Valuation of business interests is critical in resolving shareholder disputes, which can involve allegations of mismanagement or excessive compensation. These disputes can also be prompted by diversion of funds; often, they are perquisites for management and accounting irregularities.
Cendrowski Corporate Advisors assists business owners, shareholders, and the courts to resolve shareholder disputes among privately-held entities. Our seasoned advisors have provided consulting for shareholder lawsuits in diverse industries, from start-ups to established corporations. Our valuation specialists also provide expert testimony on cases related to shareholder disputes.
Our tax and valuation professionals can also help your company determine the fair market value of common stock, which is particularly valuable during shareholder disputes. Ensuring that a 409A valuation is compliant with all IRS regulations helps fend off IRS penalties. We also make certain that business owners can meet the requirements for audit practices and tax compliance from the issue of common stock.
Client Success: 409A Stock Forecast
Cendrowski Corporate Advisors was engaged by a healthcare consulting company to provide a valuation for stock-based compensation. Since the company was relatively young, historical financials were limited. The company was significantly ramping up revenue, so much of the valuation had to be determined by forecasts. We also had to assess the market they were targeting and determine how much market share they could reasonably be expected to capture.
The companies’ management provided forecasts based on their previous year’s actual sales. We were able to extrapolate a value based on these cash flows discounted back to present value based on the associated risks of being a start-up. The company’s business model reflected strong margins and minimal capital expenditures. As a consulting firm, most of their expenses came from salaries and wages, and capital expenditures were practically non-existent with few fixed assets. The company’s most significant assets were their employees.
The Cendrowski Corporate Advisors team analyzed how cash flowed through the business based on those circumstances, which altered the value of the practice. We provided the client with a formal report for use related to stock-based compensation, which was used to issue stock to their firm’s current and future employees.