Every valuation engagement is unique and dependent upon a wide range of considerations, observations, and assumptions. One business can have multiple valuation conclusions based on the purpose at hand, intended user, date of the valuation, state of the economy, revenue/earnings stream considered, and normalizing adjustments utilized in presenting financials to name a few. The following article highlights the most common issues associated with divorce valuations. Read more
Valuations are often required when a privately held business is part of a marital estate. In order to perform a division of property the parties must know the value of the asset, and in the absence of a public market price a third party valuation is required.
For the purposes of business valuation for divorce, we first look at standards of value. A quick definition: standard of value is defined in the International Glossary of Business Valuations as:
“the identification of the type of value being utilized in a specific engagement.” Read more
Estimating a value of intangible assets such as goodwill can be highly speculative. This is often a significant point of contention in scenarios involving two parties rallying for a fair market value of a business. We see it all the time in divorce proceedings. Read more
One of the key components of valuing a business involves normalizing (adjusting) financials to reflect the earnings associated with the operations of the business. This oftentimes entails removing fringe benefits and perks as well as adjusting for a normalized Shareholder salary that would be required for an owner/manager to perform the tasks of said Shareholder.
Double dipping within a valuation utilized for divorce proceedings is the concept in which the same income stream is counted twice; first in the property division, and again in the alimony determination. A company’s earnings stream is most often used to value an owner’s interest, and in turn, determine the equitable distribution of property. The Shareholder’s alimony obligation will be based, in part, on their income received from the business. If the company’s profits are considered as part of the owner’s total income for support purposes, then that income utilized to value the business for the property division is being used a second time. Read more