Hitchner James, Mard Michael. Financial Valuation Workbook

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CHECKLIST 5-9: Valuation Information Request (VIR)

High Tech Business

Business Name: ________________________________________________________

Valuation Date: ________________________________________________________

This is a generalized information request. Some items may not pertain to your com-

pany, and some items may not be readily available to you. In such cases, indicate

N/A or notify us if other arrangements can be made to obtain the data. Items

already provided have been marked with an “X”. If you have any questions on the

development of this information, please call.

A. Financial Information

_____ 1. Financial statements for ﬁscal years ending FIVE YEARS, (order of

preference: audited, reviewed, compiled, and internal).

_____ 2. Interim ﬁnancial statements for month-end DATE OF VALUATION

and one year prior.

_____ 3. Federal and state corporate income tax returns and supporting

schedules for ﬁscal years ending FIVE YEARS.

_____ 4. Financial projections for the current year and the next ﬁve years,

including balance sheets, income statements, cash ﬂow statements,

identiﬁcation of any adjustments of assets to fair market value, and

assumptions supporting the projections.

_____ 5. Summary of agings of current accounts receivables and payables.

B. Products and Markets

_____ 1. A complete market study, including potential users by market

(geographic and service), current and expected competition, and

current and expected market share.

_____ 2. Analysis of actual or perceived competition, including discussion of

alternative sources of information service or product that would be

used if the business did not exist.

_____ 3. Complete Web site statistical analysis.

_____ 4. Copies of any relevant industry studies you have purchased, produced,

or obtained.

_____ 5. Description of all strategic alliances and/or partnerships.

_____ 6. Description of and a strength and weaknesses analysis of your

information technology infrastructure (software, hardware,

bandwidth, etc.).

_____ 7. Copies of sales materials or other promotional literature.

_____ 8. History of company and major competitors.

_____ 9. List of ﬁve largest customers and their percentage of total sales (if

applicable).

142 CHECKLISTS

C. Operations

_____ 1. List of all stock options and warrants including owner, date granted,

number of shares, option period, and exercise price.

_____ 2. List of all venture funding including investor, date of investment,

number of shares, and type of shares (if preferred).

_____ 3. Notiﬁcation of any discussions held or planned to be held with

potential investors, buyers, investment bankers, or underwriters.

_____ 4. Copies of latest two versions of company’s business plan.

_____ 5. Copies of all prior appraisals of the company.

_____ 6. List of ﬁve major suppliers including amounts paid (if relevant).

D. Facilities

_____ 1. Detailed real property information, including any recent appraisals.

_____ 2. Detailed ﬁxed asset information, including brand, type, age, serial

number, and condition of ﬁxed assets (if available).

_____ 3. Addresses and descriptions of all facilities.

E. Personnel

_____ 1. Officers’ compensation for last ﬁve years.

_____ 2. Detail of company ownership and any recent transactions involving

company stock or stock options.

Disclaimer Excluding Any Warranties: This checklist is designed to provide guidance to analysts, auditors, and man-

agement, but is not to be used as a substitute for professional judgment. These procedures must be altered to ﬁt each

assignment. The practitioner takes sole responsibility for implementation of this guide. The implied warranties of mer-

chantability and ﬁtness of purpose and all other warranties, whether expressed or implied, are excluded from this trans-

action and shall not apply to this guide. The Financial Valuation Group shall not be liable for any indirect, special, or

consequential damages.

Valuation Information Request (VIR) High Tech Business 143

144 CHECKLISTS

CHECKLIST 5-10: Valuation Information Request (VIR)

Law Practice

Practice Name: _________________________________________________________

Valuation Date: ________________________________________________________

This is a generalized information request. Some items may not pertain to your prac-

tice, and some items may not be readily available to you. In such cases, indicate N/A

or notify us if other arrangements can be made to obtain the data. Items already

provided have been marked with an “X”. If you have any questions on the devel-

opment of this information, please call.

A. Financial Information

_____ 1. Financial statements for the ﬁscal years ending FIVE YEARS (order of

preference: audited, reviewed, compiled, and internal), including:

(a) All unusual charges or credits that are not expected to recur;

(b) All assets that are included in the ﬁnancial records, but are distinctly

not related to the practice of law;

(d) A list of ownership of stock at DATE OF VALUATION; and

(e) A description of any recent transactions in stock.

_____ 2. Federal and state corporate income tax returns for the ﬁscal years

ending FIVE YEARS.

_____ 3. State intangible personal property tax returns for the ﬁscal years

ending FIVE YEARS.

_____ 4. Any existing buy-sell agreements or other restrictive agreements.

_____ 5. Any existing proﬁt-sharing, pension, or 401(k) plans.

_____ 6. All prior real estate and business appraisals, if any.

_____ 7. An accounts receivable listing as of DATE OF VALUATION, or if not

available, as of the most recent date available.

