Our client company is a reputed laboratory serving the medical device industry with the objective of offering services and guidance that meet customer requirements. Our client company offers medical device testing that includes product sterility, pre-sterilized bio burden, environmental monitoring, sterilization validations, packaging medical devices, sterilization and distribution of medical devices for various companies worldwide. Our client is registered with the FDA and ISO accredited to 13485:2003 to ensure that all of their services are regulated, current and quality-driven.
The Challenge / Business situation:
The purpose of our engagement was to provide a limited scope financial valuation of the common stock of our client company for the sole purpose of gift and estate planning related to the transfer of business ownership.
ValuLink Approach and Solution:
The standard of value was fair market value per the Internal Revenue Service (IRS) including consideration of the facts and circumstances surrounding the common stock. With respect to the valuation of common stock, we relied on two approaches: income and market. We utilized a discounted cash flow “DCF” method in determining the value of the Company’s common stock. The income approach was prepared on a financial controlling basis. In our income approach analysis of future cash flows, the market value of invested capital (MVIC), discounted for lack of marketability and net of Interest Bearing Debt, was determined. Using the comparable transactions method, we selected 19 comparable transactions and reviewed each transaction against the Company’s historical financial performance in order to confirm the appropriate price multiple. Using the comparable transactions method, the value of Company’s MVIC (market value of invested capital), net of Interest Bearing Debt, was determined.
Our valuation conclusion was based on the indications of value derived by the income approach and market approach for the Company’s common stock. As of the valuation date, the fair value of the Company’s common stock was reasonably stated and it assisted our client company in their decisions related to gift and estate planning.
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