Appraisal firms, as the name suggests, offer paid valuation services for all kinds of scenarios: M&A transactions, estate planning, employee stock ownership plans (ESOPs), litigation, unbiased opinions, and more.
The scope of services is much broader than what a typical investment bank offers Top property valuation firms.
But the work itself tends to be an inch wide and a mile deep.
In other words, you can spend weeks valuing just one asset for a single company, all to support one small aspect of a deal, lawsuit, or inheritance.
By contrast, the job in investment banking is a mile wide but an inch deep: You're running multiple trading processes, responding to client requests, and dealing with random tasks at the same time, but you don't go incredibly deep into any task.
Some examples of common assignments at appraisal firms include:
Private Company / ESOP Valuation: All private companies own shares, but their share prices are not easy to determine because they are not listed on public markets.
So when private companies grant stock options to employees and determine the appropriate exercise price, they hire appraisal firms to perform 409A valuations.
These valuations also arise when there is a lawsuit pending or an existing shareholder wants to sell shares.
Purchase Price Allocation: When an M&A deal closes, the buyer must "purchase price allocate" to different items and adjust the seller's assets and liabilities to fair market value.
You can also create new items, such as goodwill and other intangibles, to "bridge the gap" between the stock purchase price and the seller's common equity, which is noted in the agreement (see: How to Calculate Goodwill). trade).
Bankers treat this as a mere afterthought in models, but appraisal firms spend a lot of time valuing and revaluing these assets because companies must record accurate figures in their filings:
Purchase price allocation
Goodwill Impairent Test: For example, if Company A acquired Company B for $1 billion, created $200 million of goodwill in the process, and then Company B becomes less valuable, Company A you need to "reduce" or "impair" that goodwill to reflect this change.
Companies hire appraisal companies to carry out these periodic checks and determine the correct deterioration.
Private Equity Portfolio Company Valuation: Private equity clients may hire valuation firms to verify their portfolio company valuations and ensure accurate reporting.
If they disagree with a PE company's assumptions for discount rate, valuation multiples, growth rates or liquidity discount, the value of the entire portfolio could change.
Inheritance and gift tax: If a wealthy person dies, his or her attorney may hire an appraisal firm to determine the value of the wealthy person's net assets.
The government will then collect estate taxes based on this estimate.
So… How does the “Company Valuation” work?
“Wow, this job sounds pretty complex,” you might say, “So how does valuation work? Are there new methodologies? Hidden tricks? New and complex math?
No!
Valuation is valuation: it still uses DCF models based on unlevered free cash flow, valuation multiples based on comparable companies or transactions, and asset-based approaches such as liquidation valuation.
The diffrence lies in the level of detail: programs and assumptions that span many spreadsheets rather than much simpler approaches in IB.
"Mathematics" still does not go beyond basic arithmetic and statistics.
(An exception is if your group values complex financial derivatives, in which case the level of mathematics required increases.)
In addition to the level of detail, another difference is that the purpose of the work varies depending on the type and size of the company.
For example, in the Big 4 companies, the valuation teams exist primarily to support their audit teams.
Therefore, he spends a lot of time reviewing other companies' valuations so the audit team can agree on specific line items on the financial statements, such as stock-based compensation expense recorded on the income statement.
Instead, you'll often do more "interesting" work at boutiques and smaller independent firms - anything from valuing Anthony Bourdain's estate to
