Business Valuation Checklist: What Documents Does an Expert Need?

The following categories provide a useful starting point when preparing information for a business valuation.

Historical financial statements provide information about the company's financial performance and financial position.

Depending on the circumstances, a business valuation expert may request:

• Statutory accounts for previous financial years
• Profit and loss accounts
• Balance sheets
• Notes to the accounts
• Directors' reports, where applicable
• Group accounts, where applicable
• Audit reports, where applicable

The number of years required will depend on the valuation and the information available. More recent accounts and management information may also be relevant where the latest statutory accounts do not reflect the company's current position.

The amount of information included in accounts filed at Companies House can also vary according to the company's size and reporting requirements. Some smaller companies can file accounts with less information than larger companies.

Management accounts can provide more recent information than the latest annual accounts.

These may include:

• Monthly or quarterly management accounts
• Current profit and loss information
• Current balance sheet information
• Revenue analysis
• Gross margin or operating margin analysis
• Management reporting
• Key performance indicators

The information required will depend on the business and the valuation assignment.

For example, where a company's trading position has changed significantly since its latest year end, more recent financial information may help an expert understand its current position.

Where future performance is relevant to the valuation, an expert may need to review the company's forecasts and the assumptions on which they are based.

Potential documents include:

• Annual budgets
• Financial forecasts
• Cash flow forecasts
• Revenue projections
• Profit projections
• Capital expenditure plans
• Business plans
• Previous forecasts and actual results

Forecasts should be supported by enough information to understand the assumptions used. For example, a projected increase in revenue may need to be considered alongside information about pricing, customers, capacity or expected changes in the business.

The relevance of forecast information depends on the circumstances and the valuation approach being considered.

For example, projected cash flows may be relevant where a discounted cash flow approach is being considered.

For an overview of common approaches, see Business Valuation Methods UK.

Tax information may be relevant to some valuations, depending on the purpose and circumstances.

Documents may include:

• Corporation Tax returns
• Tax computations
• VAT records
• Details of outstanding tax liabilities
• Information about tax losses or reliefs
• Correspondence concerning significant tax matters

Not every valuation requires all of these documents. The expert can identify which tax information is relevant after considering the nature and scope of the assignment.

Where shares or an ownership interest are being valued, information about the company's structure and the rights attached to the relevant interest can be important.

Potential documents include:

• Certificate of incorporation
• Articles of association
• Shareholder agreements
• Current shareholding information
• Details of different classes of shares
• Share option arrangements
• Details of previous share transactions
• Information about changes in ownership

The rights attached to shares can differ between share classes. Voting rights, dividend rights and other provisions may therefore need to be considered when valuing a particular interest.

For more information, see Share & Equity Valuation.

Financial statements do not necessarily provide all the information needed to understand how a business operates.

An expert may therefore request information such as:

• A description of the business
• Main products or services
• Principal sources of revenue
• Major customers
• Key suppliers
• Main competitors
• Number of employees
• Management structure
• Operating locations
• Important commercial relationships
• Key contracts

This information helps place the financial results in their wider commercial context.

For example, a change in revenue may have a different significance depending on whether it resulted from changes in pricing, customer numbers, product mix, market conditions or another factor.

The assets and liabilities of the business may also need to be considered.

Relevant information can include:

• Property details
• Property valuation reports, where available
• Plant and machinery records
• Equipment registers
• Stock or inventory records
• Vehicle details
• Bank and loan information
• Lease agreements
• Significant creditors
• Other material liabilities
• Contingent liabilities, where relevant

The extent of the review will depend on the nature of the business and the valuation approach.

For an asset-backed company, information about property and other assets may be particularly relevant. A different business may require greater emphasis on earnings and future cash flows.

Some businesses have value associated with assets that are not physical.

Depending on the circumstances, information may be required about:

• Goodwill
• Brand names
• Trademarks
• Patents
• Copyright
• Software
• Licences
• Customer relationships
• Domain names
• Proprietary technology
• Other intellectual property

Documents relating to the ownership, registration, licensing or transfer of these assets may also be relevant.

The treatment of goodwill and other intangible assets depends on the circumstances of the valuation. Business goodwill and personal goodwill may need to be considered differently in some assignments.

See Goodwill & Intangible Asset Valuation for further information.

Material contracts can provide information about relationships that support the company's operations and revenue.

Depending on the business, relevant documents may include:

• Major customer contracts
• Supplier agreements
• Distribution agreements
• Licensing agreements
• Franchise agreements
• Property leases
• Finance agreements
• Joint venture agreements
• Agreements relating to intellectual property

It is not necessarily necessary to provide every contract held by the company. The relevant documents will depend on the nature of the valuation and the significance of particular agreements to the business.

Information about directors, owners and key management can also be relevant, particularly in owner-managed businesses.

This may include:

• Director remuneration
• Bonuses
• Benefits
• Shareholdings
• Employment arrangements
• Management responsibilities
• Changes in senior management
• Arrangements involving related parties

An expert may need to understand how the company's reported results are affected by remuneration, benefits or transactions involving directors, shareholders or related parties.

This can be relevant when considering whether adjustments to reported financial results are appropriate for the valuation.

No. The documents required depend on the circumstances of the valuation.

A small owner-managed company may require a different set of information from a larger group with subsidiaries, property, substantial borrowing or significant intellectual property.

The information required may depend on:

• What is being valued
• The purpose of the valuation
• The valuation date
• The size and structure of the business
• The industry in which it operates
• The nature of the company's assets and liabilities
• The availability of historical information
• The valuation approach being considered

The starting point for a valuation is to establish what is being valued, when it is being valued and why. The applicable basis of value and premise may also need to be established.

The Business Valuation Methods UK guide provides further information about different valuation approaches.

Some information may not be available, particularly where records are incomplete or a business has undergone changes over time.

If a requested document cannot be provided, it is useful to identify this rather than assuming that it is unnecessary.

Depending on the circumstances, an expert may request alternative information or make an appropriate assumption based on the available evidence.

The significance of missing information will depend on what is unavailable and how relevant it is to the valuation.

Missing information should therefore be identified as early as possible.

A simple preparation process can help organise the information before the valuation begins.

• Confirm what business, asset or ownership interest is being valued.
• Confirm the valuation date.
• Confirm the purpose of the valuation.
• Gather historical statutory accounts.
• Collect recent management accounts.
• Gather relevant budgets and forecasts.
• Compile company and ownership documents.
• Prepare information about significant assets and liabilities.
• Gather relevant commercial agreements.
• Identify goodwill, intellectual property and other intangible assets.
• Compile information about directors and key management.
• Identify unusual or exceptional financial items.
• Make a note of any information that is unavailable.

It can also be useful to keep documents clearly labelled and grouped by financial, corporate and commercial information.

A business valuation can require more than a company's annual accounts. Financial records, management information, ownership documents, forecasts, assets, liabilities, contracts and information about the company's operations may all be relevant.

There is no universal document list for every company valuation. The information required depends on what is being valued, the purpose of the valuation, the valuation date and the circumstances of the business.

Preparing the main financial, corporate and commercial records in advance provides a practical starting point for identifying the information available and any areas that may need further clarification.