Valuation is part art and part science, but there is always a risk that some of the art may be lost or not understood. One of the more routine engagements an appraiser or valuation analyst may encounter is to value a practice for a buyout, whether it be due to an expected retirement, death or disability, or a buy-in. Such an engagement can be significantly more complex than appears on the surface. Join Mark Dietrich to learn some of the nuances of assessing local market rates of compensation, evaluating market data, and reconciling working capital.
Program Agenda
Definition of “fair market value” and whether any lack of control or marketability discounts are to be considered
Determining replacement compensation versus “profits” to be included in the valuation model
Assessing local market rates of compensation relevant to a practice located in that market
Evaluating whether and to what extent “market” data is relevant, including private equity and public company buyers
Dealing with the presence of life or disability insurance when either of those events is the reason for the engagement
Reconciling actual working capital to normal working capital
Dealing with the terms of any non-compete agreement
Learning Objectives
Describe how the terms of a shareholders’ agreement or operating agreement impact the level of value
Restate how the local market of the practice determines the appropriate normalization adjustments – just because it plays in Peoria does not mean it will play in Manhattan
Explain why “Market” transactions reflect specific terms from the buyer that are rarely applicable a given valuation engagement, but may influence perceived risk and the discount rate
List what elements to consider in reconciling actual and normal working capital – and what is “normal” anyway?
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