Many business owners believe their company has one true value. This belief is supported by many investment bankers and business appraisers. In fact, every private business has a multitude of correct values at the same time. Robertson & Foley understands this and so should you.
Private securities do not enjoy access to an active trading market. Either a private valuation must be undertaken, or a transaction must occur to determine the value of a private security for some purpose at some point in time.
Purpose is defined as the intention of the involved party or the reason for the valuation. The purposes for undertaking an appraisal are referred to as giving rise to Value Worlds. Therefore, the premise of Value Relativity is:
A Private Business Value is Relative to the Value World in Which it is Viewed
Every private company, therefore, has a large number of different values at the same time, depending on the reason for the valuation.
Example appraisal reasons are: determine open market value (market value); legal/tax (fair market value); economic value creation (economic value); minority dissent (fair value); secured lending value (collateral value) and so on.
There are dozens of such reasons, or value worlds.
Robertson & Foley is one of the few investment banking firms in the world that provides valuations for the spectrum of appraisal reasons. Every day we assist business owners discover the relative value for their business, so they can then make the best possible investment or financing decisions.