Buying out share holders in a small privately traded business - how do we determine value?
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Main share holder 55%
Share holder 1+2 45%
1+2 want out. Main share holder hasn't distributed dividend for 7 years. Company makes 500k a year profit before tax for the past 4/5 years.
The main share holder has worked out the value by removing corp tax, dividing the profit by 50% (rest retained by company) then dividing that by shares held to come up with a total valuation of £400k for the 45% of shares.
I know no one is going to be able to give an even vaguely accurate answer, but does that sound a wildly wrong way to calculate it?
Because it sounds like he's just witheld dividend for four years, and as finally going to distribute them to 'buy' the shares