Estate Gift Tax Valuation.
David Hahn, CVA, ASA, MAFF, CCIM, CM&AA, MBA is an expert in the fields of Business Valuation, R&D Tax Credit Study, M&A Valuation/Advisory, Cost Recovery Studies including Cost Segregation Study, Financial Valuations along with Fairness/Solvency Opinions, Forensic Economic Damages Valuation, Gift & Estate Valuation, Intellectual Property Valuation, and Commercial RE Appraisal. David provides solutions for, and in tandem with, Attorneys, CPA's, Financial Advisory Groups, Governments, Lending Institutions, Corporations, Individuals and others within the realms of Real Estate, Intellectual Property, Trust & Estate and Business Transfers and M&A along with others requiring valuation solutions.
We provide a broad and diverse range of appraisal solutions. We can provide services to this list of property types:
•Commercial - office, retail
•Apartments (5+ Units)
•Industrial / R & D
•Manufactured Home Parks
•Land - Commercial, Industrial, Residential, Subdivided, Acreage, Open Space, Contaminated/ Stigma
•Car Wash Facilities
•Hotels/Motels, Resort, Bed & Breakfast, Timeshare Conversion, Timeshare Units
•Senior Housing - Skilled-Nursing, Assisted-Living, Congregate Care, Alzheimer, etc.
•Hospitals, Assisted Living Facility
•Other Special Purpose - Student Housing, Charter Schools, Restaurant/ Bar/ Nightclub, Movie Theater, Church, University/ College, Day Care, Greenhouse/ Nursery, Outdoor Advertising Sign, Lumber Yard, Veterinary Clinic, Kennel, Bank Branch, Auto Dealership, Pay Parking Garage/ Lot, Corporate Headquarters, Historical Register
•Portfolio Valuations - Large numbers of properties can be appraised on both an individual basis and/or as a whole
•REO / foreclosure asset evaluation
•Property tax assessment review and appeals / abatements
•Discounts to partial interests for lack of control (DLOC) & marketability (DLOM)
•Expert witness testimony / litigation support
•Dispute resolution (divorce / partnership dissolution / zoning issues)
•Arbitration / Mediation
•Defaulting CMBS assets
•Sale or asking price determination
•Financial reporting (SFAS 141, SFAS 141R, SFAS 144 / IFRS) •Buy / sell agreements
•Eminent domain / condemnation
•Loss in value estimate due to contamination and other detrimental conditions
•Price allocation (business value or goodwill, real property, personal property)
•Estate planning, gifting, estate settlements, probate
•Land utilization studies
•Retrospective dates of value
•Determination of investment value based on client's investment criteria
•Partial & fractional interests (shares in partnerships, LLC's, ground leases, etc.)
•Financing / refinancing
Types of Businesses & Properties
•Hospitality Property Portfolios Securities Valuations •Hospitality Property Holding Company for M&A Valuation •Exchange of Properties •Luxury Hotels •Full Service Hotels •Convention Hotels •Limited Service Hotels •Resorts •Extended Stay •All Suite Hotels •Conference Centers •Fractional Ownership •Gaming/Casino Businesses • Land-based casinos and casino hotels • Racetracks • Golf courses and country clubs • Stadiums • Marinas • Health clubs • Theaters • Ski resorts and slopes • Native American casinos • Riverboat and cruise ship casinos • Lotteries • Gaming equipment manufacturers •Interactive gaming
Our valuation team is comprised of certified and designated experts, some with over 30 years of experience, in the industry who service both national and international market segments. This level of experience allows us to consistently provide our clients with exceptional customer service. Along with a solid and honest work ethic, we provide a superior product always compliant with the standards and guidelines of USPAP. Their experience qualifies us to meet the requirements of the Appraisal Foundation, Internal Revenue Service, Lending Institutions and Courts of Law around the country. We work with companies of all sizes, tailoring our expertise to their individual needs.
What Is A Business Valuation?
A business valuation or appraisal is the independent and unbiased process of determining a supportable opinion of the value of a business, business ownership interest, security or intangible asset as of a specified date.