_____ 8. A listing of work-in-process, including fees earned but not billed.

_____ 9. The fee schedule in effect at the valuation date for each attorney on

staff, plus each average realization rate (percentage) for the last year.

_____ 10. A ﬁxed-asset schedule, including all furniture, ﬁxtures, and equipment

utilized in the office. This schedule should include the date of

purchase, the original cost, the approximate condition, and the

remaining estimated useful life.

_____ 11. For the ﬁrm’s and your major legal categories, provide the three

largest total client billings, the grand total billings within the category,

and the total number of clients. Client identity is not necessary, and

examples of major legal categories would be tax, general litigation,

real estate, corporate law, commercial banking, family law, criminal

law, and so forth.

B. Documents and Records

_____ 1. Corporate charter, articles of incorporation, and/or bylaws.

_____ 2. Minutes of board of directors’ and shareholders’ meetings for the

most recent three years (may be reviewed by us on-site).

_____ 3. Summary of major covenants or agreements binding on the

professional practice (e.g., all contracts or letters of agreement that

have been entered for specialty legal work, capital leases, lease

agreements, employment contracts, service contracts, etc.) in existence

as of the valuation date(s).

_____ 4. Description of any pending litigation including parties involved, date

of ﬁling, description and nature of the lawsuit or claim, current status,

and expected outcome and ﬁnancial impact.

_____ 5. Name of any “related” companies or professional associations

(common ownership, common shareholders, etc.) and brieﬂy describe

the relationship(s). Include percentage of ownership in each.

_____ 6. Stock ledger.

Disclaimer Excluding Any Warranties: This checklist is designed to provide guidance to analysts, auditors, and man-

agement, but is not to be used as a substitute for professional judgment. These procedures must be altered to ﬁt each

assignment. The practitioner takes sole responsibility for implementation of this guide. The implied warranties of mer-

chantability and ﬁtness of purpose and all other warranties, whether expressed or implied, are excluded from this trans-

action and shall not apply to this guide. The Financial Valuation Group shall not be liable for any indirect, special, or

consequential damages.

Valuation Information Request (VIR) Law Practice 145

CHECKLIST 5-11: Valuation Information Request (VIR)

Partnership

Partnership Name: ______________________________________________________

Valuation Date: ________________________________________________________

This is a generalized information request. Some items may not pertain to your part-

nership and some items may not be readily available to you. In such cases, indicate

N/A or notify us if other arrangements can be made to obtain the data. Items

already provided have been marked with an “X”. If you have any questions on the

development of this information, please call.

A. Financial Information

_____ 1. Financial statements for ﬁscal years ending FIVE YEARS (order of

preference: audited, reviewed, compiled, and internal).

_____ 2. Interim ﬁnancial statements as of month-end DATE OF VALUATION

and one year prior.

_____ 3. Federal and state income tax returns and supporting schedules for

ﬁscal years ending FIVE YEARS. Include state intangible personal

property tax returns.

_____ 4. Explanation of signiﬁcant nonrecurring and/or nonoperating items

appearing on the ﬁnancial statements or tax returns in any ﬁscal year

if not detailed in footnotes.

_____ 5. Opening balance sheet, if a new partnership, or balance sheet at or

near the valuation date.

_____ 6. List of assets owned, if not detailed in (4), including location, age,

approximate size of each parcel of real estate, estimated book value,

and market value.

_____ 7. Support documentation for fair market values of assets (e.g., real

estate appraisals, statements of account for marketable securities, etc.)

B. Operations

_____ 1. In a paragraph or so, complete this statement: “The Partnership is in

the business of …”

_____ 2. Name and description of operations of all major operating entities,

whether divisions, subsidiaries, or departments.

_____ 3. Distribution policy, distribution history, and prospect for future

distribution.

_____ 4. Trade association memberships and industry publications of interest to

management.

_____ 5. Copies of any appraisals of Partnership interests made during the last

ﬁve years, if any.

C. Documents and Records

_____ 1. Partnership agreement.

_____ 2. Description of any pending litigation including parties involved, date

of ﬁling, description and nature of the lawsuit or claim, current status,

and expected outcome and ﬁnancial impact.

_____ 3. List of all subsidiary entities and the percentage ownership in each.

146 CHECKLISTS

_____ 4. Name of any “related” entities (common ownership, common

shareholders or partners, etc.) and brieﬂy describe the relationship(s).

_____ 5. Copies of any appraisals of the stock of the partnership made during

the last three years.

D. Other

_____ 1. Current organization chart and ownership schedule.

_____ 2. Number of employees (distinguish full-time and part-time) at year end

for the last three years including current employee classiﬁcations and

compensation.

_____ 3. Description of partners, including age, length of service, background,

annual compensation, and distributions of each person for the current

year and each of the last two years.

