Valuation Considerations for Start-Up or Pre-IPO Companies for Equitable Distribution in Matrimonial Proceedings


By: David Smith, CPA/ABV, ASA, CFE
Date: January 8, 2013

Start-up and pre-IPO companies offer unique complexities in determining a fair apportionment  of value between titled and non-titled spouses in New Jersey. There can be considerably divergent views by the parties and their respective experts on the value of such entities as of the date of filing. Relying on a brick & mortars view of the world, the value might be argued to be  no more than the actual out of pocket expenses incurred. Alternatively, the value might be  considerable taking into account the facts and circumstances, including the stage of development,  product (patented or not), management, relevant markets, availability of investment capital and  expected cash flows. Valuing these entities may sound difficult, but start-up and pre-IPOcompanies are routinely valued by valuation professionals for shareholder transactions, private  equity investments, debt financing, public equity offerings and financial reporting. As with the  valuation of any other business enterprise, the fundamentals of business valuation apply, starting  with identification of the appropriate standard of value.

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