Select An Experienced Valuation Firm
Our valuations are performed by qualified, professional appraisers experienced in all aspects of business valuation and business transfers. Our valuations are performed in compliance with the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation (USPAP) as well as the Business Appraisal Standards of the Institute of Business Appraisers. Compliance with industry standards ensures that proven peer-reviewed valuation methods are used to develop defendable opinions of value. Through participation in teleconferences and annual valuation conferences, our appraisers stay abreast of developing valuation issues and related court cases.
Why Perform A Company Valuation?
Sooner of later every business owner needs a reliable company valuation for one or more of a variety of reasons: •Business Sale •Financing •Shareholder Agreement •Shareholder Disputes •Divorce •ESOPs •Estate Planning •Insurance Claims •Gift Taxes •Litigation •Mergers •Partnership Buyout •"C" Corp. to "S" Corp. conversion •Allocation of Purchase Price •Valuation Reports
Valuation Products Available
•Business Valuation Report – A formal summary report that is used primarily for non-litigation situations. This restricted-use abbreviated report is typically all that is needed for determining the selling price of a business or assisting in establishing a buy-sell agreement between partners/shareholders. •Business Appraisal Report – This formal comprehensive report is suitable for litigation support and review by third parties such as the IRS. The report explains in a step-by-step manner what was done and how the value was derived.
Valuation Methods used include:
•Market Methods - utilizes several different databases of market comps including Pratt Stats, Institute of Business Appraiser’s, Bizcomps, Business Broker’s of Florida, and the MidMarketComps database. Multiples of discretionary earnings are used as well as other cash flow multiples.
When applicable, sophisticated statistical techniques such as data modeling and linear regression analysis are also used with the market method to provide superior results.
•Income Approach - Single Period Capitalization Method or Multiple Period Capitalization Method (DCF Model)
•Adjusted Book Value Method with Excess Earnings
•Public Company Guideline Method - used for larger companies
•Analysis of prior sales of stock of the company
If you are unsure about which report is right for your company, call today to speak to one of our Business Valuation Consultants and they will review which report is right for you and your company based on the specific needs of your company.
Cannabis Property & Business Valuation
We are experts in the valuation of assets for gift and estate tax planning. We use the latest available information regarding transactions of similar entities and quantitative discount models to determine the fair market value of partnership interests. We work closely with our clients' legal and financial advisors to ensure that our work is conducted in a professional, timely, and economical manner. With constant and often complex changes in the estate and gift tax code, it is crucial to have a professional valuation team assists in capturing all of the business owners’ potential tax savings. The goal of Estate and Gift Tax Planning is to adequately provide liquidity for the owner’s estate; provide for continuation of the business and to minimize gift, estate and generation-skipping transfer taxes. For high net worth individuals holding real property and marketable securities, a valuation is essential to preserve their assets for future generations. A business owner’s needs for estate planning will vary over the owner’s life cycle. In the early years, buy-sell agreements and insurance protection are typically the highest priority. As an owner progresses in their life cycle then transfer planning, and possible charitable giving, become more prominent in their estate planning needs. An estate tax planning valuation needs to be clear about the interests being valued. Discounts from net asset value must be documented. The fair market value of a limited partnership interest and the value of a limited partner's pro rata portion of the partnership's net asset value are not equal; this difference is commonly referred to as a “discount”. The use of the Family Limited Partnership vehicle combined with appropriate discounting can significantly reduce the estate and gift tax burden on asset transfers between family members.
Family limited partnerships •Limited liability companies •Partial ownership interests in assets such as real estate, business, or plant
These reports include discounts for lack of control and marketability, as well as blockage discounts for ownership of securities in publicly held corporations. All gifted or bequeathed assets must be assigned a value for federal transfer tax purposes. Consequently, the determination of such value serves critically to the estate planning process. Many estate and gift planning techniques are subject to intense scrutiny by the IRS, and any undervalued assets may be subject to tax penalties. Penalties are less likely to be levied if a valuation has been performed in good faith by an independent third party appraiser. A qualified appraisal prepared by a competent professional appraiser helps establish a "reasonable basis" for the valuation.
