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Business Valuation

Valuation of Business Interests

Business valuation includes the provision of either valuation opinion or valuation consulting services for the valuation of aggregate business interests or business enterprises.  Such analyses are performed for:

  • Transaction planning
  • Purchase or sale of businesses
  • General business purposes
  • Financial statement or tax reporting purposes
  • Collateral or secured financings or refinancing
  • Litigation or dispute resolution purposes

Typical illustrations include:

  • Valuation or appraisals of businesses, business ownership interests, securities, and partnership and limited liability company interests in private, publicly held, or government entities.
  • Valuations or appraisal estimates or analyses involving estimates of fair value of aggregate business enterprises in connection with an entity's financial statements pursuant to pronouncements issued by regulatory authorities, or financial or accounting standards-setting bodies (e.g., Hong Kong Financial Reporting Standards (HKFRS), including HKFRS 3, Business Combinations, and HKFRS 5, Non-current Assets Held for Sale and Discontinued Operations (and International Financial Reporting Standard (IFRS) equivalents; FASB Statement No. 141, Business Combinations; FASB Statement No. 142, Goodwill and Other Intangible Assets; FASB Statement No. 157, Fair Value Measurements).

Intangible Asset Valuation 

Intangible asset valuations include the provision of either valuation opinion or valuation consulting services for individual or multiple intangible assets or liabilities and intellectual property where the results are used for:

  • Financial statement or tax reporting purposes
  • General business purposes
  • Transaction planning
  • Purchase or sale of assets
  • Licensing or relicensing
  • Collateral or secured financings or refinancing
  • Litigation or dispute resolution purposes

Typical illustrations include:

  • Valuations in connection with an entity's financial reporting requirement in the context of business combinations (e.g., HKFRS 3, IFRS 3, FASB Statement 141) or in connection with the external audit of fair value measurements.
  • Valuation of and/or estimates of remaining useful life of individual intangible or intellectual assets (e.g., customer lists, customer relationships, brand or trade name patents, trademarks, software, distribution rights, contractual rights or obligations, franchisor or franchisee, licensor or licensee rights and leasehold interests).

Fairness Opinions

Fairness opinions involve the provision of a report, generally to a Board of Directors, deliberating the purchase or sale of assets or business interests.  There is usually a presumption that the Board of Directors will rely on the fairness opinion in reaching its conclusions on proceeding with or completing a transaction.  There is also a presumption that other third parties would need to have access to the fairness opinion or that the reference to the fairness opinion report may be needed in publications or filings available to the general public.

Fair Value Studies

"Fair, adequate consideration or reasonable value" type reports include a broad category of valuation-based services usually provided in connection with requirements arising during the purchase, sale, or transfer of assets or interests or as a result of contractual, governmental, regulatory, or statutory requirements such as disclosures in financial statements as stipulated by FASB and International Accounting Standards Board (IASB) and national regulatory bodies.  As a result, assets and liabilities need to be analysed from a fair value perspective.  These services include:

  • Valuation analyses or estimates of value required in connection with articles of association, by-laws, or other forms of shareholders' agreements.
  • Estimates of value required under contracts between parties or resulting from disputes between parties.
  • Valuation analyses related to tax mitigation and/or planning.
  • Preparation of estimates, analyses, and reports concerning matter of tax, financial, or accounting solvency frequently involving either "balance sheet" tests on the value of assets (Impairment testing studies (HKFRS5, IFRS 5, SFAS 142, 144), valuation of investments, derivatives securities and inventories).
  • Adequacy of consideration, for example, "contribution-in-kind" paid or received, in connection with a specific transaction or event.

Valuation services provided in connection with fair value studies and fairness opinions generally are based on legal or statutory requirements and may involve unique or nonstandard valuation procedures and/or definitions of the standard of value measurements.  Services provided in connection with these types of requirements involve specialized knowledge and experience.

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