There are many reasons to perform a valuation of a construction business, but the most common is an ownership transition. Before the company proceeds with ownership transition—whether fractional interest buyouts, employee stock ownership plans (ESOPs), equity incentives, or outright acquisition—an accurate understanding of the company’s value is necessary.
Valuation in the construction industry is based on the same fundamental approaches as other industries, but there are some important differences. The main issue is the cyclical and project-driven nature of the construction business, which makes every year different from the last, and makes financial projections very difficult and uncertain. Because business value is based largely on expected future benefits, our experience in the industry and access to construction-related economic information is essential to determining a realistic value.
BEAR has valued over 500 construction companies since 1986, including companies ranging in size from one guy with a pickup truck, to almost $100 million in annual revenue. Many of these have been valued several times over the years. Our valuations have been for IRS reporting (estate and gift), management and estate planning, and frequently for partners buying in or being bought out. Happily, none of these reports have been questioned or adjusted by the IRS.
BEAR is a member of the Construction Financial Management Association (CFMA), and one of our founders has a Civil Engineering degree from MIT and is involved in most of our construction valuations. Among our staff we have the major valuation credentials, including ASA, CPA/ABV, CVA, CFA, and MVS. BEAR works closely with CPA firms nationwide.