At some point in the life of every business its owners are faced with a dilemma: “How do we transition ownership in our company in a manner that is in the best interest of our shareholders, our employees and our family members?” In the later decades of the 20th century a business owner’s options in solving this dilemma were limited: sell the company to a competitor; take the company public; or turn the company over to the next generation and hope to be repaid over time. This was distressful to owners that needed to move on to retirement, employees who do not want their jobs jeopardized by a new owner or management heirs who have to shoulder the burden of repaying prior ownership out of the company’s earnings. Immediate liquidity was not always easy to achieve without negative side effects.
Fortunately, 21st century business owners have a significantly larger number of liquidity alternatives available to them. Some of the new options are complex and require careful analysis, including after tax analysis, before their implementation. The Beringer Group has developed a process called the “Keep/Sell Analysis” that we have successfully employed to give business owners a wide array of options and alternatives for the successful transitioning of their companies to new ownership at one time or over several years. The “Keep/Sell Analysis” includes all of the factors that will impact all of the company’s different constituencies including the family issues at hand.
Our success in designing and implementing owner exit/transitioning transactions is reliant upon the facts at hand, industry specifics, investor availability and other factors. However, we have access to many private equity investors with whom we have long standing relationships and can fund the liquidity alternative that is best for our client.
Experience has taught us that an unplanned or poorly executed liquidity event can be very debilitating and costly to the many parties involved.
Usually one of the first questions we receive from a new business owner or family office client is “How much is my company worth?” We agree that this is a vital element in determining the strategic options available for the client. Another question might be, “If I sell my company, how much will I, or my family end up with after all taxes?”
If the new client’s business is closely held, it may not be easy to determine its value. Yet it may become necessary for a variety of reasons, such as a merger, acquisition, sale, or purchase, estate or gift tax requirements, buy/sell agreements, litigation, or estate planning. An objective, professionally prepared business valuation can offer timely answers to critical questions that face owners of closely-held companies.
While it may be appropriate in some cases to commission a formal, independent, external valuation to support taxable gifts, internal sales or loans for employee ownership plans (ESOPs), this type of service can become expensive. Our experience tells us that for many transactions an informal, low cost market valuation will suffice.
The Beringer Group has developed valuation models and has access to large transaction data bases that can give us insight into the prices paid for companies in the same industry/size as our client’s company. This, along with other public data and industry trends, enables us to produce accurate indications of a company’s market value. Our process is a low cost solution for our client’s desire to choose the correct transaction. It is important to remember that the Beringer Group’s internal, informal valuation will not be enforceable in a court of law nor can it be used to support ESOP transactions, some tax submissions, or other instances where an independent third-party valuation is required.
In preparing a business valuation, we use a systematic process to value your business, or a particular segment, as of a specific date, and provide you with the business valuation report that you need
When providing this service, our process will usuallyAnalyze and input your financial data using our proprietary models. be to:
- Identify the purpose of your valuation and users of the report.
- Gather and research data.
- Analyse financial and economic factors.
- Apply appropriate valuation methods and appropriate discounts.
- Reconcile values resulting from the different valuation methods used.
- Prepare a concise valuation report, including financial and economic analysis, an explanation of our valuation methodologies, and a market value estimate of your company.