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J.L. Pierson & Co. LLC

HIGH TECHNOLOGY, INTERNET AND INTANGIBLE ASSETS VALUATIONS


Click here for a check list used to define/start valuing intangible assets.

Example No. One


Recent valuations in this area have included a web software company with a significant knowledge base in targeted browsers used to disseminate vast amounts of information to either the public at large or a large group of employees. The valuation was requested in order to provide key employees with options on un-issued stock of this private company. The discounted cash flow approach was first used, based on management's detailed projections. This was corroborated by looking at recent -less than 2 years-old IPOs involving similar companies, where capitalizations have been hovering, and at times well exceeding 8 times sales! Not bad for money-losing entities [the client is making a modest amount of money.]

Example No.Two


For the buyer of an industrial facility, we valued the human capital component by estimating the value of the work-force in place. This allowed the buyer to depreciate a portion of the purchase price on a faster time table than, say, the real estate component.

Example No.Three


The owner of hi tech communications know-how had raised money from investors and went on to develop some unique products of utility to Specialized Mobile Radio operators. On the occasion of a corporate spin-off, we were asked to value certain partnership interests representing that technology. The partnership was still not breaking even, as is fairly typical in new technology ventures. The assignment was executed through the use of the discounted cash flow analysis, after we advised management on how to construct realistic projections. The appraisal report will be attached to a corporate tax return in order to support the transfer price of the partnership interests.

Example No. Four


An asset-based lender had advanced medium-term funds secured by a portfolio of computer maintenance contracts; we valued that intellectual property based on the historical client retention record, mimicking how a buyer in that industry would value that asset. The loan was in default, which the lender solved by selling the portfolio to a third party.

Example No. Five


Real Estate Appraisers often provide the raw materials for our work, as they typically value an uderlying piece of property, using techniques not dissimilar from those used in Business Valuation. Often that real estate appraisal needs to be re-tailored by adjusting interest rates and loan-to-equity ratios to current market conditions. Often "What-If" scenarios can be built in an attempt to quantify uncertainty. Recently, we adjusted an income-only projection prepared by a real estate appraiser to explore the value of the property on the assumption that a major zoning change would actually be approved. Even more often, the value appraised by the real property appraiser is translated into values for the holders of various capital components after relevant discounts, e.g. value of limited/non managing interests in a partnership/LLC which owns the property.

Example No. Six

We have prepared a number of reasoned valuations of several types of corporate intellectual property, particularly for high technology based or emerging growth ventures.More information is available on the page covering business valuations for financial reporting: Go to BV for Financial Reporting page here.



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J.L. PIERSON & CO. LLC

BUSINESS VALUATION: NY, NJ, CT, ETC.

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Revised -- 08/10/05
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