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The Process of a Business Valuation – Engagement by One Party

July 27, 2021

Blog

Understanding the Business Valuation Process

In this blog, we outline the six important steps to your business valuation engagement with Davis Martindale Advisory Services.

(Originally Posted August 11, 2020)

You’ve decided to engage a Chartered Business Valuator (“CBV”) to value your business. Perhaps you’re looking to sell your business and want to get an idea what it may be worth. Maybe you’re restructuring your company for tax purposes and want to take advantage of the price adjustment clause. Alternatively, you’re going through a matrimonial separation and need to determine the amount that should be included on the statement of net family property.

Regardless of the reason, the engagement process is largely the same. We outline the six important steps to your engagement with Davis Martindale Advisory Services:

1. Engagement Letter and Retainer

The engagement letter is our contract with you. It is the starting point, and often the ending point of the process. Our engagement letter sets out the nature of the assignment, the purpose, the fees and the terms and conditions. At the same time, we will send out a conflict check within our firm to ensure the file would not put you or Davis Martindale in a conflict of interest position.

Before we begin the engagement, we request from you a signed copy of the engagement letter. We also request a retainer, which is usually 50% of the engagement fees.

2. Preliminary Request

The timing of issuing our report is dependent on when we receive all of the preliminary information from you. Our preliminary requests may seem lengthy but the information requested is imperative in understanding your situation, corroborating facts, and ensuring we have all information necessary to complete the engagement.

3. Follow-up Questions

After we receive the signed engagement letter, retainer, and responses to our preliminary requests, we begin drafting the report. When preparing the report and reviewing the information you provided, there may be additional questions. We are happy to have our questions answered through email, but if you have questions about our questions, you may speak with us over the phone.

4. Draft Report

Upon receiving the answers to our preliminary request, we will typically have a draft completed in 3-4 weeks for a Calculation Valuation or income for support engagement, and 4 weeks for an Estimate Valuation. When we send you the draft report to read, we anticipate you may have questions or comments.

5. Representation Letter

The representation letter is different from the engagement letter. It is signed at the end of the process and confirms that we have relied on information and discussions with you, and confirms that you are not aware of any errors, omissions or misrepresentations that would have a significant impact on the conclusion in our report. The representation letter will be sent with the draft report and must be returned to us, along with the remainder of our fee, before we can issue a final report.

6. Final Report

Once you have approved the draft report and signed the representation letter, we can issue our final report.

If you are interested in undertaking a valuation assignment, give the professionals at Davis Martindale a call. We would love to work with you.

Co-Authors

Louise Poole - Valuation & Litigation Partner - Davis Martindale
Louise Poole

CPA, CA, CBV, CFF
Partner
Valuation & Litigation

Tyler Kelly - Valuation Associate - Davis Martindale
Tyler Kelly

CPA, CBV
Manager
Valuation

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