Business Valuations and Machinery & Equipment Appraisals in Charlotte NC
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Business valuators and other folks typically include the market approach to ascertain the value of a business. The approach tends to be the most intuitive and easy to understand. But users of the comparable sales databases often encounter the inclusion of distressed sales and synergistic sales in the database. Unlike most transaction databases the Peercomps database excludes distressed sales or transactions at the investment (synergistic) level of trade. This is very helpful when the preparer of the valuation desires to the know the fair market value of the target business.
The Peercomps database consists solely of SBA transactions and the SOP 50 10 (7) .1 which governs the SBA program do not allow the lenders to loan for the purchase of a distressed business neither does the SOP allow for a buyer to purchase a business for greater than fair market value. This peer reviewed article discusses the advantages of using the Peercomps database. It also sheds light on which assets are included in the market value of invested capital for each transaction.
This peer reviewed article discusses the highly debated topic regarding whether a controlling interest in private equity can suffer from a discount for marketability. It is well documented that minority interests of private equity can suffer from a lack of marketability. The studies valuators rely upon to quantify the discounts for marketability for minority depict that the discount can range anywhere from 13%-72%. But there are no empirical studies to measure any lack of marketability for control interests of less than one hundred percent.
The solution provided in the article to quantify whether a discount for lack of marketability exists is based upon the internal rate of return calculated for the hypothetical buyer of a minority interest. An example with assumptions is provided to demonstrate the usefulness of this methodology. Using the IRR function in excel the author calculates the IRR for a hypothetical buyer of a 51% interest in a Heating Ventilation and Air Conditioning business. The methodology employed in this article provides the valuation community, attorneys, bankers, business brokers, and others with a quantifiable means to ascertain if a discount for marketability exists for a controlling interest of less than one hundred percent.
Machinery & equipment appraisers are often asked to value equipment at different levels of trade e.g., value installed, value in continued use, orderly liquidation value, etc. For example, a bank may need to know the liquidation value of equipment in the event they have to foreclosure on the business. Understanding and applying the correct standard of value and level of trade is required by the Uniform Standards of Professional Appraisal Practice. But what happens when an equipment appraiser uses an incorrect standard of value and an incorrect level of trade to value machinery & equipment? The answer is it creates chaos for the end user.
In this article the author details how to discern the level of trade comparable sales or comparable ‘for sale’ assets are traded at. This article stems from the author’s personal experience working on behalf of Mecklenburg County, North Carolina to thwart a business personal property tax appeal made by a large North Carolina based company. The opposing appraiser hired by the company used ‘for sale’ assets identified on auction sites, e-bay, etc. to estimate the value of installed equipment. The author used ‘for sale’ assets held at the fair market value level of trade. The deficiencies in the method used by the company’s appraiser included not accounting for installation, shipping, assembly, disassembly, effective age, condition, etc. The Court of Appeals and Supreme Courts of North Carolina ultimately upheld the County’s appraisal and refuted the appraisal made on behalf of the company.
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Do you want to know what your equipment is really worth? Are you wondering if your business could benefit from getting a business valuation? If so, you have come to the right place!
FREE Sample Appraisal Report
Do you want to know what your equipment is really worth? Are you wondering if your business could benefit from getting a business valuation? If so, you have come to the right place!
Business Valuations and Machinery & Equipment Appraisals in Charlotte NC
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