Company-specific data.

Data about the company's industry and economic environment.

Data about the subject property's market (market for ownership interests in the subject company).

The company-specific data are gathered from the subject company in written form and during site visits and interviews with people knowledgeable about the company. The gathering of this information is the subject of this and the next chapter. The industry and economy data often can be provided by the subject company and can be gathered from publicly available sources. This is the subject of Chapter 6. Data about the market for ownership interests in the subject company include information about changes of ownership of competitors, about guideline company transactions, and about premiums and discounts that might apply to the subject property. These two categories of information gathering are covered in subsequent chapters in Part III.

The manner and sequence in which the data are gathered are important only to the extent that the process be complete and efficient. For example, supporting analysts may be collecting industry, economic, rate of return, and guideline transaction information at the same time that the principal analyst is working directly with the management of the subject company. In any case, it is important to convey a sufficient overview of the company and the assignment to all valuation team members at an early meeting so that all the analysts will be in a position to recognize important data as they proceed on the project. If time allows, information gathered should be reviewed before the visit to the company so as to focus the interviewing process on the most essential factors that affect the value of the company, thereby minimizing the inconvenience of management interviews and also maximizing the productivity of the site visit.

Some of the information necessary to conduct the business valuation will need to be obtained through interviews with company management. Sometimes, however, the analyst merely inspects voluminous or highly sensitive documents and gets copies only of the information necessary to perform the assignment.

Written company-specific information that is generally used in business valuations is presented in Exhibit 4-1. This list is generic. Not every item on the list will be required for every appraisal, and in many circumstances, documents not listed must be reviewed. Working with this list, nevertheless, will assist the analyst in developing a subject-company-specific information request list. It will also be helpful to company officials and attorneys in the planning stages of a potential valuation engagement.

Preliminary Documents and Information Checklist for the Business Valuation of a Typical Corporation

Financial Statements for Typical Corporation

Balance sheets, income statements, statements of changes in financial position, and statements of stockholders' equity for the last five fiscal years

Income tax returns for the same years

Latest interim statements and interim statements for comparable period(s) of previous year

Other Financial Data

Summary property, plant, and equipment list and depreciation schedule

Aged accounts receivable summary

Aged accounts payable summary

List of marketable securities and prepaid expenses

Inventory summary, with any necessary information on inventory accounting policies

Synopsis of leases for facilities or equipment

Any other existing contracts (employment agreements, covenants not to compete, supplier agreements, customer agreements, royalty agreements, equipment lease or rental contracts, loan agreements, labor contracts, employee benefit plans, and so on)

List of stockholders, with number of shares owned by each

Schedule of insurance in force (key-person life, property and casualty, liability)

Budgets or projections, for a minimum of five years

List of subsidiaries and/or financial interests in other companies

Key personnel compensation schedule, including benefits and personal expenses

Company Documents

Articles of incorporation, bylaws, and any amendments to either

Any existing buy-sell agreements, options to purchase stock, or rights of first refusal

Franchise or operating agreements, if any

Other Information

Brief history, including how long in business and details of any changes in ownership and/or bona fide offers recently received

Brief description of the business, including position relative to competition and any factors that make the business unique

Marketing literature (catalogs, brochures, advertisements, and so on)

List of locations where company operates, with size and recent appraisals

List of competitors, with location, relative size, and any relevant factors

Organization chart

Resumes of key personnel, with age, position, compensation, length of service, education, and prior experience

Personnel profile: number of employees by functional groupings, such as production, sales, engineering/R&D, personnel and accounting, customer service/field support, and so forth

Trade associations to which the company belongs or would be eligible for membership

Relevant trade or government publications (specially market forecasts)

Any existing indicators of asset values, including latest property tax assessments and any appraisals that have been performed

List of customer relationships, supplier relationships, contracts, patents, copyrights, trademarks, and other intangible assets

Any contingent or off-balance-sheet liabilities (pending lawsuits, compliance requirements, warranty or other product liabilities, estimate of medical benefits for retirees, and so on)

Any filings or correspondence with regulatory agencies

Information on- prior transactions in the stock or any related party transactions

When asking for historical financial statements on the subject property, one should endeavor to study statements during a relevant period. The most common period of such study is five years. However, conceptually, the relevant period covers the most recent time period immediately before the valuation date during which the statements represent the company's general operations.

Discuss your mineral property appraisal, mining business valuation, or other mineral industry related concerns with Mineral Business Appraisal: Michael R. Cartwright  michael@minval.com
Five Claret Court, Reno, NV  89512-4744
Tel/Fax: 775-322-9028

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