this, in many matters experts hired by the opposing sides may find very different values.  Usually this is because facts are not agreed to, risks are assessed differently because underlying assumptions are seen differently by the parties, therefore the found value or result can be quite different.

  • Clients choose Harvest Business Advisors for our accurate business valuations and our consistent ability to deliver the highest price in the smoothest sale transaction possible. Harvest provides business brokerage, business valuation, and business succession planning services. We have extensive experience in the information technology and professional services, manufacturing, distribution, and contracting fields. We maintain offices in Maryland, New Jersey and Virginia. Connect with us at info@harvestbusiness.com or 443.334.8000 to discuss selling your business, ordering a business valuation or buying a business.

 


Clients choose Harvest Business Advisors for our accurate business valuations and our consistent ability to deliver the highest price in the smoothest sale transaction possible. Harvest provides business brokerage, business valuation, and business succession planning services. We have extensive experience in the information technology and professional services, manufacturing, distribution, and contracting fields. We maintain offices in Maryland, New Jersey and Virginia. Connect with us at info@harvestbusiness.com or 443.334.8000 to discuss selling your business, ordering a business valuation or buying a business.

Business Valuation: Do You Need a Conclusion or Opinion of Value or a Calculation of Value?

In business valuation a conclusion or opinion of value is the product of a thorough review of every available element of the business.  Investigations for conclusions start with the greater economy and work down to most minute details about the subject company.

The business valuation analyst is required to have a thorough knowledge of the business in compliance with set standards.  Doing this work and collecting all the backup supporting data raises costs but produces a better value estimate and report.

Usually a conclusion of value will be supported by a very detailed report where another valuation analyst can follow each step and understand the reasoning for all assumptions and duplicate all calculations.

Conclusions are often required for compliance reporting purposes and full scale litigation.

If you are going to make important final decisions with large legal repercussions you want an opinion of value.

In business valuation a Calculation of value is where you and the valuation analyst agree on which business valuation methodologies will be used and the specific level of depth of review of the business.

Since many things that might impact business value are not looked at clearly the calculation of value may not have the same findings as if all the work for an opinion had been performed.

These calculations of value are usually sufficient for planning purposes and for an idea of possible sales prices for merger & acquisition type work.  Calculations of business value may be sufficient for mediation or pre-litigation where the parties still have some level of trust and are trying to reach agreement.

In some jurisdictions calculations may be suitable for smaller simpler litigation type matters but sometimes the valuator will not allow them to be used in a trial setting out of a justified fear that your evidence (the estimated value) will fall apart for not being thoroughly prepared on cross examination.

Therefore calculations of value are usually suitable for smaller businesses for planning purposes.  Conclusions or opinions of value are best for compliance and full scale litigation or major decisions that could result in litigation.

 


Clients choose Harvest Business Advisors for our accurate business valuations and our consistent ability to deliver the highest price in the smoothest sale transaction possible. Harvest provides business brokerage, business valuation, and business succession planning services. We have extensive experience in the information technology and professional services, manufacturing, distribution, and contracting fields. We maintain offices in Maryland, New Jersey and Virginia. Connect with us at info@harvestbusiness.com or 443.334.8000 to discuss selling your business, ordering a business valuation or buying a business.

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