Other commonly used estate planning techniques include: charitable remainder trusts, charitable lead trusts, private foundations, private annuities, generation-skipping trusts, Grantor-Retained Annuity Trusts (GRAT), Qualified Personal Residence Trust (QPRT), annuity trusts. Our reports document the methods used to arrive at these discounts to comply with the IRS guidelines described in Revenue Ruling 59-60. Each situation is different and a valuation professional needs to carefully consider which discounts apply and to what extent. Our analysts have extensive experience in preparing and supporting valuations for tax purposes. We perform extensive independent research and draw on years of industry experience to provide the most supportable, well reasoned analysis possible. Our valuations have withstood the scrutiny of the IRS and other third parties.
The following are some of the tax related issues we assist our clients with: •Valuations of closely held businesses interests and FLPs in support of gift or estate tax returns •Valuations of securities donated to a charity •Valuation of common stock for stock option issued to employees - Nonqualified deferred compensation – Sec. 409A •Determination of built-in gains tax – Subchapter S and Sec. 382 •Valuations of underlying Real Estate Assets •Valuations of Plant, Machinery & Equipment Assets
New Tax Law - The Tax Cut and Jobs Act, 12/22/2017 Good News - 100% Bonus Depreciation for 20 years-life segregated property classfication can be allowed for the property placed after September 27, 2017.
Example - Actual Case I Performed
14-Story Office Building
Purchase Price - $37,170,000
Improvements Basis (for Cost Segregation) except Land - $30,985,316
After Cost Segregation
5-year life class - $5,888,901
(19.01% of the improvements basis)
7-year life class - $154,563 (0.50%)
15-year life class - $324,665 (1.05%)
Total eligible for 100% Bonus Depreciation at the first year (5, 7, 15 years class combined) under the new tax law:
If under the old tax law prior to 09/27/2017, apply the double-declining balance method, the first year (5, 7, 15 years class combined), the depreciation will be:
That is the increase of depreciation benefit of $3,935,206 at the first year.
Assuming a tax bracket of 37% for married filing jointly over $600,000, additional tax savings will be $1,456,026 depending on the individual or entity's tax situation.
Take a huge tax deduction by doing the Cost Segregation. Under the alternative depreciation system, as modified by the Act, the recovery periods for nonresidential depreciable real property, residential depreciable real property and qualified improvements are 40 years, 30 years and 20 years, respectively. The Act extends and modifies the additional first-year depreciation deduction for qualified depreciable personal property by increasing the 50% allowance to 100% for property placed in service after September 27, 2017, and before 2023. After 2022, the bonus depreciation percentage is phased-down to 80% for property placed in service in 2023, 60% for property placed in service in 2024, 40% for property placed in service in 2025, and 20% for property placed in service in 2026. The bill removes the requirement in current law that the original use of qualified property must commence with the taxpayer. Thus, immediate expensing applies to purchases of used as well as new items.
What is Cost Segregation?
Something called cost segregation may help owners of commercial real estate save significantly on their federal income taxes.
The primary goal of a cost segregation study is to identify all construction-related costs that qualify for accelerated income tax depreciation. Small or large, your business can save money with a cost segregation study, typically many times the amount you invest. The Benefits of Cost Segregation We perform a detailed analysis of your commercial property for the purpose of identifying all of the construction related expenses that can be depreciated over 5, 7 and 15 years. The result of our study is the accelerated depreciation of these deductions, reducing your tax liability and increasing your cash flow.
The Benefits of Cost Segregation (applicable to prior to 09/27/2017)
Cost Segregation is a tax planning tool that determines how quickly an owner should be depreciating the property on his income taxes — five years, seven years, 15 years, 27.5 years or 39 years. The Internal Revenue Service allows owners of commercial properties to accelerate depreciation on their real estate, which will result in reducing the property owner’s taxable income levels. A cost segregation study is an in-depth analysis of the costs incurred to build, acquire or renovate a real estate holding.
Hotel/Motel, Gas Station/ Car Wash, Industrial/ Warehouse Building, Apartment, Office Building, Grocery Store, Restaurant, Retail, Nursing Homes, Golf Course, Auto Related, Leased Tenant Improvements.
Any commercial/investment real property placed into service since January 1st, 1987 may benefit from a Cost Segregation Study (CSS):
Critical timing is when the property was placed into service by the current owner / taxpayer, not when the building was originally constructed.
