We generally request management forecasts to assist us in preparing a valuation of a business. The forecast helps us gain a better understanding of the expected trends of the business. For those businesses that are in start-up mode or going through some significant changes, we would ideally like to have a two or three year … Continue reading »
If you are considering establishing, buying into, or bringing a new shareholder into, an incorporated business, we strongly suggest that you get a shareholders’ agreement at the outset of the relationship. Shareholders’ agreements, among other things, set out how key business decisions are to be made, define how the shares of the company are to … Continue reading »
From a business valuation perspective, non-operating assets (often referred to as “redundant” assets) are assets owned by a company, but not used in the day-to-day operations of the business. Common redundant assets include cash, marketable securities, loans receivable, unutilized equipment and vacant land. The identification of non-operating assets is an important step in the valuation … Continue reading »
Weighted average cost of capital is the cost to a business of raising capital. This capital can take the form of equity (common or preferred shares) or debt, or some combination of debt and equity. The cost of debt is generally determined to be the interest rate which would be charged to the business if … Continue reading »
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 »
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 »