Real, honest facts to navigate your highest valuation.

While not required by law, the fairness opinion is generally required by one or both parties to a transaction, as it provides an important – and objective – review of the value of the business. It is a type of valuation report commissioned from a qualified third-party financial analyst assessing the fairness of the proposed price based on the current value of the business. 

Reworded source Investopedia:  https://www.investopedia.com/terms/f/fairness-opinion.asp

The valuation analyst is generally under considerable time pressure to complete the assessment and must nevertheless provide the utmost accuracy and attention to detail. Therefore the analyst’s due diligence process must be clear and well-defined, and generally includes an on-premises assessment of the seller’s business and careful review of the seller’s prior financial performance and factors impacting future revenue projections. The analyst’s report is then submitted to the company’s management and board, and the resulting discussions regarding each point in the report are then summarized in a letter of memorandum

Culled and rewritten from these sources:

https://www.investopedia.com/terms/f/fairness-opinion.asp

https://www.stout.com/en/insights/article/fairness-opinions-a-brief-primer 

https://corporatefinanceinstitute.com/resources/knowledge/deals/fairness-opinion-overview/ 

SHG maintains relationships with many CPA firms. CPAs will often refer valuation to outside parties when they are conflicted and will suggest SHG to their clients for business valuations. Conflicts can arise if your CPA is auditing your financial reports and therefore cannot also benefit financially from their client relationship by providing valuations based on those audited reports. But even when conflicts of interest are not the primary reason, we find that many CPAs prefer to build their practices around accounting and taxation services. Providing good business valuations requires  a significant and ongoing investment in specialized business knowledge, training, and examinations.

Referenced this site: https://valuationresource.com/faq/

Litigation finance is based on the premise that any potential lawsuits your company undertakes actually constitute an asset, similar to receivables that have discounted future value. Such litigation can originate from any action by the firm, a supplier, or a partner that damages the business. If a lawsuit ensues or if the company has to decide to seek recourse through litigation, the issue of how to finance it becomes paramount. Litigation financing is a relatively new option for CFOs and Boards to consider to self-financing or outsourcing the financing of lawsuits to law firms or other external businesses that specialize in this financing. Key to obtaining favorable terms from the potential litigation finance firm is the valuation of the damages incurred and the potential return on investment of litigation. 

Referenced these sites:

https://lakewhillans.com/articles/raise-capital-litigation/?gclid=EAIaIQobChMI9IWcq9v58AIVPweICR2oVgsoEAAYBCAAEgJRUPD_BwE

https://valuationresource.com/what-we-do/ 

There are numerous avenues to cash out of the business you’ve built. Owners of privately held businesses need to start early to plan for succession to family members, partners, or other 3rd parties interested in purchasing the business. A fundamental part of succession planning is securing a valuation for the business. This involves an intensive study of factors such as shared equity, assets, future profits, and tax implications. While there are do-it-yourself options and low-cost commodity valuation firms, you are much better served by securing valuation with a firm that will include in its valuation report recommendations to enhance the value of the deal for you and your shareholders. 

You can also seek an independent buyer for your business if no-one within the firm is a suitable candidate for purchasing the company. Depending on your business, you could look to upstream buyers of your product or downstream suppliers of materials. Most business owners are more likely to get greatest value from selling if they work with a firm that specializes in finding the right buyer and negotiating and overseeing the transaction. Many firms that do this operate strictly as brokers, posting your requirements on commonly accessible databases and seeing who bids. SHG recommends the use of brokers for smaller transactions with retail-oriented businesses such as coffee shops, nail salons, or restaurants. But for larger transactions an experienced advisory service helps you determine the optimal value and criteria for a deal, and then conducts a customized search to locate buyers who meet these requirements. SHG is unique in that we provide the full spectrum of customized valuation, advisory, and transaction service needed to enhance the value of your transaction.

There are many other exit strategies. Consult with an SHG M&A expert to learn more about how to plan and execute your exit from the business in a way that maximizes the value you yield while ensuring that the business will continue to prosper, and employees will be retained.