•New construction, including renovation, remodeling, restoration, or expansion to an existing building
•Property acquired via purchase
•Property acquired via inheritance
•Property which received step-up in basis
•Major leasehold improvements
Certain types of buildings benefit from a CSS more than others. Those are the types of buildings that tend to contain:
•More specialty plumbing, electrical, HVAC system, etc.
•Higher amount and quality of personal property
•Extensive land improvements
Classification from real property to land improvements and personal property.
The building system value, referred to as the unit of property, or UOP, is the reference point from which capitalization decisions are applied. Under the new UOP definition, expenditures relating to each building system must be evaluated as repairs or improvements only with respect to that particular system and not with respect to the entire building.
Taking advantage of cost segregation studies to provide significant tax benefits for their businesses by accelerating the depreciation on qualified fixed assets.
By depreciating the personal property costs of such assets over five or seven years (and land improvements over 15 years instead of the typical 39-year recovery period for general building property), the additional deductions can be used to offset taxable income. This accelerated depreciation, in turn, provides additional cash flow.
Now, due to the favorable tax law changes in the IRS tangible property regulations, those potential savings are more valuable than ever to your company’s financial future. These new IRS tangible repair regulations give taxpayers a second reason to engage in a cost segregation study: the future. Rather than focusing on the benefit of current or previous year tax deferral as in past studies, cost segregation studies have now become a multi-use tool now that can help ensure that taxpayers are complying with the final repair regulations.
UOP - Further Definition:
Each building and its structural components is a separate unit-of-property. In determining whether an expenditure is an improvement, the taxpayer must consider the effect of the expenditure on the building structure itself and on certain specifically defined components of the building (the "building systems"). Each of the following "building systems" is defined as a separate unit-of-property:
Most taxpayers have previously treated the entire building as the unit-of-property. With the addition of these new regulations, most taxpayers that own buildings will need to make an accounting method change to adopt the new definition of unit-of-property as it relates to buildings.
Under the new tax law (effective as of 01/01/2018) non-structural assets installed to the interior of a building after the building is originally placed in service are considered Qualified Improvement Property, or QIP. The intent of the law these assets were supposed to be considered bonus depreciation eligible.
In most cases, renovation project improvements expands not only interior improvements, but also other building component systems such as exterior facades, HVAC systems, Elevators, Escalators, load bearing walls, etc. A cost segregation study may be necessary to break out the assets that are not QIP. Without an analysis to break apart the QIP from the remaining assets a taxpayer will not be able to maximize the bonus eligible property.
Additionally if a renovation is combined with an expansion, a study will be required to separate the assets included in the expansion from the assets in the original space. When a taxpayer completes a renovation a discussion should be had with a trusted professional to determine if a study is necessary to determine the amount of QIP.
The Tangible Property Regulations (also known as Repair Regulations) are the largest change to US Tax Law in 30 years and affect every building owner in America. The final regulations provide a general framework for distinguishing capital expenditures from supplies, repairs, maintenance, and other deductible business expenses. Building owners and their tax professionals now have strict guidelines as to what stays on a fixed asset schedule and what must come off. Not only must every building owner in America follow and apply these regulations to their accounting practices, but there may be a financial upside to doing so. Our Cost Segregation Study reviews the regulations to assist with compliance along with the financial benefit.
We provides the necessary calculations for business owners to apply the Tangible Property Regulations; this is coordinated with your tax professional.
When a taxpayer makes an improvement to a unit of property, the project often includes demolishing or removing a portion of the property. A write-down can be taken on the items removed from the building, but this must be done in the year the items were removed. We provide the calculation for Partial Asset Dispositions when business owners make improvements to their buildings.
A taxpayer who has made the Partial Asset Disposition election can also deduct the costs of a project associated with removing and disposing components of the building. This write-down would be done instead of capitalizing these costs with the improvement costs, but it also must be done in the year of the disposition deduction. We provide the calculation for Removal and Disposal Cost which occurs when improvements are made to buildings.
Have you replaced items in your building in the past? Replaced a roof or parts of a roof? Replaced HVAC equipment or completed entire renovation(s) to your building? The new Repair Regulations state that there be no “ghost assets” on your fixed asset schedule. Our Cost Segregation Study will find duplicate items that are currently being depreciated and identify them, along with their value, for a write-down. We provide an analysis for the calculations to be applied for historical capital assets that may now be reversed to expense.
