Case Studies

If you are looking for a business valuation you’re being prompted to do so. Most likely for one of the following reasons:

  • You are thinking about retiring – how much can you count on receiving if you sell? How do you make sure you aren’t short-changed when you sell your business? (Case Study 1, Case Study 2)
  • You or your business partner(s) is leaving the company and you’re looking for a fair price. (Case Study 2)
  • You are going through a divorce – you aren’t necessarily selling, but you need to know the value so you can provide it to your attorney.
  • You need the value for estate or gifting purposes – planning or otherwise. (Case Study 1)
  • A large bucket of “other reasons” such as stock option valuation/employee compensation or negotiating tools. (Case Study 3)

Case Study 1

Case Study 1

Mr. COO ran a machine shop that was owned by his parents. The Company made specialty valves, caps, pins, and other custom products for a variety of industries. Although this Company was a highly profitable, the valuation report that he received demonstrated a discount for lack of marketability and a lack of control for tax purposes. The valuation was used for gifting purposes – Mr. COO became Mr. CEO and received a large share of a valuable Company. His retiring parents were able to shelter a large portion of their estate from taxes and still collect the dividends of their hard work.







Case Study 2

Case Study 2

Partners A & B owned a manufacturing plant that made O&G products required for drilling new wells. One day, the IRS showed up to seize Partner A’s assets. Partner A had not filed his taxes for several years, including peak years of the O&G industry. Partner B gave up a large chunk of his retirement nest egg to make the IRS go away, but it was time to dissolve the partnership. The valuation report showed the business value and why the business was worth X. The time to sell the Company was at the peak of the O&G cycle. Now there weren’t many buyers and many competitors were shutting their doors unsold.

Using the valuation report, Partner A and B worked out a sale. Partner A may not have been  100% happy, but he knows that Partner B didn’t cheat him. With the valuation report Partner A was able to understand what the value was at the time of sale and why. Partner  A had a road map for the future. He had a plan increase the value of the Company so that he should not only be able to recoup the investment in the Company, but grow it as well.

Case Study 3

Case Study 3

Mr. Manufacturing CEO made an agreement 10 years ago with his management team. He would gift options to buy at date X to his team.  But how much were the options worth?

The Company’s product was a specialty O&G drilling product. When the Company was valued some of its customers were going out of business. The Company was still well positioned; the Company’s product greatly reduced the cost to drill a well and while other companies were going out of business. The Company was increasing its market share. 

Using the valuation report for fair market value the Mr. Louisiana CEO decided to gift his team shares instead of gifting options. The report was used for the employee’s IRS reporting purposes. Mr. Louisiana CEO presented the valuation report to his business broker and developed an exit plan to maximize the sales price.

Don’t Leave Your Valuation to a Non-Expert.

Make sure that whoever you choose to do your valuation takes your business a seriously as you do. A poorly performed valuation can lead to a variety of issues including:

  • Leaving money on the table when you sell your business.
  • Setting expectations too high when negotiating with a buyer, resulting in a failed transaction.
  • Paying too much estate tax or having to defend a tax audit.
  • Paying too little estate tax and incurring additional fines.
  • Damaged relationships between family members, partners, and employees

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