Business owners must face the possibility that someday the enterprise will need to be taken apart. Large companies may divest themselves of business units that are not generating sufficient revenue. Small companies are often broken up when there are management disputes or cash-flow problems or when an owner decides to retire or be bought out. One of the greatest difficulties is determining the company’s breakup value — that is, its market value if parts of it were to be sold off. Business breakups sometimes end up in litigation, in which case the court must assess the breakup value.
In general, breakup value is based on what each business unit would be worth if it were separated from the parent company. However, this calculation is not as simple as comparing assets to liabilities. Especially for a small, privately held company, much of its value lies in intangible assets like goodwill, brand recognition and intellectual property. There is no uniform business valuation formula, but here are some generally recognized valuation methods:
An experienced business litigation lawyer can advise on the best valuation method to use for your company. The choice of method is subjective and sometimes leads to contention among the business owners, especially during litigation. Each side will generally retain their own expert evaluator. A combination of methods can be used depending upon the type, size and condition of the business.
H. Clay Parker, Esq. in Orlando, Florida has wide experience in all aspects of commercial law and litigation. We provide each client with the time and attention required to achieve optimal results. If you have a business valuation or other commercial matter requiring legal support feel free to contact us online or call [l for a consultation.