The IRS has formally approved the ability to dispose of the remaining cost basis of assets previously retired, replaced, or demolished. This is outlined in the Tangible Property Regulations (IRC §1.168 (i)-8) and can be a tremendous vehicle for tax savings.
Our process includes a review of the existing depreciation schedules, demolition drawings, and other pertinent information. The team also assesses the scope of recently completed capital work to determine the potential for disposition. When this review identifies assets ripe for disposition—but does not warrant a Standard Cost Segregation Study—we suggest our Partial Asset Disposition (PAD) Analysis.
As defined in the Tangible Property Regulations, a PAD Analysis may be conducted in one of three ways:
The outcome of our PAD Analysis is a report that quantifies and presents the value of dispositions, outlines when the assets were placed into and taken out of service, and describes the asset(s) in question. With this information, the client may determine the remaining depreciable basis to support a Partial Asset Disposition election.
A PAD Analysis can also be used to update existing Unit of Property values.
Tangible Property Repair (TPR) Regulations
Taxpayers can realize significant benefits from the Tangible Property Repair (TPR) regulations by identifying building components that have been replaced or demolished in current or prior years and claiming retirement loss deductions. However, it is often difficult to determine the tax basis of each component without a cost segregation study. While the IRS agrees that a cost segregation study can be used for this purpose, they also allow the “PPI discounting approach” that our calculator utilizes. For more information on the IRS rules related to the PPI discounting approach, see T.D. 9689 Guidance Regarding Dispositions of Tangible Depreciable Property.
Five Categories of Intellectual Property & Intangible Assets
•Marketing-related: Trademarks, trade/brand names, service marks, logos and non-compete agreements
•Customer-related: Customer contracts and relationships, customer lists, databases, open purchase orders, distributors and sales routes
•Contract-based: Franchise and licensing agreements, permits and contracts and supplier contracts
•Technology-based: Process and product patents, patent applications, proprietary processes and technology, engineering drawings, technical documentation, computer software and copyrights, formulas and recipes
•Artistic-related: Musical composition, literary composition and film copyrights
Among the various types of intangible assets/Intellectual Property to which we have assigned value are:
•Patent Valuation, copyrights and licenses
•Customer lists and relationships
•Trained and assembled workforces
•Unpatented proprietary technology
•Databases Trademark Valuation, trade names
Intangible assets such as brands, intellectual property and licenses now comprise a greater percentage of the economic value of successful businesses than ever before. Some economists argue that intangibles represent the main performance drivers in the current transition from a traditional financial economic structure to a new knowledge-based economy.
The value of identifiable intangible assets are important to: - Shareholders and their advisors, for use in assessing the true worth of their companies Management, as a useful tool for measuring performance, for taxation purposes and in the event of an acquisition or disposal under ASC 805 (formerly SFAS 141). - Financiers, for use in assessing the borrowing capacity of a company when arranging funding facilities. Sophisticated lending institutions now recognize the value of certain intangible assets as security for loans.
Research and development can be one of a company's most significant and important investments. It sparks innovation, drives technological advancement, energizes product development and promotes efficiency improvements. Because of this, companies seek legal protection of the resulting ideas and processes in the form of patents. A patent grants the assignee exclusive right to the invention for a specified period of time. Like other intangible assets, it is sometimes necessary to obtain patent valuations. Our business valuation team examines the value of intangible assets every day and understands the key factors that impact the value of a patent.
Patent valuations are needed for a variety of matters including to support transfer of ownership (licensing or assignment) of the business or patent, collateralized financing, financial reporting and taxation matters. A valuation of patents may also be needed to support litigation matters, such as quantifying patent infringement damage.
To select the appropriate methodology, we first seek to understand the use of patent valuations. This context is important because the approaches to value can result in very different value conclusions.
You need to know these two terms.
Pre-money valuation: venture capital terminology for the valuation given to a company by a venture capital firm before it puts money into it. For example, a start-up is valued on a pre-money basis at $4 million. After $1 million is invested the company has a post-money valuation of $5 million with the venture capital firm owning 20%.
