During a divorce, the party’s respective solicitors will seek to achieve a fair financial settlement on their client’s behalf. If one party is a shareholder in a privately owned business, it will be necessary to value the company in order to achieve that fair settlement.
The court will want to know what the shareholding is worth and the level of income the company can generate.
At a preliminary hearing the judge will consider the need for a valuation of the business. If – as is usually the case - the parties cannot agree a figure, the court will request a valuation from an independent valuation expert. The business valuer will need to be given access to all the information necessary to complete a valuation of the company, or a party’s interest in it.
There are a number of methods of valuing a private company. The most common valuation approach when valuing a trading entity is an earnings based valuation, which examines the future earnings potential of the company. An earnings multiple ratio is applied to an assessment of the maintainable earnings of the company with the valuer reviewing comparable companies and ongoing deals with other companies to achieve this. A discount may be given to minority shareholdings which can often be difficult to realise.
The second most common approach is an asset based valuation. This is particularly appropriate where the value of the company may be largely influenced by its fixed assets or if it is not possible to quantify value based on an earnings multiple.
A discounted cash flow (DCF) valuation looks at the company’s anticipated cash flow well into the future and then applies an appropriate discount rate. This method may be relevant if the company’s future cashflow can be estimated with reasonable accuracy.
Reports produced by R A Valuation Services are bespoke and geared to the unique circumstances and requirements of each instruction. We are recognised as ‘Expert Witnesses’, having supplied business valuation reports to many UK courts.
We are happy to explain the process and what you would need to provide, so why not phone the office on 01425 402 402.
An expert business valuation supported by a professionally prepared Valuation Report from an independent and authoritative source is an essential aid for:
Valuation Reports produced by R A Valuation Services Ltd are bespoke and geared to each client’s individual circumstances and requirements; they are definitive and realistic in the market place. As we are recognised as expert witnesses for supplying Valuation Reports to UK courts and HMRC queries/challenges, we are acknowledged to be the authoritative business valuer by:
R A Valuation Services' Valuation Reports are tailor-made for their purposes, definitive and realistic in the market place. Indeed, such is their authority that an R A Valuation Services' Valuation Report is normally insisted upon in support of negotiations.