_____ 4. Copies of appraisals of any partnership-owned real property or

personal property performed during the last three years.

Disclaimer Excluding Any Warranties: This checklist is designed to provide guidance to analysts, auditors, and man-

agement, but is not to be used as a substitute for professional judgment. These procedures must be altered to ﬁt each

assignment. The practitioner takes sole responsibility for implementation of this guide. The implied warranties of mer-

chantability and ﬁtness of purpose and all other warranties, whether expressed or implied, are excluded from this trans-

action and shall not apply to this guide. The Financial Valuation Group shall not be liable for any indirect, special, or

consequential damages.

Valuation Information Request (VIR) Partnership 147

148 CHECKLISTS

CHECKLIST 5-12: Valuation Information Request (VIR)

Professional Practice

Professional Practice Name: ______________________________________________

Valuation Date: ________________________________________________________

This is a generalized information request. Some items may not pertain to your prac-

tice, and some items may not be readily available to you. In such cases, indicate N/A

or notify us if other arrangements can be made to obtain the data. Items already

provided have been marked with an “X”. If you have any questions on the devel-

opment of this information, please call.

A. Financial Information

_____ 1. Financial statements for ﬁscal years ending FIVE YEARS (order of

preference: audited, reviewed, compiled, and internal).

_____ 2. Interim ﬁnancial statements as of month-end DATE OF VALUATION

and one year prior.

_____ 3. Financial projections for the current year and the next three years.

Include any prepared budgets and/or business plans.

_____ 4. Federal and state corporate income tax returns and supporting

schedules for ﬁscal years ending FIVE YEARS. Include state intangible

personal property tax returns.

_____ 5. Explanation of signiﬁcant nonrecurring and/or nonoperating items

appearing on the ﬁnancial statements in any ﬁscal year if not detailed

in footnotes.

_____ 6. Accounts payable aging schedule or summary at DATE OF

VALUATION.

_____ 7. Accounts receivable aging schedule or summary at DATE OF

VALUATION.

_____ 8. Fixed asset and depreciation schedule at DATE OF VALUATION.

_____ 9. Amortization schedules of mortgages and notes payable; and terms of

bank notes, credit lines, and/or ESOP debt agreement(s).

_____ 10. Current ﬁnancial statements for the ESOP, proﬁt sharing, pension, or

other employee beneﬁt trust.

_____ 11. Current level of over (under) funding for any deﬁned beneﬁt plan.

B. Services and Markets

_____ 1. List of the major services of the practice and copies of marketing

materials, including sales brochures, catalogs, or other descriptive

sales materials.

_____ 2. Sales and proﬁt contributions analysis by service category.

_____ 3. Unit volume analyses for existing services for the past ﬁve years.

_____ 4. Description of major services added in the last two years (or

anticipated) and current expectations as to sales potential.

_____ 5. Description of new services under development with expectations as

to potential.

_____ 6. List of the top ten customers of the practice, indicating sales (or sales

upon which commissions were earned) and unit volumes for each of

the past three ﬁscal years.

_____ 7. Summary of major accounts gained (lost) in the last year indicating

actual sales in the current year and beyond.

_____ 8. List of major competitors (full name, location, size, and estimate

market share of each).

_____ 9. List of trade associations memberships.

_____ 10. List of industry publications of interest to management.

C. Operations

_____ 1. In a paragraph or so, complete this statement: “The practice is in the

business of …”

_____ 2. Name and description of the operations of all major operating

entities, whether divisions, subsidiaries, or departments.

_____ 3. List of the top ten suppliers (or all accounting for 5% or more of total

purchases) and the level of purchases in each of the past two years

(include total purchases by the practice in each year).

_____ 4. Summary of services on which the practice is single-sourced, or

suppliers on which the practice is otherwise dependent.

_____ 5. Dividend policy, dividend history, and prospect for future dividends.

_____ 6. Copy of any existing employee stock ownership plan (ESOP).

_____ 7. Copies of all other stock option plans or option agreements, or any

other plan providing vested beneﬁts in practice stock. Also, list

number of options granted and to whom, and the stated exercise

price(s) and expiration date(s).

_____ 8. Basis for practice contributions (contribution policy), contributions in

each of the past ﬁve years, and projection for future contributions to

the ESOP, pension plan, and/or proﬁt sharing plan.

_____ 9. The most recent projection of emerging ESOP repurchase liability. If

no study has been done, list known ESOP liquidity requirements

during the next three years (e.g., known retirements during periods).

_____ 10. Copies of any appraisals of the stock of the practice made during the

last three years.

D. Facilities

_____ 1. Location, age, and approximate size of each facility, including

business volume by major facility.

