Why use valuations for the sale or purchase of an equity interest?
Owners of companies may consider the sale of equity interests for many different reasons: to raise capital, to support a shareholder buy-out, to establish share value for or comply with buy-sell agreements, or to transition out of the business by selling 100% equity. In addition, companies may consider the purchase of partial or whole interests in other companies to expand geographic markets, diversify product lines, or improve the supply chain. A valuation of the subject interest by a qualified, independent valuator provides key decision-makers with the critical information they need in order to determine whether the sale or purchase of equity will provide the expected value.
Buy-sell or shareholder agreements often require qualified, independent appraisals of equity interests being considered for sale or purchase. Even if an appraisal is not required by corporate governance policies, owners and executives should consider obtaining an opinion from an independent valuator whenever transactions in equity interests occur or are being considered, including:
when a potential transaction may come under scrutiny by minority shareholders
a transaction that presents a possible “conflict of interest”
the issue of a security that could be perceived to unfairly benefit or impair another class of securities
when similar transactions occur with different prices or structures
if a board or executive team wants to provide owners with a high degree of transaction “diligence”
when a transaction between related entities occurs
when equity is used for compensation
The Business Valuation, Inc. Advantage
BVI’s experience includes valuing small to large companies in industries comprising manufacturing, professional services, healthcare, technology, construction and engineering, food services, consumer goods, distribution, transportation and logistics, and utilities. Our experience includes valuing the transfer of equity interests for both buyers and sellers for a variety of reasons, including all of the scenarios previously listed.
Who can benefit from the purchase or sale of interest valuations?
Business owners and corporate executives benefit from the clarity valuations provide when considering the sale or purchase of equity interests. BVI’s experience providing thorough, understandable, and defendable opinions of value for a variety of transactions in a broad range of industries gives owners and executives peace of mind when considering or executing the purchase or sale of equity interests.