Is Business Valuation Necessary?

When you are selling your company, the marketplace determines the true value of your business. Business Valuations provided by business brokers and consultants as a rule, they are academic exercises that are out of date the day they are produced.

Valuations can be useful when one needs an objective appraisal of what a business is worth at a specific point in time, one that can stand up in a court of law. Examples would be estate planning purposes or forced redistribution of assets due to divorce.  But otherwise valuations are not worth the $30,000 to $50,000 a business owner pays.

Why? Shifts in market, economics, and competitive landscapes make valuations obsolete. Additionally, your business will be worth more to the right acquirer or acquirers. If you identify several acquirers that can benefit by adding your product lines, client base or plant locations, you drive your price higher.

For business owners seriously considering the sale of their life’s work, time and money is wasted by buying a valuation. An estimated range that is based on research and confidential discussions with acquirers that are looking for companies like yours should be made a part of the M&A process, rather than an expensive precursor to it.

M&A Markets on the Edge of Revival

In recent weeks a flurry of announcements has energized sentiments in M&A markets replacing a glum that abounded during the recession.  What does this change mean for M&A markets for the rest of 2010 and 2011?  It likely points to a revival in activity.  As we know, fundamentals are the fuel that sustains trends.  However, changes in sentiments are the spark that fires the engine

Opinions vary, but the general consensus is that the economy is recovering, albeit slowly.  Earnings reports have been good and in many cases surprisingly so.  In addition to the performance of the economy, liquidity in the system and access to credit are very important drivers in M&A markets.  Estimates differ, but all suggest liquidity is dramatically higher than in the “heydays” for M&A markets of 2006 and 2007.  Both corporations and financial groups are under pressure to deploy this liquidity, suggesting a spark of sentiment is likely to open the floodgates for M&A markets.  Lenders are active again and interest rates are lower than ever, meaning better access to cheaper capital.  All of these suggest that we could see a near term surge in M&A activity as capital moves off of the sidelines.

The Wall Street Journal no longer reads like an obituary like it did during the recession. Recent reports of M&A transactions like the HP acquisition of 3PAR have started to pepper the news. Uncertainty about future tax policy and the future of the economy seem to be driving a sense of urgency in company owners that want to strike while the opportunity is present. Fundamentals are important, but sentiments cause people to act. The fundamentals are good. And for the first time since late 2007 sentiments are good. The nexus of these suggests a window of opportunity for good companies to come to the market. For more information about Private Investment and M&A please visit Allegiance Capital Corporation’s blog at www.allcapcorp.com/blog.

Allegiance Capital Corporation is a private investment bank that guides privately-owned companies through every aspect of selling and financing a business. The company specializes in selling family-owned businesses for a premium price. The company offers Mezzanine Financing, Executing leverage buyouts, Acquisition Strategy, Business Advisory, Exit Strategy, Family business Consultation and More. Allegiance Corporation not only has a Private Investment firm in Texas and a thriving Advisory Firm in Illinois, the company offers their services in multiple locations both nationally and globally. All Capital Corporation offers buyers and sellers, advice, planning, and strategic development to maximize their buying and selling investments. To learn more about Allegiance Capital Corporation visit http://www.allcapcorp.com.