Commercial Bankers
To get the big
picture, one must recognize that the commercial banker’s job is that of
evaluating case information (presented by a customer) in light of a ‘‘realistic’’
payback of loan amounts requested. Although business plans offer,
or at least should offer, most of the essential factors in business valuation
processes, the banker is not concerned with ‘‘business value’’ per se but
with ‘‘collateral’’ being offered and with the level of cash flows to support
repayments. Thus, valuation is rarely an effort required by their jobs.
However, in the loan review process, bankers do conduct financial analyses,
calculate operating ratios, and compare applicants with industry standard
performances. Larger commercial banks have wonderfully arrayed
comparable data banks, and, of course, they also have reams of internal
case histories. Smaller banks are prone to include at least some of these
data and will .ll in missing gaps through their own trade associations.
Somewhat more fragmented than business brokers are, commercial
bankers also have firsthand experience with local buyers and sellers. They
are also more likely to have ‘‘the tools’’ for business valuation, although,
as mentioned, much less likely to be called upon to use these tools in
actual business valuation assignments. However, commercial bankers, because
of the multiplicity in applicants and the frequency in reviews, can
normally supply a resourceful commentary to the end products of estimated
values.
Accountants
The traditional form of training that accountants receive makes them most
proficient in the scientific elements of business valuation. However, their
training is also traditionally void of marketing research and studies in human
enterprise (psychology). Generally missing from their everyday practices are
‘‘repeating impressions’’ of the vital influences that buyers bring to bear on
the equation of value in closely held enterprise. Thus the general practitioner
tends only to scientifically measure the value of hard assets in light
of cash flows. More often, a general practice is so busy with traditional tax
and accounting matters that they are shy to offer more than opinions of
value to their clients. However, larger firms will often have specialized business
valuation departments; in fact, the Association of Certified Public Accountants
(ACPA) now offers the CPA-BV designation. Course work and
examinations leading to this specialty are quite rigid, and I suspect eventually
that good expertise will be available in even smaller firms. Once again,
however, expertise in valuating the closely held enterprise is a keg of psychological
worms unto its own. For the time being, this specialization seems
more in tune with valuation of the publicly held sector business.
Lawyers
The traditional form of training that attorneys receive is excellent for negotiation
and/or mediation, and while it emphasizes research and structure,
the ‘‘ticket’’ alone does not provide much in the way of financial
tools. However, attorneys must normally have completed undergraduate
work prior to entering law schools. Political science or one of the wide-ranging
social sciences seems to be the major concentration of choice in
undergraduate studies for a great many. But some choose business and
other routes that may be particularly applicable to business valuation practice.
Business valuation, however, is quite inconsistent with the reasons
that people customarily choose to become lawyers. There must be one or
two out there, but personally, I’ve never met an attorney who is also a
valuation expert.
Several lawyers had written works on buying and selling small businesses,
but I did not find one who had written about business valuation. Educations
and experiences of lawyers are traditionally inconsistent with educations
and experiences of business valuation specialists. From the
consulting practice point of view, clients of lawyers and judges are my own
most frequent clients for business valuation.
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