Valuations in Buy/Sell Agreements for Private Companies and Businesses

Mastering Standards and Best Practices to Calculate and Update Fair Market Value

Recording of a 110-minute CPE webinar with Q&A


Conducted on Wednesday, June 22, 2011

Recorded event now available

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Program Materials

This teleconference will prepare advisors to decide how and when to apply valuation methods to a private business or company that uses a buy/sell agreement, as well as to understand what is expected with different valuation standards under different circumstances.

Description

Among the most important services of a valuation professional is calculating and updating the fair value of a privately held business or corporation, in the event that owners choose to liquidate their interests under an existing buy/sell agreement.

Such engagements require the use of key valuation standards, such as the AICPA's SSVS No. 1 and Appraisal Foundation's USPAP, along with mainstream valuation methods (e.g. book value, capitalization of earnings, discounted cash flow). However, making the right valuation decisions is challenging.

Is traditional fair market value the right path, or should the advisor take an alternative valuation route based on transfer price? If a more mechanical calculation is exempt from SSVS No. 1, is it still covered by other valuation standards? Valuation specialists face these and other tough choices.

Listen as our panel of experienced valuation advisors offers best practices in valuing a business under a buy/sell agreement and walks you through the application of different standards in different circumstances.

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Outline

  1. Typical goals of a buy/sell agreement
    1. Owners’ interests will be purchased following a “triggering event”
      1. E.g., death, need to sell, retirement of an owner
    2. Mechanism to set a purchase price depending on market conditions and other factors
    3. Provide a funding source (e.g., insurance policies) to offset liquidity demands
      1. Different possible insurance structures
    4. Valuing a deceased owner’s interest, for estate tax purposes
  2. Valuation methods that can be used to establish and update value of owner’s interest
    1. Standard methods
      1. Book value
      2. Capitalization of earnings
      3. Discounted cash flow
      4. Sales-multiple valuations
    2. Alternatives to fair market value approach
  3. Valuation standards that can come into play with buy/sell agreements
    1. AICPA SSVS No. 1
    2. Appraisal Foundation Uniform Standards of Professional Practice (USPAP)
    3. American Society of Appraisers, “Business Valuation Standards”
  4. Current best practices with valuing private businesses for buy/sell agreements

Benefits

The panel will review these and other key questions:

  • Valuation methods that may apply: Book value, capitalization of earnings, discounted cash flow, sales-multiples valuation and others.
  • Applicability and key terms of valuation standards: AICPA SSVS No. 1, Appraisal Foundation Uniform Standards of Professional Practice (USPAP), American Society of Appraisers "Business Valuation Standards."
  • Related aspects of a buy/sell agreement: Updating the business value and adjusting for growth and inflation, examining underlying insurance policies.

Following the speaker presentations, you'll have an opportunity to get answers to your specific questions during the interactive Q&A.

Faculty

James Alerding
James Alerding
Partner
Clifton Gunderson

He has worked in business valuations for more than 30 years and has helped a number of business clients in both sale...  |  Read More

Brian Bornino
Brian Bornino

Director of Valuation Services
GBQ Consulting

In his career in regional and national valuation practices or firms, he has worked on more than 1,200 business...  |  Read More

Kelly Noll
Kelly Noll
Senior Financial Analyst
GBQ Consulting

She has worked on more than 100 valuation engagements in industries ranging from wholesale/distribution to construction...  |  Read More

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