Business appraisal is required
not only for sale and purchase transactions and calculation of the business collateral
value, but also for assessment of managerial decision viability that is required
for increase in company value.
Business value is a business performance indicator while business appraisal actually
means financial, organizational and technical analysis of current operations
and prospectives of an enterprise being appraised.
In the course of company appraisal, many factors should be considered.
Initially, one should understand why business appraisal is required.
Mandatory business appraisal may be provided by the applicable laws or
statutory instruments. Thus, in order to do some legal actions you should
receive the official conclusion on company value in the form of the report on
appraisal prepared by an independent appraiser. This is one of the cases. However,
if the business appraisal is initiated by your party, i.e. if you wish to perform
it to understand the actual value of your business and you do not need the official
report on appraisal of the business market value as it is provided by the Federal
Law No. 135-FL, this is another case.
The major difference between these two cases is not the quality of work
performed by appraiser but the results. The law provides for specific requirements
to appraisal activities. Many of such requirements are reasonable but preparation
of the report based on all these requirements usually results in increase of
appraisal service price. If the results of
appraisal are documented not in the form of the official report on appraisal but
in the form of opinion, then, the detailed requirements specifications for
appraisal will be subject to discussion as a result of which the appraisers
will apply only the procedures required by your party that allow you to avoid
expenses not necessary for you but required when the official procedures
provided by the law must be followed.
The business (company) appraisal is required:
When selling a business;
When selling a part of company (business) assets;
When company is subject to restructuring (consolidation, division, merger, etc.)
or liquidation upon decision of owners or, in case of bankruptcy, upon the
When insuring the company assets;
For taxation purposes;
When receiving loan on the pledge of asset conditions;
For investment project implementation;
For making efficient managerial decisions;
When granting a lease;
When buying a company or a part of it which is the joint-stock property (stock
sale and purchase);
When selling/buying a share in registered capital of a limited liability
company or partnership.