Hello SFers
I am looking to buy out my 50% partner.
In doing so, we agreed to get the business valued by a professional valuation firm. Is there anyone who can provide:
1) range of cost for such a valuation (business is approx. $4M revenue and $1M EBITDA )
2) recommendations of those who perform such valuations
3) samples of valuation reports.
Thank you
Business Valuation - Cost and Recommendations
by a searcher from University of Pennsylvania - The Wharton School
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1) Typical valuation is for the whole business. It assumes 3rd party will re-leverage. Say P=5000 consisting of E=1000 and D=4000. Seller gets 5000 cash. The 50% selling shareholder expects 2500 cash. Where would the buying shareholder get 2500? Put more debt on the books? Is selling shareholder willing to take a note or future payments (consulting, salary, etc.). Such factors have to be considered in valuing.
2) EBITDA could be different for 3rd party sale vs. partner buyout especially if there are excess salaries and benefits.
3) 50% purchase is a Stock purchase. And it depends on C Corp. vs. S Corp b/c entity cannot be changed,. I do not know of any tool that address these variables except BuisinessValueXpress (BVX).. I developed it, You can download from www.BVXpress.com. It is an interactive tool for live what-if analysis of value (if ROI is given) or IRR (if value is given) under different structures. .
4) My main practice is M&A (sell-side and buy-side). We don't value, except have done few valuation for partial buy-out due to the BVX software. In most cases the payment has been some cash plus future payments (Seller Note,, but often a non-working salary for retirement purposes). Have not seen more debt on the books to cash out selling partner.
5) For a sale to a 3rd party, seller gives R&W. No such thing from a 50% selling shareholder.
6) Market multiples do not have clarity on Stock vs. Asset and C vs. S Corp.
7) In 2019, an attorney asked me to value a business for one brother to buy out 2 brothers (each 1/3). I gave my valuation under certain assumptions. Our report is an Excel output of few pages. My value was ~$100 M. After my report,, I was sent two formal valuation reports (one by a firm with 10 certified appraisers and other with 30 appraisers, all with CVA or mostly ASA certification).. Their value ranged from $50 M to $140 M. I had to explain the differences. None had considered Stock purchase and C Corp, and one had used market multiples and overlooked non-operating assets.
8) Feel free to DM. No strings.