3.25: “Special purchasers”
Fair market value, by definition, is a notional concept. It assumes, among other factors, that the business is exposed to an “open and unrestricted” market and that all “informed and prudent” parties are under “no compulsion to act.”
On the other hand, FMV also requires the CBV to conclude on the “highest price achievable”, which suggests that the CBV should report on any known real-world reason that a business may attract a higher value than the normal notional FMV calculations suggest.
Enter “special purchasers:”
The existence of known “special purchasers” may alter a CBV’s valuation conclusion.
“Special purchasers” referred to in valuators’ reports are parties that may, for synergistic or strategic reasons, pay more for a business than its fair market value. Their interest, especially if there are two or more such parties, may alter a valuator’s reported conclusion, on condition that that their presence in the market is known to the valuator.
The CBV should always include a comment in the report on the extent to which, if at all, “special purchasers” have influenced the valuation conclusion.
Contact MVI for help understanding if the existence of special purchasers has influenced the valuation conclusion.