How long is a business appraisal good for?
A properly done appraisal—an assessment of a business’s intrinsic value based on characteristics such as earnings and assets—is valid as long as its underlying assumptions remain valid. Some of these assumptions change rapidly, some more slowly: external factors such as world events, economic trends and competition as well as internal factors such as management, markets and finances. Some valuations, like those for Employee Stock Ownership Plans, are legally obsolete after a year and must then be updated. Others are contractually outdated; prudent buy-sell agreements should stipulate annual reviews. Estate tax returns, litigation appraisals, merger and acquisition reviews and transaction fairness opinions are normally one-time engagements. Most valuations are open-ended because their underlying purposes are long-term. A typical example occurs when families sell or transfer minority business interests each year as part of their estate and business succession planning. Valuations depend
