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BUSINESS
VALUATION
Business valuation is the core professional activity of
Clayton Shultz & Associates, Inc. We prepare valuations
on behalf of clients and their accounting and legal advisors
for a wide variety of purposes and on a large number of
businesses and professional practices, all the way from
sole practitioners to multi-million dollar, multi-branch
corporations.
Some valuations are prepared to assist counsel in pursuing
or defending claims in shareholder disputes, loss of corporate
opportunity and wrongful business termination. Non-litigious
assignments include consulting engagements assisting clients
to prepare their corporations for sale on the open market
or to establish values for transactions between family members
or to establish fair market value for taxation and succession
purposes.
The steps that we take in coming to a valuation conclusion
include the following:
- Interviewing
the client's management team and with their accounting
and legal advisors;
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Preparing an engagement letter advising of the approach
that will be taken, its timing and an estimate of
the total cost;
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Researching the industry in which the business operates
to identify opportunities and threats that enhance
or detract from our view of the corporation's sustainable
profitability;
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Review the accounting and legal history of the corporations
and examine prior transactions in its shares or
shares of similar corporations;
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Reviewing management and non-arm's length compensation
arrangements and, for the purposes of our valuation,
adjusting them to reflect the fair market value
of the services rendered;
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If real estate or material fixed assets are part
of the corporation, to coordinate the efforts of
other appraisers and experts whose work will dovetail
with ours;
- Preparing
a detailed report which typically takes the following
format:
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An executive summary estimating the fair market
value of all of the shares or, if appropriate,
the portion of the issued shares that are the
subject of the valuation;
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summary of the industry in which the business
operates and a complete description of the operations
including management duties and responsibilities,
uniqueness of the company's operations and competitive
advantages if any, and pictures of the operating
facilities;
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An analysis of the historical operating results
of the corporation adjusted to reflect those
revenues and costs that an independent, arm's
length purchaser should reasonably expect to
occur in the foreseeable future;
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An analysis of the approaches to the valuation
including comparative market data, if available;
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The appropriate earnings yield for this business
in this industry;
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An analysis of the net tangible equity of the
company; and
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When the interest being valued is less than
50%, an analysis quantifying the minority discount.
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Appendices are attached showing the historical earnings,
normalized to add or deduct appropriate non-arm's
length transactions;
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A schedule of the past five years' statements of
financial position, adjusted as appropriate to reflect
the fair market values of the balance sheet components;
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Operating and financial position ratios;
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A glossary of financial and valuation terms; and
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Credentials of the authors.
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The reports
are produced in hard copy which is delivered along with a
CD-ROM in word searchable Adobe format of the report itself
as well as supporting documentation.
Clayton is a Fellow of the Canadian Institute of Chartered
Business Valuators and has been certified by the American
Society of Appraisers (Business Valuation Division). He has
written and lectured widely on the valuation of both closely
held and publicly traded companies.
Stirling, a financial planner, is midway through the course
of studies leading to the Chartered Business Valuator (CBV)
designation. He actively assists on all assignments..
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