Houlihan Valuation Advisors

Business Valuation Services

Houlihan Valuation Advisers provides clients with valuation opinions of equity, on a controlling interest and/or minority interest basis for a variety of purposes including the following:

Buy/Sell Agreements

Houlihan Valuation Advisors has experience working directly with clients, and at times their attorneys, to perform valuations in support of Buy/Sell agreements that may or may not conform to Fair Market Value standards.

Estate Planning & Gifting

For decades, high-net-worth individuals employing estate planning strategies have relied on Houlihan Valuation Advisors to provide valuations. We work with many leading law firms in the region to support a wide variety of strategies including:

Family Limited Partnerships (FLP)
Grantor Retained Annuity Trusts (GRAT)
Charitable Remainder Trusts (CRT)

Our knowledge of the relevant tax cases and Internal Revenue Service statements provides clients with credible discounts for lack of control and lack of marketability that withstand the increasing scrutiny of the IRS review process.

Charitable Donations

When making in-kind charitable donations valued above $500, the IRS requires that the donation be supported by a valuation performed by a “Qualified Appraiser” and also requires the execution and submission of IRS Form 8283. Houlihan Valuation Advisors performs these valuations annually and works with tax attorneys to ensure that donations are made at the appropriate time to ensure clients receive the proper basis for tax purposes.

Capital Raises, Mergers & Acquisitions

Houlihan Valuation Advisors works with companies to derive a fair market value estimate that provides management with a basis for raising capital (typically minority interests); for entertaining and analyzing acquisition offers (controlling or minority interests); or in preparation for selling the company (controlling interests). It should be mentioned that Houlihan Valuation Advisors is not a broker-dealer nor an underwriter and does not raise capital. We do consult with clients concerning deal structures and valuation issues.

Purchase Price Accounting
(ASC 805 & 820/FAS 141R)

Purchase price accounting arises when one company acquires another. The acquirer is required to allocate the price or value of the transaction to the purchased tangible assets, intangible assets, and goodwill (if any) at Fair Value. This process involves:

Working with the client to obtain values for the related tangible assets (this may involve working with a real property appraiser(s) since we do not appraise fixed assets or real property);
Identify the intangible assets acquired that will be employed by the acquirer. This is done with company management’s input as well as input from their auditors; and
Value the intangible assets using methodology consistent with ASC 820, which provides guidance, and specifically identifies a three-level hierarchy of inputs for developing a hypothetical market for illiquid securities:

Level I consists of the most observable market inputs such as quoted prices in active markets for identical assets;

Level II represents data other than Level I inputs that are directly or indirectly observable. Examples include: quoted prices for similar instruments, quoted prices of similar assets in inactive markets, inputs other than quoted prices that are observable, and inputs not directly observable but obtained from observable market data; and

Level III inputs are unobservable and developed with management’s estimates and assumptions that reflect a market participant’s perspective.

Goodwill Impairment Testing
(ASC 350 & 820/SFAS 142)

Houlihan Valuation Advisors works with companies to determine whether there has been impairment of the acquired assets from a transaction. This is a two-step process:

Step I is to value the reporting entity or unit and compare this value to the entity’s carrying value. If the derived estimate of Fair Value is greater than its carrying value (book value) then no impairment is present and Step II is not necessary; however

Step II is necessary when the estimate of Fair Value is less than the entity’s carrying value. In this case, the Fair Value estimate of the entity, as of the testing date, must be allocated to its assets (including intangible assets) and liabilities, with the remainder (if any) being assigned to goodwill. If the amount of goodwill resulting from this calculation is less than the carrying amount of goodwill, then the difference is impaired goodwill and must be charged as an expense in the current period. Step II is virtually the same as a purchase price allocation update.

Intangible Asset Valuation

Houlihan Valuation Advisors has experience valuing trademarks, copyrights, patents, and other intellectual property for financial reporting purposes, to establish value for investment committee approval, and to substantiate the value of collateral for debt financing.

Stock Option Valuation
(ASC 718/IRS Code 409A)

Companies granting stock options must do so at Fair Market Value (FMV) according to the IRS under Section 409A or face significant penalties. Parties who receive stock options with exercise prices that cannot be shown to be at or above the reasonably-determined FMV on the date of grant face immediate tax on vesting at a combined federal and state tax rate as high as 85 percent (in addition to regular federal income and employment taxes, an additional 20 percent federal tax can apply, and certain states may have parallel statutes) on the spread between the exercise price and the FMV of shares as they vest. Therefore, the option holder will be taxed on income the option holder has not actually received, from shares that may not even be salable at the time.

Houlihan Valuation Advisors helps companies establish a defensible FMV using an IRS-approved valuation method that effectively shifts the burden to the Internal Revenue Service to prove the FMV determination is unreasonable.

Employee Stock Ownership Programs (ESOP)

ESOP valuations have become more complex and more scrutinized in recent years. ESOP engagements can involve ERISA issues, as well as Department of Labor concerns. Houlihan Valuation Advisors has worked with dozens of leveraged and non-leveraged ESOP clients over the years. Houlihan Valuation Advisors also provides fairness opinions to ESOP companies when they are acquired, which opine on the fairness of a proposed transaction to the ESOP.