The valuation report for a sale, and the allocation nobody plans for

Why a sale needs the fuller report

Because the reader is on the other side of the table and has an adviser. A calculation of value discloses its own scope limitation, and handing a document containing that disclosure to a buyer's adviser hands them their opening.

A conclusion of value considers the approaches and writes down the reconciliation. That does not make the number right, and it does make it defensible, which is what a negotiation needs.

What a buyer will test first

Not the multiple. The earnings figure it was applied to: the add-backs, the owner's compensation normalisation, and whether management accounts reconcile to the tax returns.

Then concentration, both customer and supplier. Then the durability of whatever the valuation assumed would continue after the owner leaves.

The allocation

IRS guidance states that the sale of a business usually is not a sale of one asset, that each asset is treated as being sold separately for determining the treatment of gain or loss, and that both the buyer and the seller of a business must use the residual method to allocate the consideration to each business asset transferred.

Buyer and seller do not have identical interests in how the price splits across the assets, and the split has real consequences for both. It is a negotiation in its own right, and it belongs at heads of terms rather than at signing.

One report, or two

A valuation prepared for a sale is generally not reusable for an estate or gift filing, because the standard of value and the reporting requirements differ. Commissioning one document to serve both purposes usually produces one that serves neither well.

Where both are genuinely needed, say so at engagement. An appraiser who knows the second use exists will structure the work differently, and doing it once is cheaper than doing it twice.