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Assessing Industry Risk is a Critical Part of the Valuation Process

Go beyond beta Industry risk isn’t something you factor in once and then forget about. The pros consider industry risk throughout the valuation process — and its relevance even extends beyond the income approach. Valuation professionals typically factor industry risk into the cost of capital, using a “beta” or other industry-specific risk premium. Here are…  Continue Reading »

What’s the Outlook for FLPs?

For family limited partnerships (FLPs) and other family-controlled entities, the viability is uncertain. To curb what the IRS considers abusive estate planning practices involving these entities, in August 2016, the IRS proposed changes to the tax code. However, the proposal has been widely criticized for being too broad and general by business owners, practitioners and…  Continue Reading »

Site Visits are a Critical Part of the Valuation Process

See the site for yourself It’s critical to see a Houston, Texas business in person to value it, as well as businesses in other locations. Tax returns, financial statements, and marketing materials tell only part of the story. Especially in an adversarial situation, a written questionnaire doesn’t adequately bridge the gap. To get a comprehensive…  Continue Reading »

Finding Hidden Assets and Unreported Income

When valuing a Houston, TX business for divorce or shareholder disputes, the business valuation and forensic accounting disciplines often intersect. Controlling shareholders may, for example, try to hide assets or downplay cash flow to minimize buyouts of their spouses or minority shareholders. Valuation experts know how to unearth and adjust for financial misstatement, and are…  Continue Reading »

23 Questions to Ask When Hiring a Business Valuation Expert

Richard Claywell was recently a panelist for the Financial Poise webinar: Selecting the Right Valuation Expert for a Corporate Transaction. Richard provided valuable tips to business professionals and deal lawyers about how to identify and attain the right valuation expert for their situation. If you’re looking for a business valuation expert in Houston, TX or beyond, take…  Continue Reading »

4 Ways to Add Value Before Selling a Business

Ready, set, sell A company that is well positioned for future growth is one that investors want to buy. If you’re looking to sell, it’s important to make your business more attractive to potential buyers. Here are some strategies: 1. Obtain a professional valuation A professional valuation can provide objective market evidence of what similar…  Continue Reading »

Valuation Looks to the Future, Not the Past

Often, the list of documents appraisers use to value a business include the last three to five years of financial statements. Historical trends may be used to help forecast future performance, but historical results are only relevant to the extent that similar results are expected in the coming years. How do business valuation professionals handle…  Continue Reading »

Valuation Professionals Factor Fraud into the Valuation Equation

Assessing Fraud Risks A company’s value may be largely impacted when fraud strikes. According to the 2016 Report to the Nations on Occupational Fraud and Abuse, the Association of Certified Fraud Examiners (ACFE) estimates that companies lose approximately 5% of revenues to internal theft and financial misstatement each year. Here’s how this statistic relates to…  Continue Reading »

Beware of Valuation Provisions

PECO Logistics v. Walnut Investment Partners Recently, a Delaware Court of Chancery case demonstrates how courts give substantial weight to valuation provisions in owners’ agreements, especially when the experts follow the terms of these agreements and maintain their independence. Even though the investors objected to the purchase price determined under an owners’ agreement, some minority…  Continue Reading »

Market a Business to Maximize its Selling Price

Deal of a lifetime How a private business is marketed can have a significant impact on the cash available for distribution to owners when it’s time to sell. For many private investors, their business interests are their primary assets, so their livelihoods often depend on receiving top dollar. It’s a hot market In recent years,…  Continue Reading »

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