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Doeren Mayhew was retained to provide two business valuations for purposes of obtaining a loan through the Small Business Administration (SBA). The SBA loan was utilized for financing purposes related to a pending equity transaction involving two entities. The subject companies specialize in helicopter related transportation services for business and personal use, including but not limited to, transportation of products for commercial purposes, personal charters, aerial imaging, and film and entertainment services. The subject company’s fleet consists of four helicopters seating three to seven passengers. Revenues for the subject companies were just under $3 million at the time of the valuation.

The business valuations required research related to the economic and industry-specific conditions related to the company. Specific factors considered were the current state of the COVID-19 pandemic and its impact on the local and national economies, the condition of the automotive industry (which the companies primarily serve), and trends in local employment and household income.

Among other documents, Doeren Mayhew reviewed income tax returns, internal financial statements, income projections and relied upon input from the client in order to analyze the cash flows of the companies. Doeren Mayhew also had frequent communication with the business owner via email to address specific questions regarding the operations and financial condition of the companies.

The three primary approaches to value a business (asset, income and market) were reviewed; however, only the asset approach and income approach were utilized in this engagement. Specific factors or adjustments considered within each approach based on the nature of the businesses were as follows:

  1. Asset Approach– The adjusted book value method was utilized taking into consideration the estimated value of the fixed assets provided by management. We specifically relied on appraisal reports for the helicopters owned by the companies, prepared by an independent aircraft appraisal expert.
  2. Income Approach– A capitalization of earnings method was used. This method considered the various risk components of the subject company, including the management structure, local and national economic conditions, conditions of the automotive industry, temporary changes in revenue and cash flow due to the COVID-19 pandemic, and the historical financial results of the business.
  3. Market Approach – Based on the unique nature of the subject company, Doeren Mayhew felt the market approach would not provide a reliable indication of value. Therefore, it was not utilized in this engagement.

Doeren Mayhew provided two summary valuation reports, one for each company being valued, to the client in order to obtain financing for the equity transaction. A final valuation report was provided within seven business days of receiving the information required and prepared in accordance with the SBA’s Standard Operating Procedures per SBA SOP 50 10 5(J) and the Uniform Standards of Professional Appraisal Practice (USPAP).

Learn more about Doeren Mayhew’s SBA valuation services by contacting our valuation analysts today.

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