Microsoft Word - Selling Business process.docx

Major steps when Selling and Purchasing a Business  

1. Business valuation     2. Information pack     3. Validation  (Due Diligence)    

1. Business valuation  

Business valuation is a process and a set of procedures used to estimate the economic value of an owner’s interest in a business. Valuation is used by financial market participants to determine the price they are willing to pay or receive to effect a sale of a business. In addition to estimating the selling price of a business, the same valuation tools are often used by business appraisers to resolve disputes related to estate and gift taxation, divorce litigation, allocate business purchase price among business assets, establish a formula for estimating the value of partners' ownership interest for buy-sell agreements, and many other business and legal purposes such as in shareholders deadlock, divorce litigation and estate contest. [1] In some cases, the court would appoint a forensic accountant as the joint expert doing the business valuation. ( Fair Market value) A business valuation report generally begins with a summary of the purpose and scope of business appraisal as well as its date and stated audience. What follows is a description of national, regional and local economic conditions existing as of the valuation date, as well as the conditions of the industry in which the subject business operates. A common source of economic information for the first section of the business valuation report is the Federal Reserve Board’s Beige Book , published eight times a year by the Federal Reserve Bank . State governments and industry associations also publish useful statistics describing regional and industry conditions. Financial analysis [ edit ] The financial statement analysis generally involves common size analysis, ratio analysis (liquidity, turnover, profitability, etc.), trend analysis and industry comparative analysis. This permits the valuation analyst to compare the subject company to other businesses in the

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