Valuation & Perpetuation

A fair market valuation (FMV) is a thorough review of the financial and operational attributes of a business enterprise, taking into consideration the inherent risks of the general marketplace as well as the specific risks of the particular firm. Absent a public marketplace for establishing the value of a business, a FMV of a privately held business is the primary means of assessing whether the value of a business is growing or not.

We provide valuation services to various firms across the insurance distribution and related sectors. Fair Market Valuation reports provide great insight to management regarding the internal and external factors affecting the value of the business, and are commonly used to establish the value of the firm for business planning in support of both shareholder agreements and ownership perpetuation plans.

FMVs can also be used to periodically gauge the health and value of the agency and may be used in conjunction with mergers & acquisitions and fairness opinions. Fair Market Valuations are also required annually for Employee Stock Ownership Plans (ESOP).

Other common uses of FMV information include the following:

• Valuation of stock options, stock grants, stock appreciation rights and other similar ownership rights
• Valuation implications of minority ownership positions
• Support of purchase price allocations
• Restrictive covenant and personal goodwill valuations
• Fairness Opinions
• “C” to “S” Corporation conversions

The internal transition of ownership from one group of owners to another is a process – not an event. This process may occur over a number of years through the periodic sale of ownership shares by the seller(s) to the buyer(s).

To be successful, ownership perpetuation requires careful thought, discussion and planning. There must be time to discuss the needs of all parties involved, and time to design a plan and receive input from all who will participate before the plan is finalized. Lastly, a successful perpetuation program requires periodic reviews, and modifications as circumstances change. All sound perpetuation programs contain four key inextricably linked components we refer to as “PACT”:

Financial discipline and long-term focus on the part of both sellers and buyers is critical to the success of the plan.

OPTIS Partners works with clients to assess their needs and develop action plans and alternatives for each of the above components. We will also provide and/or assist with the following specific deliverables:

• Establishment of the valuation basis from which to start the purchasing and selling process, and the updating of that process as necessary over time
• Development of plans to fund the transition of ownership between individuals
• Creation of cash-flow projections and other financial projections throughout the term of transition
• Revision of projections and plans as circumstances continue to develop