Intangible Assets and Fair Value
PVX provides detailed methods for identifying control-related impairments and pricing them. Its analysis is market-based, and directly relevant for the hypothetical buyer/seller concept associated with the fair market value standard. Other circumstances (particularly closely-held situations like family partnerships) can argue for a different fair value standard that contains particular agreed-upon buyout provisions that involve actual, rather than hypothetical, buyers and sellers. These parties may have specific relational attributes that argue for including intangible value in the analysis. Read more about fair value here and here and intangible value here.
Finding fair value requires considering the rights given up by the seller, but might also require the valuation to consider the actual control that would be held by the buyer of the interest, and whether his or her degree of control will have been changed by the transfer (for example, getting close to or crossing over a voting threshold because the size of the interest has increased). This process of finding fair value could also mean revisiting how the partners see their personal situation in the partnership context. Read more about voting rights and control here.
Fair market value can provide a baseline, and the reasons for discounts in a hypothetical situation should be clearly understood. PVX is largely designed to produce fair market value. However, its control adjustments can accommodate specific conditions affecting actual parties as well, including intangible benefits (or detriments). PVX lets you examine these fair value and intangible considerations and then make appropriate adjustments. For example, perceptions of their special circumstances, as well as the trust and confidence they share, might be present and can be accounted for by adjusting for subject control risk. The same subject control slider can also be adjusted to account for one party increasing his or her share and influence by acquiring another’s interest.