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Commercial valuations
The need for a business appraisal or share valuation may arise in many different commercial circumstances, including:
- Retirement of owners and disposal to next generation of management
- Pre-flotation or trade sale
- Departure of minority shareholder from employment in the business
- Introduction of venture or development capital
- Company purchasing its own shares
- Management buy-ins
- Trade investments
- Share option schemes
- Independent advice to directors for Companies Act, Sarbanes-Oxley and other regulatory and compliance purposes
There will be tax implications if shares are transferred at less than their open market value for tax purposes and this is often a consideration when transferring a family business to the next generation. Transactions may also require agreement of values for tax purposes with the Shares Valuation unit of the Inland Revenue.
There are other circumstances where valuation advice might be required:
- Companies may need independent advice on the valuation of share options under FRS 20/IFRS 2. These rules apply to large and small companies, listed (AIM from 1 January 2007) and private (under FRS 20 from 1 January 2006). Share appreciation rights, employee share purchase plans, employee shares ownership plans, shares option plans and plans where the issuance of shares (or rights to shares) may depend on market or non-market related conditions all fall within the ambit of the accounting standard
- Drafting valuation clauses in a company's articles of association or in a shareholders' agreement
- Valuations under section 103 of the Companies Act 1985 where shares in a public company are issued in exchange for non-cash consideration
Examples of typical assignments undertaken can be seen in the case studies of commercial valuations.
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Case studies of market valuations