We are, often, asked these three questions at some point by owners in a transaction setting:
- Why do we need a business valuation for a transaction?
- What is your experience and our business broker / accountant has approved the figures?
- We do not want to incur more fees, in this transaction, so why do we care?
- Most people have a couple of big purchase in their lives: their homes is a big one; there they use a Realtor, who gets 2.5% of say a $1,000,000 or ($25,000) and then they use a home inspector to inspect for issues and a real estate lawyers to conduct legal due diligence and register/discharge charges. However, most homes are similar to each other on a particular street (i.e. built by the same builder) and the value is often split out between the land and the building, so there is some buffer (i.e. land value). Businesses in the same industry are quite often very different, take any two competitors in an industry (i.e. Hudson Bay vs. Sears). There are numerous moving parts (i.e. risk factors) and considerations that must be given in a correct valuation. Buying a business is no easy task; take it from individuals, who have advised management in public companies and private on purchase and sale well into the hundreds on millions ($100,000,000). As such on a $1,000,000 purchase or sale, we are very careful to ensure that you pay fair market value on either the purchase or sale. We have saved buyers over hundreds of thousands by advising them of the various valuation outcomes.
- We are all creatures of habit. We are what we think, what we do and what we have done. Most of our competitors are financial advisors, accountants, business brokers or valuators – each of them has their own expertise and we respect that; We often ask clients, in a purchase and sale, to a ask their advisors whether they do this often and what else do they do (i.e. tax returns, audit etc.) and their biases (i.e. brokers sell a business and they receive a commission, the same goes for investment bankers). For example, some of the best transaction valuators / investment bankers in the city and in the country are either accountants, CFA Charterholders or lawyers but they do not compete with us as they advise on $100M+ or $1B + transactions. They do not advise on a $100k to $10M transactions. A lot of the valuators, brokers or accountants, in this realm, have minimal experience, other than learning through your transactions – THIS IS SAD BUT FINE WITH US. I wouldn’t buy a company (put my money in harms way) this way; We would not advise to let a general physician assist any family or friends in a heart surgery just as we wouldn’t advise to allow a general financial advisor to value a business and help unless that is all they specialize in. Our experience includes public and private markets, advising CEO’s, CFO’s, Management, Board of Directors, Accountants and Lawyers on whether to purchase or sell a business at the correct price. We have done this in North America (U.S. and Canada) and the Middle East.
- Fees are not always good but they are not always bad. I wouldn’t buy a home without an inspector and definitely not a commercial property without an inspection and a real estate appraisal; The same goes for a business, I would not touch a business purchase or sale without either accountants cleaning up the financials and a valuator advising on the price and then using the services of a good lawyer. Often, in many cases, the extra fees paid in transactions to advisors justifies the savings bought or the warnings advised of, prior to them unfolding. For example, we have provided valuations where sellers have not disclosed the report because buyers have overpaid for the business(es). We have also saved buyers hundreds of thousands on a transactions as things were flagged in the financial due diligence stage. We believe that any transaction is a team effort and the sum of the part should be greater than the whole.
We believe that we are all creatures of habit and that we are what we do. I would not get a general physician to perform a by-pass heart surgery nor would I engage a residential realtor to sell a commercial building. I would also truly understand the biases (i.e. business brokers make 10% of purchase price on a sale so price can be inflated). We only value businesses for tax, litigation and transactions and, as such, we have done in excess of 300 valuation reports, in that time frame.
At Minerva Valuation Advisors, we are trained, as business valuators, appraisers, bankers and financial analysts, in a variety of settings including in tax planning valuations, family law valuations, shareholder disputes valuations and merger & acquisitions valuations and advisory. We are not your typical business valuator or appraiser, we attempt to connect the dots using a variety of perspectives to give you some of our best insights.