Non-contentious valuations clarify business optionality

Non-contentious valuations are often most valuable when they help owners clarify the options a business can realistically support. Unlike valuations that arise in disputes, non-contentious work is usually undertaken alongside accountants or commissioned directly by businesses and is used to inform decisions.

A broad range of circumstances can prompt a non-contentious valuation – from succession and inheritance tax planning to equity issuance for directors, employees and lenders, or an internal restructuring. The common thread is to clarify business value so that owners and advisers can make informed decisions about growth, ownership and capital structure. Sometimes the purpose is not to implement a predetermined transaction, but to establish which options are viable before any decision has been made. An independent valuation can set out those options more clearly and show what each path might mean in practice. The following are common non-contentious valuation use cases.

Equity issuance and shareholder succession

Where a business is deliberating between repaying a shareholder loan or issuing shares to the lender, the business needs a valuation to establish a conversion share price and the resulting ownership allocation. The valuation serves to reallocate liabilities and equity on a fair and defensible basis. The same principle applies to other ownership and capital-structure changes, including issuing new shares and options for directors or employees, and planning for the retirement of a key shareholder.

In one recent BTG instruction, the business knew that one shareholder intended to retire but had not decided what should follow. An independent valuation allowed the owners to compare several possible pathways: the retirement of one or more shareholders, a trade sale, a management buyout or continuation under a revised ownership structure. In some cases, the valuation itself is the catalyst for broader decision-making. Once a defensible number is established, new possibilities can come into view, while others may be ruled out.

Internal group reorganisation

Larger SMEs are often composed of multiple corporate entities, with commercial, tax and ownership considerations changing the optimal internal structure over time. When a group is considering moving a subsidiary from one part of the business to another, valuations provide the basis for an appropriate and defensible transfer value and help advisers assess the tax and accounting consequences. While internal restructuring is often largely invisible to customers, these events can materially affect the allocation of value, liabilities and ownership across the group.

The methodology

Even when there is no dispute, the valuation process still requires meticulous due diligence and judgement to arrive at a robust and independently supportable conclusion. There is rarely a single objectively correct outcome. Rather, there is a range of reasonable independent valuations reflecting how relevant evidence, assumptions and risks are assessed and weighted. These inputs include peer-group analysis using relevant listed and private transaction comparables, adjusted for business size, risks, dependence on key individuals, customer concentration, contract exposure and future outlook.

Market comparables provide an important reference point, but rarely a direct answer. For example, a multiple derived from a large listed company cannot simply be applied to a much smaller private business without accounting for differences in scale, liquidity, management capabilities, and an assessment of the resilience of future earnings. Informed sector knowledge and commercial judgement are therefore required to determine the relevance and weight of each input. This is where complementary input from independent valuation specialists, such as BTG, accountancy firms and legal advisers, strengthens the process.

Non-contentious does not mean that every conclusion is readily accepted. Business owners usually have strong expectations about value, particularly where the outcome affects tax, succession or ownership. A company believed by its owners to be worth £10 million may, after closer examination, support a materially lower valuation. The process can therefore involve difficult conversations, but the conclusion must remain independent and, where relevant, capable of withstanding scrutiny from HMRC, lenders and other stakeholders.

This is the art and science of valuation methodology. Non-contentious valuations are not simply a box-ticking exercise. They give owners and advisers a defensible view of value and the confidence to make the next move, whether that means restructuring, issuing equity, planning a succession or preparing for a future transaction. Where most effective, valuations convert a number into a consequential business decision.

BTG’s valuations team works with business owners, accountants and legal advisers across a range of non-contentious instructions, from succession and shareholder restructuring to equity issuance and internal reorganisation. If you are considering a valuation or would like to understand what an independent assessment might reveal about your options, please contact our team.