When valuing a business, it’s important to clearly identify the appropriate premise of value. There are two basic options: going concern value or liquidation value. In general, liquidation value sets the floor for a company’s value. When a company is “worth more dead than alive” — such as in a Chapter 7 bankruptcy filing — liquidation value is typically the appropriate premise of value. But it also may be relevant in other situations, as a recent Michigan Court of Appeals case demonstrates. Going concern vs. liquidation value Most valuations focus on a business’s going-concern value. That is, what’s the value of a business enterprise that’s expected to continue to operate into the future? But in certain situations, liquidation value can be an important benchmark. There are two types...
