Crain’s Detroit on Valuation Services

An article by Crain’s Detroit caught our eye recently. It’s a great, quick writeup on some of the reasons that people and companies engage us for business valuation services. We find that in casual conversations a lot of people focus on business purchases or selling a business as the main driver of ordering a valuation.

Crain’s astutely points out a few other items:

  • Estate and gift planning
  • Bringing in a partner / stock incentives
  • Exit planning
  • Leverage in loan negotiations

We’d add a few more:

  • Buy-Sell Agreements.  We do a lot of work related to partnership disputes.  Often underpinning those disputes are a badly drafted buy-sell agreement, an outdated agreement, or simply the fact that one was never drafted.  While we can always work on a valuation services engagement that’s triggered in the buy-sell agreement, consider engaging a valuation at the time of drafting to ensure all partners have reasonable expectations.
  • SBA Financing. Depending on the size and characteristics, the SBA 7(a) loan program has a hard mandate for a third party appraisal
  • Purchase Price Allocation
  • Financial Reporting


Are 409(a) Stock Option Valuations Really Optional?

And finally, one comment on the Crain’s article.  Crain’s mentions that valuation services might be required  to “establish a number” for issuance of stock options.  We’d suggest that a valuation in these situations is likely not an option as outlined under Section 409(a) of the Internal Revenue Code.  Non-qualified, deferred compensation likely requires a valuation – check with  your legal counsel to be sure.





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