How much is a given business worth? How much is a particular shareholder’s interest in that business worth? How much are a company’s intangible assets worth? These questions arise in a variety of situations. It is important to recognize the need that fits your purpose and conduct the valuation accordingly. Defensible opinions of value are necessary for many reasons and each reason may require a different approach and utilize different assumptions. Delphi Valuation Advisors, Inc. provides independent business appraisals to assist clients in a wide variety of situations.
There are three acceptable scopes of valuation assignments as described by the Business Valuation Standards:
Full Appraisal: The objective of an appraisal is to express an unambiguous opinion as to the value of the business, business ownership interest, or security, which is supported by all procedures that the appraiser deems to be relevant to the valuation.
- All relevant information is considered.
- Appraiser collects and analyzes all information expected to be relevant to the valuation.
- All conceptual approaches deemed to be relevant by the appraiser are considered.
This is mandatory for all valuations conducted for purposes of tax, ESOP, litigation and financing.
Limited Appraisal: The objective of a limited appraisal is to express an estimate as to the value of the business, business ownership interest, or security, which lacks the performance of additional procedures that are required in an appraisal.
- Limited relevant information is considered.
- Appraiser conducts only limited procedures to collect and analyze information expected to be relevant to the valuation.
- Only those conceptual approaches deemed to be most relevant by the appraiser are considered.
This can be used for a buy-sell agreement or for decision to buy or sell a company (strategic, pricing analysis).
Calculations: The objective of calculations is to express an approximate indication of value based upon the performance of limited procedures agreed upon by the appraiser and the client.
- Limited relevant information is considered (usually from financial statements only).
- Appraiser performs limited information collection and analysis procedures.
- The calculations may be based upon conceptual approaches as agreed upon with the client.
This can be used for initial-stage strategic planning.
NOTE: Given these three scopes, we can be hired as valuation consultants as opposed to being independent appraisers. However, only in a full appraisal are we providing an opinion of value.
Also note that other appraisal standards define these scopes differently. Please call us to discuss these further.