Fairness Opinions & Valuations

THE LOCKEBRIDGE CONSULTATIVE VALUATION

The LockeBridge Consultative Valuation is much more than the typical calculation of value.  We don’t merely “run” numbers. During the information collection process we seek to identify value enhancing strategies. Such strategies can include:

· Modification of working capital
· Identification of value deflators
· Identification of value enhancers
· Change in legal entity type

We believe that “most businesses would obtain higher valuations if owners had focused on polishing those aspects of their operation that drive value up prior to a liquidity transaction. The fact is that often times the businesses owned by our prospective clients are not value maximized prior to a liquidity event.” 

How defensible/credible the report must be will generally be dictated by the client’s purpose for commissioning the appraisal.  Most valuations prepared for internal private company use, for the purpose of supporting a transactional decision, do not require a full formal valuation report. On the other hand, valuations used for litigation, including partnership, shareholder and family conflicts, business torts and contract disputes must be highly defensible and therefore require the appraiser to consider multiple valuation methods with references to industry and economic outlooks.

What Type of Valuation Do I Need?

The table below lists the major variables in determining the type of valuation you need.

 FMV ReportCorporate ValuationFull Formal Valuation
INTENDED USEInternal or 409ATransactionalLegal/Tax
COUNTER-PARTY RISK*None - LightModerate - High
High
DEFENSIBILITYModerateHighVery High
NUMBER OF VALUATION
METHODS
122 - 3
PRO-FORMA REQUIREDSometimesYesYes
ECONOMIC
REPORT
INCLUDED
NoOftenYes
INDUSTRY
REPORT
INCLUDED
NoOftenYes

*Counter-Party Risk – Potential risk of opposition to the valuation. 



FAIR MARKET VALUE REPORT

The objective of Fair Market Value Report (“FMV Report”) is to express an approximate indication of value based upon the performance of limited procedures agreed upon by the appraiser and the client. An FMV Report can be appropriate for shareholders who require a ball-park estimate of value, 409A valuations used to set the strike price for options and granting equity-based incentive awards, a starting point for sales negotiations, or perhaps to achieve a better understanding of a company’s value drivers. Often an FMV Report is followed by advisory services to prepare the business and the owner for subsequent sale.

The deliverable will include both a determination of Fair Market Value and the basis for determining this valuation.  One valuation methodology will be utilized. The report may not contain any reference to macro-economic nor industry specific conditions.               

 

CORPORATE VALUATION

The objective of the Corporate Valuation is to express an estimated value of the business, business ownership interest, or security at a  high level of defensibility. The deliverable will include: (1) An estimate of value utilizing one or two valuation methods, as deemed appropriate by the Appraiser and (2) A report on economic conditions in the vertical in which the Company operates, which is used to inform the Company value.

The Corporate Valuation is appropriate for uses such as:

· Bankruptcy/Reorganization
· Buyouts
· Buy-Sell Agreements· Dissenter’s rights
· Divorce
· Employee Stock Ownership Plans
· Estate & Gift Taxes
· Litigation
· Loan Acquisition
· Mergers & Acquisitions
· Purchase Price Allocation

 

FULL FORMAL VALUATION

The objective of a Formal Valuation is to express a well-supported, highly defensible 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. The deliverable will include: (1) An estimate utilizing multiple valuation methods (2) A report on macro-economic conditions and the potential impact of such conditions on the value of the Company and (3) A report on the conditions within the vertical in which the Company operates and the impact of such conditions on the Company value. 

The Full Formal Valuation is appropriate for uses such as:

· Tax reporting
· ESOPS
· Litigation
· Financing
· Bankruptcy

              

APPRAISAL REVIEW

We are occasionally asked to review and critique a report issued by another appraiser. A letter describing the review and critique is typically issued.