An independent valuation gives both sides a reasoned figure to work from. Where the company's documents prescribe how value must be determined, we follow them; where they do not, we agree the basis of value with you at the outset.
When is this valuation required?
- A shareholder is retiring or stepping back from the business.
- A director-shareholder is leaving employment and leaver provisions apply.
- Co-owners have decided to separate and one will buy the other out.
- The company is buying back a shareholder's shares.
- A shareholder has died and the remaining owners have an option to buy the shares.
Who instructs us?
- Departing and remaining shareholders, separately or jointly
- The company and its directors
- Corporate solicitors and accountants advising on the exit
What exactly is valued?
The departing shareholder's holding, valued on the basis set by the company's documents or agreed by the parties. That may be market value with or without a minority discount, a defined "fair value", or a good or bad leaver price that differs according to the circumstances of departure.
How is value assessed?
We start by reading the articles and any shareholder or service agreement to establish the valuation mechanism: who appoints the valuer, the basis of value, the valuation date, whether discounts apply and whether the valuer acts as an expert. We then value the company and apply the required basis to the holding.
Where the business will fund the purchase, we can comment separately on affordability and on deferred payment structures, while keeping that commercial analysis distinct from the valuation itself.
How the approaches are usually weighed
Typical
- IncomeMaintainable earnings or discounted cash flowUsual starting point
- MarketComparable transactions and companiesCross-check
- AssetAdjusted net assetsWhere relevant
What factors influence the result?
- Valuation mechanism
- The precise wording of the articles or agreement, which may override general valuation principles.
- Leaver status
- Good leaver and bad leaver provisions can produce very different prices.
- Discounts
- Whether the documents require, permit or exclude a minority discount.
- Valuation date
- Often the date of a transfer notice, death or termination, which may be some time ago.
- Funding
- How a buyback or purchase will be financed, including deferred payments.
What information is required?
- Articles of association, shareholder agreements and service agreements
- Any transfer or leaver notices served
- Accounts and management information around the valuation date
- Correspondence on value already exchanged, if relevant
We send a tailored information request once the scope is agreed.
What report will you receive?
Where we are appointed under the articles, we produce the valuation or certificate the documents require. Otherwise we provide a report explaining the basis of value, the company valuation and the value of the holding.
See types of business valuation reports for how the scope of each type differs.
Timing and cost
How long will it take?
Articles sometimes set a deadline for the valuation. Let us know when you first contact us so we can confirm whether it can be met.
How much does it cost?
The documents often say who bears the valuer's costs. Where they do not, the parties agree this before we start, and we confirm the fee in writing.
How our fees are set →Frequently asked questions
Do the articles decide how shares are valued?
Often they do. Many articles set out a valuation mechanism, including the basis of value and whether discounts apply. Where they are silent, the parties need to agree a basis or seek advice on how one would be determined.
What is a good leaver and a bad leaver?
These are contractual categories, commonly found in articles or shareholder agreements, under which the price paid for a departing shareholder's shares depends on the reason they leave. The definitions vary between companies.
Can you act for both sides?
We can be jointly instructed to provide an independent valuation. We cannot act as an independent valuer and advise one party on negotiating strategy in the same matter.
Can you act as the independent valuer named in our articles?
Often yes, provided we are eligible under the wording and have no conflict. The articles may make the valuer's decision binding, which affects how we run the appointment.
What if we cannot agree a value?
If negotiation fails, the articles may provide for expert determination. Otherwise the dispute may proceed to court. We can assist at each stage, in the appropriate role.
