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Making value judgments.
Quist looks at every angle when valuing
business interests. We must take into account numerous variables
that differ case by case. For example, investors are most interested
in a company’s future cash flow and the risk associated with
realizing that cash flow. Therefore, we consider a company’s
historical financial performance very important.
We certainly look at history, but we also must factor in evolving
market conditions and variables such as loss of key personnel, entry
of a well-funded competitor or introduction of technological changes.
The approach we use to establish value is best visualized as a three-tiered
“continuum of value.”
- Control Value:
Highest value is based on majority or total control. For example,
when the interest holder has the ability to influence cash flows,
we look at the price the interest would command in a single transaction
with one buyer.
- Freely Tradable Minority Interest Value:
Theoretical trading price of minority interests if a market already
exists. For example, the interests are registered and traded in
an active market.
- Non-marketable Minority Interest Value:
Takes into account a discount on the minority trading price where
a market does not already exist. For example, with no established
market, sellers could not convert their interest to cash quickly
like publicly traded stock.
Of course, on all levels of value, we factor in
obligatory variables, including control premiums, minority discounts,
marketability discounts, cash flows and ownership rights. But here’s
the key: The process cannot move forward until one of the above levels
of value is clearly defined, and the rights and powers of the interest
holders are closely examined. Once that’s established, Quist
can deliver the most accurate and objective valuation without compromises
or contingencies. The end work product? An unbiased report that will
stand up to intense examination.
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