_____ 2. Ownership of each facility and other major ﬁxed assets. If leased,

include name of lessor and lease terms or agreements. If owned by the

practice, include date purchased, purchase price, recent appraisals,

insurance coverage, and book values.

_____ 3. Estimated depreciation of all assets on a straight-line depreciation

basis if accelerated depreciation is used for ﬁnancial statement

purposes.

_____ 4. Copies of appraisals of any real property or personal property owned

by the practice.

Valuation Information Request (VIR) Professional Practice 149

E. Personnel

_____ 1. Current organization chart.

_____ 2. Number of employees (distinguish full-time and part-time) at year end

for the last six years, including current employee classiﬁcations,

general wage scales, and approximate rate.

_____ 3. List of all union relationships including name of union, date of

current agreement, workers and facilities covered.

_____ 4. Number of part-time and full-time practice-employed salespersons,

including compensation arrangements or schedules. If there are none,

describe how sales are obtained and by whom.

_____ 5. Description of management team, including current title, age, length

of practice service, background, annual salary, and bonus of each

person for the current year and each of the last two years.

_____ 6. Full names of the board of directors, including occupation for outside

members.

F. Corporate Documents and Records

_____ 1. Corporate charter, articles of incorporation, and/or bylaws.

_____ 2. Minutes of board of directors’ and shareholders’ meetings for the

most recent three years (may be reviewed by us on-site).

_____ 3. Summary of major covenants or agreements binding on the practice

(e.g., union contracts, capital leases, employment contracts, service

contracts, product warranties, etc.).

_____ 4. Description of any pending litigation, including parties involved, date

of ﬁling, description and nature of the lawsuit or claim, current status,

and expected outcome, and ﬁnancial impact.

_____ 5. List of all subsidiary companies and the percentage ownership in each.

_____ 6. Name of any “related” companies (common ownership, common

shareholders, etc.) and brief description of the relationship(s).

_____ 7. Stock ledger.

_____ 8. All closing statements and purchase agreements related to all

purchases of the practice’s stock over the history of the practice.

_____ 9. All closing statements and purchase agreements related to all mergers

or acquisitions by the practice up to the valuation date.

Disclaimer Excluding Any Warranties: This checklist is designed to provide guidance to analysts, auditors, and man-

agement, but is not to be used as a substitute for professional judgment. These procedures must be altered to ﬁt each

assignment. The practitioner takes sole responsibility for implementation of this guide. The implied warranties of mer-

chantability and ﬁtness of purpose and all other warranties, whether expressed or implied, are excluded from this trans-

action and shall not apply to this guide. The Financial Valuation Group shall not be liable for any indirect, special, or

consequential damages.

150 CHECKLISTS

Valuation Information Request (VIR) Services 151

CHECKLIST 5-13: Valuation Information Request (VIR)

Services

Business Name: ________________________________________________________

Valuation Date: ________________________________________________________

This is a generalized information request. Some items may not pertain to your busi-

ness, and some items may not be readily available to you. In such cases, indicate

N/A or notify us if other arrangements can be made to obtain the data. Items

already provided have been marked with an “X”. If you have any questions on the

development of this information, please call.

A. Financial Information

_____ 1. Financial statements for ﬁscal years ending FIVE YEARS (order of

preference: audited, reviewed, compiled, and internal).

_____ 2. Interim ﬁnancial statements for the month-end DATE OF

VALUATION and one year prior.

_____ 3. Financial projections for the current year and the next three years.

Include any prepared budgets and/or business plans.

_____ 4. Federal and state corporate income tax returns and supporting

schedules for ﬁscal years ending FIVE YEARS.

_____ 5. Explanation of signiﬁcant nonrecurring and/or nonoperating items

appearing on the ﬁnancial statements in any ﬁscal year if not detailed

in footnotes.

_____ 6. Accounts payable aging schedule or summary at DATE OF

VALUATION.

_____ 7. Accounts receivable aging schedule or summary at DATE OF

VALUATION.

_____ 8. Fixed asset and depreciation schedule at DATE OF VALUATION.

_____ 9. Amortization schedules of mortgages and notes payable; and terms of

bank notes, credit lines, and/or employee stock ownership plan

(ESOP) debt agreement(s).

_____ 10. Current ﬁnancial statements for any ESOP, proﬁt sharing, pension, or

other employee beneﬁt trust at DATE OF VALUATION.

_____ 11. Current level of over (under) funding for any deﬁned beneﬁt plan.

B. Services and Markets

_____ 1. List of the major services of the business and copies of marketing

materials, including sales brochures, catalogs, or other descriptive

sales materials.

_____ 2. Sales and proﬁt contributions analysis by service category.

_____ 3. Unit volume analyses for existing services for the past ﬁve years.

_____ 4. Description of major services added in the last two years (or

anticipated) and current expectations as to sales potential.

_____ 5. Description of new services under development with expectations as

to potential.