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Valuations

Successions

Selling

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Valuations

Valuation Services

Probably the most common reason for performing a business valuation is that either the buyer or the seller of the business, or both, wish to have an objective and independent, professional appraisal of what the business is worth. Often, these valuations are used as the basis for the negotiation of the selling price. There are, however, a number of other reasons for getting a business valuation. Some of the most common ones are listed below.

Mergers - When two companies merge, it is necessary to determine the relative values of both companies in order to determine the proportion of ownership each set of shareholders will have in the new merged company.

Obtaining Financing - Companies need financing because they are expecting to grow the business and expect, for example, accounts receivable and inventories to increase faster than their accounts payable.

Most businesses have created valuable brands, goodwill, customer lists, proprietary processes and knowledge that do not show up in financial statements. Some companies that have large investments in real estate and equipment, may find that the earning ability of those assets is far greater than their depreciated book value. A professional appraisal will support management’s request for financing.

Estate Tax Planning and Gift Taxes - Determining the value of closely held businesses is important for estate planners as well as when determining the value of lifetime gift transfers that includes stock.

Minority Interests - Many companies try to accommodate minority shareholders who seek liquidity and who may not have good alternatives other than selling their shares back to the company. A valuation is a way of determining the fair market value of the stock in a buy-back.

As a Management Tool - An independent and objective business valuation provides an effective way for a business owner to benchmark his business and compare it to other similar businesses in the industry and gain a new perspective. It can help management discover weaknesses in the business as well as overlooked strengths that may be capitalized upon when developing strategic plans or exit strategies.

The valuation can be a very useful tool for business owners planning an exit strategy since it can provide valuable insights on how "the market" determines value and what needs to be done to make the business more valuable in advance of the transition.

Successions

Exit or Succession Planning

Exit Planning is based on one simple premise, that at some point in the future, every owner leaves their business, voluntarily or otherwise and at that time they will want to receive the maximum amount of money in order to accomplish personal, financial and estate planning objectives.

Few business owners give this much consideration while starting or running their business, however, at some point it will become important.

Sometimes the exit may be forced upon an owner such as death of a partner or co-owner, divorce, realization that the competition is winning, pressure from family or debilitating health. If the process of exiting a business and succession is not done against an organized plan, it will inevitably be done by crisis, with perhaps catastrophic results.

Formulating an exit plan will provide a clear understanding of the ownership transition goals and the various steps, which will be required in order to achieve them. An owner/shareholder must begin to become clear about their attitudes to some very basic questions such as:

• How much longer they intend working?
• What chances are there of surviving in good health to that date?
• What would happen to the business if they did not?
• What could the tax implications be and how much after tax income will be needed when they get there?

What ever exit route is taken, there is one very important item to remember and that is that typically, business owners achieve operational success based on learning, trial & error, making mistakes, and experience. In the respect of the exit from their business, in the vast majority of cases, they only get one chance.

Attorneys/Accountants

Attorney/Accountants

MD Johnson, Inc. has represented the largest automobile dealership groups, private and public, in the Country. Our success ratio is 100% on every engagement we have entered into.

We give your clients real world data when working on the valuation process. We bring your clients many years of experience in the buy/sell process. We are the only “transaction management” firm in the Country whose practice is solely the automotive industry.

The difference to you and your client is that we execute a detailed list of services, along with the engagement period and up to two years post-closing.

We are associate members of the National Auto Dealers Counsel (NADC), members of many dealer organizations, and members of professional organizations.

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