Accurate information about an asset’s value is key to many financial transactions. Just what is a company or estate or realty holding worth? Patuxent Valuation Group LLC is in the business of answering that question and providing credible, supportable information for the business community.
Headed by Mark Rubin, PVG provides a full-range of business valuation consulting services. “Business valuation” can be defined as a process and procedures used to estimate the economic value of an owner’s interest in a business, stock holdings or an estate. Often, financial participants need to determine the price they are willing to pay or receive to close a business deal.
Valuation tools also can serve to resolve estate and gift taxation issues or divorce litigation, allocate business purchase price among business assets, establish a formula for estimating the value of partners’ ownership interests and other financial and legal purposes.
PVG grew out of Berman Goldman & Ribakow LLP (BGR), a 72-year-old certified public accounting firm located in Columbia. Seven years ago, PVG was formed specifically to perform business valuations; the firm shares the same office suite as BGR.
“We had been doing valuations internally,” said Rubin. “We saw an opportunity to grow. We formed PVG and brought in Pat Lowry.”
One Purpose; Diverse Services
“These services are all that we do,” states the company prospectus, “making PVG uniquely qualified to handle the intricacies inherent in each client engagement.” Its analysts have prepared valuations for purposes as diverse as shareholder disputes, business ownership transitions, estate and gift tax planning, divorce and litigation.
PVG stresses that it remains independent and objective when preparing and issuing financial statements. Frequently, its work must pass scrutiny by audit firms and their valuation professionals, boards of directors and private equity firms.
PVG performs about 80 valuations each year. Typical clients may be going through the merger and acquisition process, looking to buy a company, need to know the value of an estate or, in the case of a partner buyout, need to know the worth of stock holdings.
“People need an independent assessment of the value of a business or a stock,” explained Lowry. “We give them our professional opinion. … It’s a good market. The demand seems to be pretty strong.”
Variety of Needs
As an example, Rubin mentioned that PVG is currently performing a valuation for the owner of several real estate properties. The client wants to place the holdings into a trust to eventually transfer to the family’s next generation. Using various financial accounting standards (FAS) and generally accepted accounting procedures (GAAP), PVG can determine the properties’ worth.
“The report is the evidence,” he said, “It’s our final product, generally 20 to 50 pages in length.”
“If a company wants to issue stock options,” added Lowry, “they want to set a price; they want to know what it is worth. … Or, in an acquisition, they need help with the purchase price; they have no idea what to offer.”
Typically, PVG’s engagements include the following types of services.
• Purchase price allocation (SFAS 141 and SFAS 141R) to value an acquired company, closely held shares issued as consideration or intangible assets; or analyze asset life
• Goodwill impairment testing (SFAS 142) to determine the fair value of reporting unit(s) as well as identify and value intangible assets and perform the asset life analysis
• Share-based payment transactions for employees (SFAS 123R) to value common stock issued as part of an incentive compensation plan or as stock options, and assisting in documenting and supporting assumptions used in stock option pricing models
“A lot of our work, maybe 60 to 70%, is with companies contracting to the government,” added Lowry, noting the prevalence of that type of company in this area. “Typically, we work with the chief financial officer. … Usually, we are referred by another client or CPA firm.”
“We get engaged by other CPA firms who aren’t as independent” from the client, said Rubin. He also mentioned assisting with estate planning when the client wants to make a large gift or charitable contribution.
Hands-On Professional Experience
PVG has a staff of five, all with accounting or financial backgrounds and hands-on experience in negotiating and pricing actual transactions of closely-held business interests. Professionals in the field, such as Pat Lowry, hold credentials as an accredited valuation analyst (AVA) and accredited senior appraiser (ASA). Candidates for the credentials must attend classes, pass exams and stand for peer review.
Rubin calls PVG a “boutique valuation firm.” Its close association with BGR gives the company proximate access to the accounting firm’s resources. Most of PVG’s business comes from referrals from attorneys, CPA firms and other clients.
Rubin anticipates that his firm will continue to grow. “We would like to double over the next three years. … The work we do is very high quality. We are very customer-oriented. We have a high involvement with the partners. That’s what most clients want.”