Introduction.
The range of valuation and related services provided by Enterprise Valuations is described in this section. To meet the differing needs of our diverse client base, we offer the following:
- Valuation services and reports tailored to meet the needs of clients at different stages of development and with different objectives. Our methodologies are sophisticated and are based on generally accepted valuation principles and practices (including those specified in the §409A regulations and those described in the relevant AICPA Practice Aid).
- All of our valuation work is conducted locally by proven professionals with extensive experience and outstanding business and valuation credentials. These individuals are also available to assist if questions are raised about our valuation by a client’s audit firm or the IRS.
- We offer an economical fee structure for one-time valuation analyses. We also offer package pricing for multiple valuations (for example, when the client reaches the point where it becomes advisable to obtain independent valuations more frequently than once a year).
- When it comes to 409A & 123(R) valuations, we typically prepare a valuation report that is suitable for both purposes.
- The ultimate deliverable when the process is complete is a thorough valuation report that documents the assumptions made, the methods applied and the valuation conclusions reached.
Description of Service Offerings.
We provide professional business valuation services for tax and accounting purposes. Our primary focus is on valuing private company equity securities – most frequently common stock for purposes of IRC 409A and FAS 123(R). In addition to our private equity security valuation services, we also offer valuation and related services for a variety of other tax, accounting and corporate purposes.
IRC 409A/FAS 123(R) Valuation Services
Our standard practice is to provide a common stock valuation that is suitable for purposes of both IRC §409A and FAS 123(R). We believe this approach provides the best value for our clients and helps to avoid or minimize problems that may arise if a valuation prepared for §409A purposes only is later used to support stock option accounting under FAS 123(R).
Our process is efficient and expeditious. Typically, it requires three weeks or less from the time we receive the necessary information from our client to delivery of a near-final draft valuation report for client review and comment.
We provide a comprehensive and comprehendible written valuation report that describes the valuation methods applied and the conclusions reached.
Fair Value Analytic and Valuation Services
The increasing emphasis placed on “fair value” standards in U.S. GAAP that has evolved over the past several years has increased the need for professional valuation expertise in the accounting process. Enterprise Valuations provides valuation services to companies that need assistance in determining the fair value of their assets and liabilities for the following purposes:
Purchase Price Accounting.
Under FAS 141R, when a company acquires another company or business, the acquiring company must determine both the fair value of the consideration paid and of the assets (tangible and intangible) acquired and the liabilities assumed. Enterprise Valuations provides a full range of FAS 141R valuation services, including:
- Determining the fair value of the consideration paid by the acquiring company, including any contingent consideration;
- Identifying tangible and intangible assets acquired and liabilities assumed in the transaction;
- Applying appropriate valuation methods and practices to determine the fair value of the acquired assets (including goodwill) and assumed liabilities; and
- Documenting our findings and conclusion in a thorough valuation report.
The real world acquisition and legal experience of our senior valuation professionals enables us to extract the relevant valuation facts from the sometimes voluminous acquisition documents.
Impairment.
Under FAS 142 & 144, some companies must periodically conduct analyses to determine that the current fair values of certain intangible assets and goodwill are not less than their carrying values. If they are, the assets are considered to be “impaired” and must be written down to fair value. Enterprise Valuations provides valuation services to assist companies in conducting and documenting the necessary impairment analyses.
Portfolio Valuation Assistance.
Under FAS 157, venture capital and private equity firms are required to value their portfolio holdings (consisting mostly of private company equity securities) based on fair value standards. We provide time-saving and cost-effective analytic services to assist venture and private equity firms with FAS 157 compliance for their portfolios.
Warrant Valuation.
When needed for financial accounting purposes, Enterprise Valuations provides analytic services to assist in the valuation of warrants to purchase common or preferred stock issued by private companies.
Litigation Support and Expert Witness Services
Whether in the context of defending a 409A valuation or some other controversy involving the valuation of a company, its equity securities or its assets (including intellectual property or other intangibles), Enterprise Valuations senior valuation professionals have extensive experience providing expert valuation advice and serving as expert witnesses.
Other Financial Consulting Services
As an outgrowth of our extensive 409A/123(R) valuation services for private companies, we have developed a number of financial consulting services, including:
Valuation Simulation.
Enterprise Valuations prepares valuation simulations in connection with private company equity financing that model the impact of price and terms of new financing on the value of earlier preferred stock and common stock. Our work product allows the client to conduct an informed negotiation of equity financing terms, with better understanding of the impact of different terms for a new equity round on value of existing stock.
Corporate Financial Model.
Enterprise Valuations develops company-specific 1, 3 and 5 year financial planning and projection models. These models are tailored to the client’s business and facilitate the preparation of the client’s short or longer term budgets, plans and projections. The resulting financial models can be used to develop the annual operating plan, make reasonable estimates about longer term prospects, or provide benchmarks if an acquisition is being considered.
Allocation of Proceeds Model.
Enterprise Valuations creates a model based on the client’s actual Cap Table that can project with precision the allocation of sale proceeds to all equity holders in the event the company is sold. If sale of the company is being considered, our model can be employed to make detailed calculations of the payouts to stockholders and option holders based on the actual terms and distribution priorities incorporated in the company’s charter, eliminating guesses and uncertainty.
Carve-Out Plan Analysis and Design.
Generally, management carve-out plans are not popular with investors. However, there are circumstances in which a carve-out plan is the best way to align the interests of the investors and company management. If a carve-out plan is the best solution, Enterprise Valuations can assist in designing a plan that is well integrated with the company’s equity incentive plan and creates the right incentives for management to achieve the investors’ objectives.