An assessment is an essential step in assessing your business’ financial well-being or considering selling all or a portion of a media business. Whether for estate purposes, an Employee Stock Ownership Plan, a change of control transaction, a fairness opinion, or the protection of minority shareholders, a comprehensive valuation of the business is essential. A proper media company assessment requires an extensive review of a business’s financial history, the development of reasonable financial projections, and a thorough examination of how the market is served and how the company performs relative to its industry and the overall market.
Assessments to establish an Employee Stock Ownership Plan
ESOPs have many advantages. One of the more distinct advantages is that it allows an owner of a closely held firm to withdraw cash from the business without giving up control of the firm while deferring taxes on capital gains. To establish an ESOP, a value on the company must be placed since the ESOP will buy a percentage of the business from the owner. Grimes McGovern & Associates can provide an accurate and thoroughly researched valuation of your closely held company in order to best estimate fair market value before establishing an ESOP.
Assessments for Estate Planning
Valuing a closely held business is a mix of the subjective and the objective. There are several commonly accepted methods for valuing a business. These include the multiple approach, income capitalization approach, discounted cash flow approach, and net asset value approach. Each approach has its strengths and weaknesses. The objective is to determine what a willing buyer would pay a seller for the assets of that business. Yet, unlike their public company counterparts actively traded in the marketplace, closely-held companies typically do not have regularly established values. To calculate the value of a closely held company, Grimes, McGovern & Associates uses both financial theory and practical experience. We look at market conditions and numbers while considering intangibles such as key personnel, buyer activity, and the economy as a whole.
Establishing Fair Market Values as Part of an Owner Buyout Agreement
Companies that several principals own typically enter into fair value buyout agreements at some point during their early growth years. Under these agreements, the business will purchase a principal’s share at fair market value. Agreements can be triggered by many factors, including a principal’s desire to retire or disassociate from the business, a principal passing away or suffering a disability, or even disagreements over how the company is to be run. The primary issue typically focuses on the fair market value and who makes that determination. And in most cases, the business is valued from how much it would bring in a sale. This can be a very contentious negotiation, one in which it helps to have an expert third party opinion. Grimes, McGovern & Associates will look at the numbers and the personnel behind those numbers, the market, competitive factors, and business trends. This allows us to make projections on where the business is headed, who the logical suitors may be, if there would be any suitors, and what resources might be needed to grow the business. This allows for creating a clearly established Buy/Sell agreement before the time of need. A structured set formula for determining value will provide an accurate determination.
Valuation of Restricted Securities
Restricted securities are those shares or ownership positions that contain essential restrictions on the ability of the holder to sell or exchange those securities. Regulations limit the marketability of the security, and their values are generally below those of non-restricted counterparts. The amount of the discount varies depending on the circumstances. Discounts typically range from 10% to 75%, sometimes even higher.
Fairness opinions are provided for a variety of purposes, including the sale of a Business
In the case of a sale to an outside party, placing a realistic and attainable value for the business is essential to achieving fair value. It is a critical step before the search is launched. Our associates bring diverse and highly successful backgrounds within newspaper and magazine publishing, global events, technology, digital media, and information services industries. We get a unique understanding of the numbers and the ability to look beyond the operation itself. Every day, we track national and regional and local markets and know who the movers and shakers are, who the potential suitors may be, and what transaction value your target operation may bring. In addition, we carefully track similar transactions offering sellers comparable transaction data. This is critical in placing a value on the business.
Fair opinions are put together utilizing a broad range of methods. These include:
- Complete review of all financial data
- Quantitative analysis of cash flows
- Quantitative analysis of accumulated assets
- Analysis of comparable companies and similar transactions
- Analysis of contributions
Due Diligence Support Services for Mergers and Acquisitions
Buyers have come to rely on our expertise in providing an objective analysis of what properties are worth and an objective opinion of what the benefits of the combination may be. The bottom line — M&A’s that does not create value more than the aggregation of the two separate organizations should not be undertaken. Distinguishing combinations that will create incremental value is a task that requires both insight and analytical skills. Our comprehensive due diligence services go well beyond the numbers. We carefully examine the target markets and opportunities for growing those markets, competitive factors that may influence those markets down the road, personnel, and production issues, while taking a good hard look at how the operation may fit. We’ll identify those items, particular to that company, which may affect its ability to increase profit.
Call John McGovern, CEO & Owner at 1 212 255 9700 or [email protected] for a confidential review of your own situation or click here to contact your regional associate.
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