Post-money valuation: valuation placed on a firm immediately after receiving a round of funding.
No negotiating item between entrepreneur and investor creates a wider gulf than this one. The two parties may agree on every other point but will have diametrically opposing views on what the startup is worth and how much equity the investor should receive in exchange for his capital.
To put it bluntly, placing a credible valuation on a startup is impossible. Privately held companies on the sales block are typically valued at a multiple of their historical ODCF (Owner's Discretionary Cash Flow). ODCF is the cash that can go into the owner's pocket after all operating costs are covered for the year. Obviously, since a startup lacks historical ODCF which is the basis for an objective valuation, any opinions expressed on valuation will be entirely subjective.
As a rule of thumb, this is what invariably happens when a startup is seeking seed capital. The entrepreneurs convince themselves based on discounting future cash flows that the company is worth today, say, $5 million. So, since they are looking to raise only $500,000 the investor providing that sum should be happy with 10% of the equity. Then when they start talking with a serious investor they discover that he expects 50 or 51% of the equity for his money. That's the magic number for most angel investors these days.
• No product revenue to date
• Limited expense history
• Have an idea and possibly some initial product development
• Incomplete management team
• Seed capital or first-round financing provided by friends and family, angels, or venture capital firms
• Securities issued sometimes common stock but more commonly preferred stock (Preferred virtually always convertible to common)
• No product revenue (still)
• Substantive expense history, product development is under way, and business challenges are thought to be understood
• Second or third round of financing occurs during this stage
• Typical investors are venture capital firms, which may provide additional management or board of directors’ expertise
• Securities issued to those investors are preferred stock
• Significant progress in product development
• Key development milestones met (e.g., hiring of a management team)
• Development is near completion (e.g., alpha and beta testing)
• No product revenue (still)
• Later rounds of financing occur
• Typical investors are venture capital firms and strategic business partners
• Securities issued to those investors are typically preferred stock
• Key development milestones met (e.g., first customer orders or first revenue shipments)
• Some product revenue, but still operating at a loss
• Usual for mezzanine rounds of financing
• Discussions start with investment banks for an initial public offering
• Product revenue is achieved
• Breakthrough measures of financial success such as operating profitability or breakeven or positive cash flows
• Liquidity event of some sort, such as an IPO or a sale of the enterprise, could occur
• Securities issued typically all common stock, with any outstanding preferred converting to common upon an IPO (and or other liquidity events)
• Established financial history of profitable operations or generation of positive cash flows
• IPO or sale during this stage
What is a capital or industrial asset's really worth? What do you do? Guess? Go by book value? Unfortunately, guessing and book values are risky and inaccurate.
We have the expertise, certification and knowledge to conduct an independent third party industry and asset appraisal. Therefore, the value of any item is substantiated and reflects the realistic true market value of an item. In addition, we abide by the regulations and ethics of the Uniform Standards of Professional Appraisal Practice (USPAP).
•Farm Equipment •Fertilizer Distributing Equipment •Livestock •Winery & Vineyard •Hay Production
Aviation & Marine Industries
•Airplanes/Aviation Equipment •Barges/Tugs •Boats/Vessels
•Chemical Processing •Coating Companies •Commercial Bakeries •Dairy and Ice Cream Plants •Food Processing •Graphic Arts Companies •Material Testing •Painting Companies •Printing Companies
Construction Equipment & Vehicles Dealers
•Construction Equipment •National & Local Car Dealerships •Trucking Companies
•Excavation Contractors •Fire Sprinkler Companies •Flooring Contractors •General Contractors •Paving Contractors •Petroleum Specialists •Plumbing Contractors •Pre-stressed Concrete Forming •Stone Contractors •Utility Contractors
•Fertilizer Manufacturing Equipment •Soil Remediation Equipment •Wastewater Treatment Facility
•Bag Printing & Manufacturing •Boiler Fabrication & Repair •Door Manufacturing •Injection Molding •Metal Production •Tank Fabrication
Timber & Lumber Industry •Lumber Manufacturing •Milling Companies •Pressure Treated Lumber •Woodworking Companies
–Financing, lender’s collateral
–Financial Reporting (FASB & International Standards)
–Sale or Purchase
–Disputes involving Value •Dissenting Shareholders, Family Disputes, Divorces, Partnership Dissolutions •Eminent Domain
–Taxes •Estate Planning, Minority Discounts •Allocations for Income Tax Depreciation •Property Tax Assessment Appeals •Capital Gains Calculations
• Consumer spending and tourism
• Nonfinancial services
• Real Estate and Construction
• Banking and Finance
• Agriculture and Natural Resources
• Employment (Federal and California)
• Per capita alcohol consumption on the increase
• Demand for both wine is on the increase
• Industry Cycles
• Consumer Preferences
• General Economic Trends
• Global Factors
–Land as Capital Cost (Return on, or opportunity cost of land)
–Area and site specific costs
- Vines, Trellis, Irrigatin, Reservoir, Wells, Pumps, Roads, Fences, Land Improvements
- Facility FF& E (Fixtures, Furnishings, and Equipment)
–Cost of Capital
–Depreciation (Living vs. non-living)
–“Mature” vs “Developed”
Sales Comparison Approach:
– Unit of Measure
•Price per Acre •Price per Ton? •Price per foot of Cordon ?
