VALUATION AUDIT CASE STUDY | COMPANY/INDUSTRY:

Matt Stelzman, an HHM CPAs business valuation professional, was hired by an attorney to determine the value of a local family-owned business for marital dissolution purposes.

SYNOPSIS:

The client was the wife of the business owner and had been involved in the business off and on since its inception.  When this particular attorney was hired to take on this case, there were preliminary talks as to what the husband and wife thought the business was worth.

CHALLENGE:

With historic sales of approximately $1 million per year and little left over in net income at the end of each year, this fact presented some challenges. For this individual client, a successful negotiation was directly related to her future livelihood.

SOLUTION:

“Rough estimates” were submitted by the husband’s attorney reflecting what they thought the business was worth.  Their value of $210,000 was based on a sourced rule-of-thumb for stores that operate in the same industry.  At this point, many attorneys begin to weigh the expense of hiring a valuation consultant with the potential benefit they will receive above and beyond the value submitted by opposing counsel.  However, in this case, the attorney went against her normal procedure and contacted HHM CPAs to place a value on the company. In the end, the client was very thankful she did.

DISCOVERY:

After an extensive Q&A session with the client, her attorney, the husband’s attorney, as well as a site visit, HHM’s valuation team identified numerous expense add-backs as well as consideration that had to be made regarding the line of credit intended for working capital purposes but drawn on for distribution purposes. After all was said and done, a value of $425,000 was determined, $215,000 above the opposing side’s estimate of value.

On court day, the opposing counsel immediately took the stand and announced that they stipulate the value HHM CPAs presented, assuring the client’s future livelihood.

If you are interested in learning more about our business valuation services, please contact Matt Stelzman at (423) 702 8147.

Download this valuation case study to save as a reference.