Does it ever make sense to get more than one valuation?
Anonymous (VP Finance)
| Mar 28, 2011My board "does not like" the result from our first valuation. Does it make sense to get a second opinion? If we like that answer better can we just forget about the first opinion?
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Answers
Company: NextEra Energy Resources
It does make sense to get a second and sometimes even a third opinion when it comes to the valuation of a private firm. It's typically very difficult to get both a put agent and buying agent aligned in the valuation of a firm, especially when there aren't really good public comps available to determine applicable peer multiples, discount rates, or terminal values.
My firm is a private LLC and we have to complete a valuation at least semi-annually and it is quite the task to get both sides of the parties aligned. Therefore, we have a process that is defined in our operating/management agreements that direct us to solicit a nationally recognized investment bank to complete the valuation. If the valuation isn't to the liking of one side of the transaction, it is the opposing sides responsibility to pay for a second valuation to be done by a separate nationally recognized investment bank. If one side opposes the second valuation, it is their responsibility to pay for a third and final valuation done by another nationally recognized investment bank. Once the third valuation is complete, we then take the median of all three valuations.
Hope that helps.
Pete