– Characteristics Compared
– HOMESITES (Vineyard Estate consists of Vineyard, Land, and Homesite)
• Most transactions are private; very difficult to get pricing, terms, other stats on private transactions
• Obtain Merger & Acquisition data
• Most commonly used approach for operating companies
- Capitalized Cash Flows
- Discounted Cash Flows
• Invested Capital methodologies and EBITDA multiples
- Can be high depending on the brand value
- 7x to 10x is not unusual
- Can exceed 12x with exclusive integrated estate wineries, when brand and real property assets are included
There are three primary types of wineries:
an integrated winery, a merchant winery, and a hybrid winery. These types can vary in size and organization structure, and each has its own advantages. A merchant winery buys all grapes. A hybrid winery owns a vineyard, however buys a variety of grapes to blend or make their labeled-wines per their likings.
Winery valuation as a going-concern business must consider the following pertinent questions:
1. Are the books maintained on a cash or accrual basis?
2. What inventory costing methodology is being used? (Fifo or Lifo)
3. Where does the winery source its grapes?
4. Are winery and vineyards leased from a related party?
5. What are future capital requirements?
6. Is the winery’s forecast reliable?
A 409A valuation is a common stock valuation. Required by Sarbanes Oxley, a 409A valuation is used to value stock options for employees in pre-publicly traded companies. But a 409A valuation is much more than just a required compliance document: it is something that will affect every one of your employees who has stock options—and it’s something that, like it or not, your board members are going to have a vested interest in.
1. The fair market value must be determined using "reasonable application of a reasonable valuation method;"
2. a valuation needs to be performed by someone qualified to perform such a valuation, based on her knowledge, training, experience, etc. (In most cases, companies choose to hire outside appraisal firms to meet this requirement);
3. and the valuation needs to be updated at least every 12 months, or more frequently if significant changes occur in the business between grant dates (e.g., new rounds of financing, new product launches, new major customers, etc)
Our firm is a mergers & acquisitions (M&A) valuation and advisory company. Before, during, or after the deal has been struck, our professionals provide independent valuation and financial consulting services to ensure that your best interests are served. As a professionally credentialed as a Certified Merger & Acquisition Advisor (CM&AA), we can provide the well-rounded advisory services. Strategic planning in connection with a merger, an acquisition, or an exit from a business calls for an independent assessment of value. With clear understanding and informed expectations, you will be better armed to make the correct decisions to maximize shareholder value. Negotiating a merger, acquisition, or business sale often involves differences in opinion of value. An experienced valuation professional can assist you in explaining the valuation process and how it should be applied to the business at hand. With both parties having a common understanding and appreciation for the value of the business, a smoother transaction is assured.
