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Can appraisers value a Closely Held Business?

Discussion in 'Commercial/Industrial Appraisals' started by mattdamon, Oct 24, 2011.

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  1. mattdamon

    mattdamon Sophomore Member

    0
    Apr 24, 2009
    Professional Status:
    Appraisal Management Company
    State:
    California
    When I ask this question, I'm referring to valuing an entire business, not just the property on which it sits or the property and a building.

    So if A wants to buy B's plumbing business and A wants to determine the value of the business based on and including income, liabilities, good will, the value of property and buildings and other assets, can appraiser do this?

    What professional designation would you need? How do you examine the books? How large of a company can you realistically value? Would this be better accomplished by an accountant or an investment banker?

    Thanks in advance.
     
  2. leelansford

    leelansford Elite Member

    45
    Mar 29, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    Illinois


    The American Society of Appraisers (ASA) has the specialty group for Business Valuation (in addition to Machinery, Real Property Property, etc.). To learn more (including, but not limited to, education), go to www.Appraisers.org

    As to your question of whether or not an 'appraiser' can do business valuations, the answer is yes (if the appraiser is competent). But, don't limit 'appraiser' to 'real property appraiser' (which most all of us are licensed under).
     
  3. stangtime

    stangtime Senior Member

    5
    Jul 19, 2009
    Professional Status:
    Certified Residential Appraiser
    State:
    Maryland
    That's the direction I was going to point you in as well. Valuing the going concern is something most real estate appraisers won't touch.

    Dan
     
  4. Stephen J. Vertin MAI

    Stephen J. Vertin MAI Senior Member
    Gold Supporting Member

    7
    Jan 17, 2002
    Professional Status:
    Certified General Appraiser
    State:
    Illinois
    Further AI has seen the need to standardize these concepts among real estate appraisers and now offers a new course called:

    Fundamentals of Separating Real and Personal Property from Intangible Business Assets

    This course provides the theoretical and analytical framework for separating the tangible and intangible assets of operating properties. Through discussion, lecture, readings, and case studies, participants will apply the theory of the firm and the concept of economic profit to the solution of problems related to ad valorem taxation, eminent domain, loan underwriting, and transaction price allocation.

    An overview of business valuation procedures, and a clarification of real estate and business valuation terminology will be provided. Finally, participants will learn about allocating real estate, personal property, and intangible asset values.


    However, both offering were filled in a matter of hours in Chicago. I was fortunate enough a get into the second.

    Lee: If you have sway in class acceptance for continuing education on the state level you should put in a good word to have this approved. It is badly needed and is extremely helpful in c-store, gave yards, land fills, restaurant, hotels, nursing homes, gas-station or a number of other real estate holdings having business value components.

    We should all fully support standardization of methodology.
     
  5. leelansford

    leelansford Elite Member

    45
    Mar 29, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    Illinois


    If the seminar has been submitted for approval, someone will attend to it.
     
  6. Terrel L. Shields

    Terrel L. Shields Elite Member
    Gold Supporting Member

    424
    May 2, 2002
    Professional Status:
    Certified General Appraiser
    State:
    Arkansas
    Locally, a CPA/appraiser does these sort of assignments... Most of us don't touch 'em if possible...
     
  7. Kali the Boston Terrier

    Kali the Boston Terrier Senior Member

    1
    Jul 7, 2003
    Professional Status:
    Certified General Appraiser
    State:
    Michigan
    The firm I work for is a CPA firm and we do business valuations as a major staple of our business. I happen to perform the real property portion of these appraisals, all of us have an ASA designation. We do BVs that have values as low as a few thousand dollars, to as high as hundreds of millions. We specialize in closely held businesses.

    Hope that helps.
     
  8. leelansford

    leelansford Elite Member

    45
    Mar 29, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    Illinois

    Nice niche.
     
  9. mattdamon

    mattdamon Sophomore Member

    0
    Apr 24, 2009
    Professional Status:
    Appraisal Management Company
    State:
    California
    Yes, thank you for the responses.

    I know that privately owned businesses need values placed on them at various times in case of death, lawsuits, sales, mergers or acquisitions, maybe issuances of stock or something like that.

    I figured an appraiser could be involved somehow, but not completely because things like capital and liabilities need to be analyzed. At the same time, being able to appraise some property and improvements would be a good segue into valuing everything else, but accounting and CPA are their own little niche in handling most of that.

    Thanks
     
  10. Kali the Boston Terrier

    Kali the Boston Terrier Senior Member

    1
    Jul 7, 2003
    Professional Status:
    Certified General Appraiser
    State:
    Michigan
    I'll tell you the BV stuff is way over my head when you get into these companies that have twelve different subsidiaries and are different types of corps. Most of the time the properties are scattered all over the globe.

    I have been a private practice real estate appraiser my whole career, when I quote the real property segment I quote from that world. The BV people think it is cute to see my little fee. I'll quote $30k for a project and be worried that I am going to ruin the job, they laugh when my fee is part of a $200k BV quote.
     
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