The commonly accepted definition of fair market value used by Chartered Business Valuators is “the highest price available in an open and unrestricted market between informed and prudent parties, under no compulsion to act and acting at arm’s length, expressed in terms of money or money’s worth”. While this may seem like an overly wordy … Continue reading »
EBITDA is an abbreviation that stands for earnings before interest, taxes, depreciation and amortization. EBITDA is an approximate measure of the cash flow available to the owner of a business prior to capital expenditures, working capital and debt-servicing requirements and income taxes. Other measures of earnings include: net earnings, net earnings before income taxes, EBIT … Continue reading »
In order to prepare a valuation of your business, we will need to review the financial position, recent financial results and the key operating characteristics of your business. In preparing our valuation report, we will typically require the following information: 3 to 5 years of historical financial statements and a current budget or forecast, if … Continue reading »
Value is prospective. In valuing a business, the valuator is trying to determine what a notional buyer would pay today for a series of expected future cash flows. For large companies or companies undergoing rapid growth or significant changes in their business, this usually requires the development of a detailed cash flow forecast looking several … Continue reading »
This is probably the question that we get asked the most by business owners. Unfortunately, the best answer to this question is probably: ‘it depends…..’. Many people think that valuators have a ‘black book’ or database where they can simply look up the appropriate multiple for a given industry or type of business. However, most … Continue reading »
There are many different business brokers operating these days and almost as many different fee structures. The standard fee structure that we have found to work well for sales mandates is: a small monthly work fee for the duration of the engagement; and, a percentage success fee upon the closing of a transaction. The amount … Continue reading »
Generally speaking a minority shareholding is an interest in 50% or less of a corporation’s outstanding shares. The value of a minority shareholding may be less than the pro-rata value (percentage of outstanding shares multiplied by the ‘en bloc’ value of the company) due to a minority shareholder’s inability to control the corporation. In most … Continue reading »
Whether your business has coverage under a business interruption insurance policy for having to evacuate the business depends upon the wording of the policy. Most insurance policies we have reviewed do provide for coverage if the business is forced to be evacuated under civil authority. However, the time period for this type of coverage is generally … Continue reading »
In the spectrum of business valuations, traditional thought has held that valuations prepared for tax purposes are the lowest risk valuations. The tax practitioner need only ensure that the file is adequately ‘papered’ and that a price adjustment clause is included in the transfer agreement. However, in our practice we have seen an increasing number … Continue reading »
Although one of the first things we ask for when preparing a business valuation is the company’s previous five years of financial statements, this isn’t the only information we rely on. The concept of business valuation is forward-looking. For stable businesses, past earnings are generally indicative of expectations for future earnings. However, in situations where … Continue reading »