A “Fairness Opinion” is a detailed valuation of a company that’s being sold or a valuation of the company that the client is buying. Right before a deal is announced, the valuer that prepares the Opinion presents it to the Board of Directors and concludes whether or not the deal is “fair” based on the purchase price and deal structure. While they’re not technically required by law, Fairness Opinions almost always get issued for deals that involve the sale of public companies due to lawsuits: no matter how much a company sells for, someone is bound to sue them. Even if the company is worth $100 million and it gets sold for $1 billion, some random shareholder with too much time on his hands will argue that it should have been sold for $10 billion and will start a class-action lawsuit. The valuer’s Fairness Opinion is filed along with all the other documents related to the transaction and serves as evidence when lawsuits start arriving. Fairness Opinions might also be issued when: 1.There’s a management buyout or take-private (a PE firm acquires the company via a leveraged buyout and turns it private). 2.A public company divests one of its divisions. 3.There’s a bankruptcy, liquidation, restructuring scenaro. 4.There’s a hostile takeover – in this case it would be called an “inadequacy opinion” instead and would be used to defend the target by claiming that the offer is not fair.
David Hahn, CVA, ASA, MAFF, CM&AA, CCIM, MBA is an expert in the fields of Commercial Business Financial Valuation, Property Tax Appeal, Merger & Acquisition Advisory, and Exit Planning Advisory since 1985.
· Certified Business Valuation Analyst (CVA) credential from the (NACVA)
· Master Analyst in Financial Forensics (MAFF) credential from the National Association of Certified Valuation Analysts (NACVA)
· Accredited Senior Appraiser credential of the American Society of Appraisers (ASA)
· Certified Merger & Acquisition Advisor (CM&AA)
· Certificate in Exit Planning from the Exit Planning Institute
· Certified Commercial Investment Member (CCIM) credential
· Association of Corporate Growth (ACG) - member
· Alliance of Merger & Acquisition Advisors - member
· California State Licensed Real Estate Broker, BRE #00902122
· California State Certified Real Estate Appraiser, BREA #AG009828
· American Bankruptcy Institute - member
· College Instructor's Credential - Business & Real Estate
· Instructor Certified through THE TRAIN THE TRAINER program - CCIM Institute
· Taught Commercial Investment, Commercial & Business Appraisals, Financing more than 5,000 classroom hours since 1985.
· Competent Toastmaster (CTM) certificate from Toastmasters International
· Principal, Alpha Consulting Group, Inc since 1985
· Lockheed Missiles & Space Company, Sunnyvale, Software Engineer, 1984-1985
· Control Data Corporation, San Jose, Business Systems Analyst, 1981-1983
. U.S. Army veteran - active duty for 3 years - honorable discharge, 1979
· Doctoral Studies, Public Administration, University of La Verne, 1995-1998
. UCLA Executive Management Program certificate - 1995
. USC, Public enterprise cost/benefit analysis graduate course, 1993
· Master of Business Administration (MBA), University of Phoenix - 1983
· B.S. in Industrial Technology/Computer Science - San Jose State University - 1981
· Associate of Arts degree - Monterey Peninsula College - 1979
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David Hahn, CVA, ASA, MAFF, CCIM, CM&AA, MBA
CM&AA - Certified Merger & Acquisition Advisor
CVA - Certified Business Valuation Analyst
ASA - Accredited Senior Appraiser
CCIM - Certified Commercial Investment Member
MAFF - Master Analyst in Financial Forensics
CA State Licensed RE Broker, License #00902122
CA State Certified RE Appraiser, License #AG009828
Business Valuation, Commercial Real Estate Appraisal.
Alpha Appraisal Consulting Group (AACG) serves in the area of Valuations, Business Valuation, Company Valuation, M&A Valuation, Financial Valuation, Commercial Appraisal, Commercial Real Estate Appraisal, ESOP Valuation, Cost Segregation, Capital Assets Valuation, Patent Valuation, IP Valuation, Startup Capital Valuation, Bankruptcy Valuation, Healthcare Hospital Valuation, Estate/Trust Tax Valuation, Exit Planning, Turnaround/ Restructuring Advisory, Cannabis Property & Business Valuation, and Fairness Opinion in Northern California, San Jose, San Francisco, Oakland, San Ramon, Palo Alto, Redwood City, Menlo Park, San Carlos, Napa Valley, Sacramento, Redding, Bay Area, Silicon Valley, Marine County, Sonoma County, Contra Costa County, Solano County, Placer County, Santa Cruz County, Monterey County, Alameda County, San Mateo County, Santa Clara County, Shasta County, Humbolt County, Mendocino County.
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