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what type of discounts are applied when valuing a company in a marital dissolution, where husband ran business

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The BAF Group LLC

There are no discounts for a marital dissolution, except what the couple might accept to dissolve the arrangement. That is, how fast do they want to get out? In many cases, the faster the transaction that is desired, the more the "discount" the couple may offer from what a competitive price is deemed to be.

The real question may be, how vital was the husband to the business - which has nothing to do with the marital situation. Every business purchase raises (or should raise) the question of whether the key person's departure will harm the business. If, for example the husband does all the sales, all the clients know him and they stay with the business because of their relationships with and trust in him, then Revenue can expect to suffer when he leaves the picture. That has nothing to do with a divorce. And that is something you would look at on a client-by-client basis, trying to determine who would stay and who would go. If 20% of the people are anticipated to go elsewhere, you can probably look at a 20% or greater discount from the average estimated pricing value.

Other key questions are, if the husband leaves, what is he going to do? Has he been forced out? Will he form another company and go into competition with this one? Will he sign a non-compete agreement with the sale? THOSE are the major considerations, particularly in this kind of scenario.

Nov 16, 2010