Valuation

Valuations are often needed for a variety of federal and state tax planning and compliance purposes. These valuations can come with major financial implications and scrutiny from the IRS, courts, and other agencies. Anders has significant valuation experience in the following areas:

• Gift and estate tax planning
• Charitable contributions
• Partnership tax planning and compliance
• Employee compensation
• Purchase price allocations for domestic acquisitions
• State and local tax planning and compliance
• Legal entity restructuring

In a business combination, companies must navigate a range of often-confusing accounting guidelines. Properly following these guidelines can have a profound impact on the transaction’s success. At Anders, our team of valuation advisors helps clients navigate the financial reporting and tax treatment process for business combinations to ensure a seamless and stress-free transition. Our valuations have withstood the scrutiny of the acquirer’s auditors and the IRS. We can assist you with valuation needs arising in the context of ASC 805, including:

• Pre-acquisition valuation analysis
• Valuation and economic life analysis of acquired real estate, machinery and equipment, and identifiable intangible assets
• Allocation of purchase price and goodwill to reporting units
• Fair value measurement of contract liabilities such as deferred revenue and other liabilities
• Legal entity valuations for tax purposes in connection with a business combination
• Valuation of contingent consideration
• Valuation of contingent assets and liabilities
• Fair value measurement of the consideration transferred and any remaining noncontrolling interests

Upon recognition on the balance sheet, goodwill and indefinite-lived intangible assets are tested for impairment at least annually under ASC 350, or after a triggering event. At Anders, our team has an understanding of the valuation requirements of ASC 350 and ASC 360 and the key areas of concern to auditors. We assist our clients with a variety of issues in the impairment testing of goodwill and indefinite-lived intangible assets, including:

• Support for the optional Step 0 qualitative assessment as part of the goodwill impairment test, and as part of the impairment test for indefinite-lived intangible assets
• Measurement of the fair value of reporting units, including consideration of market participant assumptions and allocation of shared assets
• Estimate of the fair value of the debt of the reporting units when the goodwill impairment test is conducted at the equity level
• Comparison of reporting unit values to the overall entity value to assess the implied control premium inherent in the reporting unit fair values
• Measurement of the fair value of indefinite-lived intangible assets

Our team also has experience with ASC 360 and the fair value of long-lived assets. We can assist in determining the recoverability and fair value measurement, as required,  including:

• Analysis of projections to assess whether the undiscounted cash flows provide for the recoverability of the asset or group
• Measurement of the fair value of the asset (or group) using appropriate valuation methods, for those that fail the recoverability test
• Measurement of the fair values of the assets within an asset group to assist with the allocation of impairment loss

Successful businesses focus on creating intangible value and innovation to drive business value. Understanding the value of your business’s intellectual property can help you understand the true value of the business and take advantage of the value of assets that might currently be unaccounted for on the business’ balance sheet. There are a number of ways in which determining the value of your intellectual property can provide a tangible benefit:

• Assessing the value of a patent or trademark may simplify your licensing process and help you determine an appropriate royalty rate to charge for use of your patent or trademark by a third-party
• If not currently accounted for, assigning a supported value for your intellectual property may increase the book value of your business and improve your opportunities for financing
• If you’re an early-stage business, having formal intellectual property rights can drive greater opportunity for outside investment, and a sound valuation of the intangible asset can help communicate that value to potential investors

A key component of a succession plan is a business valuation, which can significantly impact gift and estate taxes, the structure of shareholder agreements, and the assessment of strategic alternatives. Business owners can create a successful long-term succession plan, avoid potential conflicts among family members, and align corporate and shareholder objectives by understanding the value of the business. It’s critical for owners to:

• Partner with a valuation specialist who understands the complexities of succession planning and business value, and
• Will collaborate with you and your advisors.

Anders assists business owners with valuations in connection with buy and sell-side opportunities, as well as the establishment of buy-sell agreements and estate planning. We routinely work with trust and estate attorneys, CPAs, corporate attorneys, wealth advisors and business owners.

As a company moves toward a transaction, the strategy and planning process is critical. Anders advisors guide business owners through key valuation and business modeling to understand the impact of a range of outcomes. Our capabilities include:

• Providing robust quantitative analysis, insight, and evidenced-based analytics to provide you with the information needed to make the right strategic and operational decisions
• Helping you understand the costs, benefits, uncertainties, and risks so that you can make sound strategic decisions around capital allocation
• Performing sensitivity analysis to demonstrate the impact of changes to key value drivers and assumptions
• Assisting in assessing and refining business model assumptions and inputs, assessing the supporting data and other necessary activities to make important decisions and improve outcomes

In turning to a commercial lender for a business loan, expect the focus to be on the company’s cash flow. One cause of disagreements between business owners and lenders is the way in which the value of pledged assets is determined.

Lenders will often use what is called a “liquidation” premise of value. This reflects a worst-case scenario in the event the business fails to repay the loan. For an owner of a profitable business, the typical premise is “value in use.” Under this premise, the resulting business valuation is generally considerably higher. Thus, depending on the premise used, the valuation results and the amount of the loan can vary dramatically.

Given these scenarios, it is important for the business owner to engage a qualified valuation specialist. Anders has valuation advisors with the depth of experience, credentials, and qualifications to provide sound, objective, and credible business valuations that can be relied upon by lenders, increasing the likelihood of a successful outcome.

A successful outcome in many legal disputes can depend on well-prepared evidence. At Anders, our team uses extensive valuation experience to assist clients, attorneys, and other advisors in connection with a range of issues and can provide expert witness testimony in support of our work. We routinely provide clients with valuations and related analyses for litigation support.

Examples of litigation matters in which a sound valuation report and expert are needed include:

• Shareholder disputes
• Marital dissolution
• Bankruptcy
• Loss of business value resulting from a specific event

We can provide testimony in depositions and trials and also serve as a third-party appraiser, which may be jointly hired by the involved parties or court-appointed.

We combine our experience with complex financial modeling and expertise in corporate finance to assist clients with solving complex problems and bringing to light the key issues. Our team has a passion for collaborating with our clients to understand the most critical questions facing their business and developing decision-making tools that provide business owners with greater confidence in their understanding of the key drivers of their business’s risk and return. We work with our clients to scope, build, and test financial modeling solutions. We are also able to draw from our industry experience, insight and technical skills to solve problems. Areas in which we can provide support include:

• Buy-side and sell-side support in connection with a transaction
• Financial planning and analysis
• Management and bank reporting
• Optimization of business profitability
• Identification and quantification of KPIs