16 Jun Around the Web: A Week in Summary
The following information has been sourced by Business Brokerage Press for the benefit of the business brokerage community. The views of these articles do not necessarily represent the views of Business Brokerage Press. We hope you find this information helpful.
A recent article from Viking Mergers & Acquisitions entitled “Appraised Value Vs. Market Value: Understanding The Differences And Why They Matter” discusses the difference between appraised value and fair market value, and why they are essential when selling a business.
Appraised value is the amount an appraiser determines a business is worth after analyzing pertinent information. Lenders may look at appraised value.
Fair market value is the amount a business is likely to sell for on the open market. In other words, it is what a buyer is willing to pay.
These two figures ideally should be similar, however intangible assets in particular can make valuing the business complex.
A recent article from Transworld Business Advisors entitled “Who’s Buying and Who’s Selling in 2023” explores the demographics that are driving business sales. Transworld’s Main Street Market Report found that business acquisitions increased by over 32% from 2021 to 2022.
Primary sellers are currently baby boomers, born between 1946 and 1964, who are approaching retirement. The next top category of sellers is those looking to capitalize on the current state of the business sales market.
Primary buyers include individuals looking to leave their corporate jobs and become their own boss, and strategic buyers interested in an acquisition for strategic reasons.
A recent article from Exit Strategies Group entitled “How ASC 842 (the lease reporting standard) Can Impact the Sale of Your Business” discusses the Accounting Standards Update (ASU) 2016-02, commonly known as ASC 842, which requires that all companies that issue GAAP-based financials account for leases on their financial statements. This may impact the sale of a business.
ASC 842 can lead to increased complexity of due diligence, possible effects on valuation, and potential impacts on the deal structure. Businesses with complex finance and capital leases are wise to enlist the help of an experienced accounting professional to ensure compliance with ASC 842 and accurately report lease obligations. This can help facilitate a successful sale and minimize the risk of unexpected financial impacts.