Many sectors utilize the term “fair market value.”
Some of these sectors include company valuation and appraisals, business brokerage, mergers and acquisitions, venture capital, commercial financing, charity donations, and federal and state laws. But the usage of the term is not limited to them.
There are also various definitions of the term. But when it comes to a corporate entity, most are quite consistent and comparable. The following is a list of some of the most common definitions of “fair market value” in the business appraisal industry:
The price at which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller. The entities operate at arm’s length in an open and unrestricted market. Provided also that neither is obligated to purchase or sell and both have a reasonable awareness of the relevant facts.
When neither party is under any pressure to purchase nor sell, and both parties have a reasonable awareness of pertinent information, the sum at which the property would change hands between a willing buyer and a willing seller.
The price that someone would purchase or sell an asset in a transaction between two interested parties. As opposed to a forced or liquidation sale.
The price, as of a commodity or service, at which both buyers and sellers agree to do business.
The price at which a willing seller transfers an item or service to a willing buyer. Both the buyer and the seller are considered rational and have a reasonable understanding of the relevant facts.
Our goal is to uphold the above standards to keep fairness in business assessments and associated operations. While this may be seen as a range before buy-sell negotiations, plans and synergies on the part of either the seller or the buyer might push the selling price over or below fair market value.