Business Valuation for mid-market privately held businesses

Business Valuation

Do you know the value of your business?

Many business owners think they know what their business is worth. But they often rely on informal methodologies, such as a simple formula, to determine the value of their business. Misunderstanding value can mislead the owner while they are making one of the most important financial decisions in their life – to sell or not to sell their business.

It is critical to the success of your financial and business planning that you thoroughly understand the value of what is potentially your largest asset. The process of determining business value is frequently met with frustration and confusion by business owners because of the complexity.

Legacy Partners brings clarity to the business valuation process.

Our world class valuation team has global experience across industries. We perform an in-depth quantitative and qualitative analysis to compute the market value of your company for transaction purposes. We focus not only on the numbers, but also the intangible assets that drive value and ultimately make your company stand out from the competition when you go to market.

Our valuation team has extensive financial modeling, risk analysis, and market experience to provide you with an accurate transaction value to make informed decision based on real data.

Understanding your business value will:

Help you understand the impact of the sale of your business on achieving your personal financial goals
Highlight gaps in value and serve as a guide as you make critical decisions on how to optimize your business while preparing for a future sale
Help you to determine the best time in the maturity of your business to go to market
Uncover any due diligence issues that will prevent the successful sale of your company
Ensure that you are knowledgeable when engaged in the process of selling your business, prohibiting a buyer or their representative from taking advantage of you

Note that the ultimate value of your business will always be what a buyer is willing to pay, which will be driven by the quality of your mergers and acquisitions team as you execute your Master Exit Plan.

Valuation Methodologies used in determining the value of your business:

We use all of the following methodologies in computing transaction value for your business.

Discounted Cash Flow

This income-based approach transforms measures of cash flow into estimates of value

and is considered the most comprehensive approach, demanding significant financial modeling experience. This methodology requires normalizing your financial statements by recasting the historical financials for the owner’s discretionary expenses and one-time or extraordinary expenses. A 5-year pro forma is then created, discounting future earnings based on a discount rate which reflects your company’s risk and in addition computes the residual value.

Comparable Company Analysis

This market approach compares your business to transaction prices that investors have paid for similar companies. In addition to private company analysis we may also consider public company values in your sector and discount the value to reflect the difference in liquidity for a private company. We have an extensive private transaction database that reflects the M&A landscape, and our team has the pulse of buyers who are active in your sector. We know where the capital is flowing and will ensure your value is in line with current market factors.

Adjusted Net Asset Approach

This is a process of understanding the value of the assets on a business’s balance sheet if liquidated or replaced. Replacement value is computed by valuing each asset, as if it was being replaced individually.