5.02: Purpose of Business Valuators’ Reports
The first thing that should be looked at when reviewing a valuator’s report is its purpose. The purpose of the report could significantly impact both its content and its conclusions.
- Report A: A report that has been prepared to resolve a dispute will be highly detailed, taking into consideration the perspectives of all the parties in the dispute. It may have been prepared under a joint appointment. Its most important user may well be a judge. Its conclusions are likely to be definitive.
- Report B: A report prepared to help a business owner determine a suitable asking price for his/her business may not contain much detail. The conclusion may put the value of the business as a range, designed to give the seller negotiating parameters.
The purpose of the report could significantly impact both its content and its conclusions.
Clearly, Report B would not be useful in settling a dispute. And Report A may well be more detailed and expensive an exercise than is needed for a negotiating sale document – after all, the final price is likely to be determined by the negotiating process, not the report.
The Canadian Institute of Chartered Business Valuators (CICBV) identifies several types of reports that may be prepared in different circumstances. These are Valuation Reports (which may vary according to scope), Advisory Reports, Expert Reports, Limited Critique Reports, Fairness Opinions and Investment Entity Review Reports. Practice standards are set by the CICBV for each of these – see Practice Standards of the CICBV for further details.
Contact MVI to discuss what kind of report you really need.