Financial Services Firms: Governance, Regulations, Valuations, Mergers, and Acquisitions, 3rd Edition

Chapter Four

Overview of the Valuation Process

Introduction

Business valuation is a specialized field with a variety of valuation standards, statutory guidelines, case laws, and techniques offering valuation services for a variety of purposes. Traditionally, a business value (e.g., selling price) is determined based on the bargaining power of negotiation between the buyer and the seller. Today's business climate is made up of the boards of directors, executives, investors, suppliers, customers, government, and employees who are looking for customized valuation services. Businesses have built infrastructures that not only deliver timely, relevant, reliable, and useful information but also consist of networks of specialists who can provide critical assistance and advice to constantly changing situations. The appraisers can play an important role and be a key member of this team.

The business valuation market has grown at a steady pace and will continue to grow as long as the demand for business valuation services increases, due to factors such as: (1) increasing merger and acquisition (M&A) activities in all industries, especially financial services; (2) high-volume creation of executive and employee stock ownership plans; (3) enhanced financing opportunities for individuals and businesses; and (4) litigation involving shareholder disputes, small businesses, taxation issues, business damages, and divorces. A number of professionals and individuals, including academics, accountants, ...