Fair Value and Market Value

In determining value, we consider the cost, income, and market approaches as appropriate to the assets involved and the supporting evidence available. This data is utilized in our valuation analysis that includes estimating replacement cost new less depreciation from all causes, research of market data for recent sales/offering by used equipment dealers of comparable equipment and other fixed assets, public information regarding auction data from comparable equipment, and a correlation of value indications from the three approaches. Fair Value and Market Value-In-Use If the equipment, furniture, fixtures, and computers will continue to operate as is, then the piping and electrical connections are also appraised, as applicable. This value is used to establish a new Federal tax depreciation basis, and to comply with GAAP, SFAS 141, and SFAS 141R. Orderly and Forced Liquidation Lenders are looking for the orderly and forced liquidation value that might be realized if the loan defaults. FACT: Shortcut appraisals using rules-of-thumb such as “Net Book Value” equals “Fair Market Value” or quick methods of trending original cost and applying a depreciation factor produce highly distorted and inaccurate results.

Success Story A manufacturing firm was seeking a loan to fund a major acquisition and needed their assets appraised at 6 plants in 90 days to be used as collateral. The appraisal was done in 60 days and exceeded the value they needed. The acquisition was completed and added significant growth and success to the firm.
Worldwide equipment valuation expertise you can rely on for supportable opinions for the following applications:

  • Financing
  • Merger & Acquisition
  • Property Taxes
  • Insurance
  • Sale or Purchase
  • Business Valuation
  • Fixed Asset Inventory Reconciliation
  • Fair Value Financial Reporting

Reducing Property Insurance Premiums …

Without Increasing Exposure

  • Determining the true value of assets–and separating the insurable values from the uninsurable requires special skills and expertise.
  • Value estimates based upon square footage are only as good as the underlying assumptions–spaces used for manufacturing, warehousing, or offices have different construction costs–it may ignore variations in climate, geographic areas, labor rates, building codes, and quality.
  • The costs for building additions or installation of new equipment are usually added to the insurable value base, but when the assets are removed, their respective insurable values should be deducted. Often times they are not and these phantom assets are artificially inflating insurance coverage and premiums.

Buildings/Equipment/Furniture Are you over-insured, under-insured, or just un-sure? Take the guesswork out of your risk management decisions. We apply state-of-the-art technology, advanced methodology, and the experience of our staff and studies. The result is a report which is accurate, supportable, and documented. Whether you are a building owner or tenant, property insurance rates and construction costs are increasing at high rates and are forecasted to continue this trend. It is essential to obtain independent appraisals from experts to avoid over-insuring at higher premiums or exposing the company to unknown risks by under-insuring. FACT: Oftentimes, original construction costs are used as the starting point, then trended upward over the years, resulting in a significant over-insured position.

Success Story: Over Insured A complex of 29 buildings that started with one structure in 1930 was the profile of a major hospital facility in the Midwest. Each addition over the years had different construction types, varying floor heights, unique finishes, more modern electrical and HVAC systems, and often involved the removal of major property components of a prior building to accommodate the expansion. The replacement cost of those components was never determined and deducted from the current coverage before adding the new costs. There had never been an insurance appraisal and current coverage had grown to $135 Million. A complete engineering-based insurance appraisal by a highly experienced firm resulted in a current replacement cost of $85 Million. Yes…a $50 Million difference!

Success Story: Under Insured After declining to spend $7,500 for an insurance appraisal of the headquarters building, the CFO deeply regretted that decision. During a storm, lightning struck the gas main which exploded and took out the pipe supplying water to the sprinklers. The resulting $35 Million total loss was not covered by the $20 Million policy and the company went out of business.

Business Valuation Services

So, what is your business worth? Often heard at parties or on the golf course – oh 4 times net earnings, or 2 times revenue, or divide the temperature by the humidity and multiply by 5! Well it is never that simple, and you know your business is different from most others. In determining fair market value, we consider the cost, income, and market approaches as appropriate to the assets involved and the supporting evidence available. This data is utilized in our valuation analysis that includes research of market data for recent sales/offerings of comparable companies and fixed assets, public information regarding financial data for comparable companies, and a correlation of value indications from the three approaches. Several financial valuation procedures may be used to value businesses, and include but are not restricted to, discounted cash flow analysis, similar market transactions, capitalization of income and earnings multiples, and sum-of-assets. Other approaches may be used as appropriate to this business. Compliance with IRS regulations (Revenue Ruling 59-60) and the courts also require certain factors to be considered in the valuation of companies.

Success Story The owner of a family owned business wanted to start gifting minority interests to his children and set up a trust through his legal counsel. While using one of those rules of thumb, he thought the business was worth $5 Million. An independent valuation determined it was worth $6 Million, and with appropriate discounts applied, each 1% was not $60,000 but $42,000. This allowed better planning by making larger contributions while minimizing the tax impact.