By Bruce McGechan, CVA — Fealty Business Valuations · Last reviewed 27 August 2026
The average age of New Zealand SME owners is now over 55 (Stats NZ Business Demography Statistics, 2025). A lot of them will hand the business on within the decade, to family, to their management team, or to an outside buyer.
Succession has a feature that an ordinary sale doesn’t. The people who have to accept the number usually didn’t pick the person who produced it, and sometimes they’re related to you.
This page is for information only. It isn’t legal, tax, or financial advice. Talk to your lawyer, accountant, and a qualified valuer about your own situation.
A family transfer is the one where the number gets read for the longest. A child who works in the business buys in, or inherits, and the siblings who don’t work there form their own view about whether that was fair. They may form it 10 years later, at a funeral. A figure with a credentialled valuer’s name on it and a documented method behind it survives that conversation.
A management buyout has a bank in the room. The bank lends against the valuation, and if you’re carrying a vendor note, so are you. I’ve written about how the MBO process works and where the valuation sits inside it.
A staged handover runs over several years, with shares moving in tranches. Here the consistency of the method matters more than any single number: the same standard of value, the same level of value, and a stated convention for the valuation date each time, rather than a fresh argument at every tranche.
A sale to a third party is the case where you may not need a valuation at all. If you’re listing on the open market and no internal party is involved, a broker appraisal and a good broker may be everything the job requires.
Start with the economics. The free appraisal is funded by the commission on a sale, and in a family transfer or a staged handover there often isn’t a sale for a broker to earn from. The incentive that pays for the free work isn’t there.
Then there’s what the figure actually represents. An appraisal reports the enterprise value, the headline price, and not the equity value the exiting owner receives once debt and working capital are dealt with. In a succession the exiting owner is usually funding their retirement out of that difference, so it isn’t a rounding issue.
Last, an appraisal typically doesn’t define its standard of value, its level of value, or its premise of value. Those are the three choices that decide the number, and a successor’s adviser will go looking for them. I’ve set out the difference between an appraisal and a valuation in more detail in a separate article.
The standard of value is usually fair market value, though some families adopt their own convention and write it into a shareholders’ agreement. Whichever it is, write it down before anybody has a stake in the answer.
The level of value is the choice that moves the number most. A successor taking a controlling stake and a successor taking 20% are buying different things, and a minority interest in a private company may carry discounts for lack of control and lack of marketability. Families often decide, quite reasonably, that they don’t want those discounts applied between siblings. That’s a legitimate choice, and it needs to be a stated one.
Key-person risk creates a peculiar problem in a succession, because the exiting owner very often is the key person. A valuation quantifies that through the capitalisation rate and says so on the page. An appraisal built on comparable sales usually doesn’t reach it at all.
IRD guidance on share transfers is worth reading early, because the Income Tax Act 2007 uses “market value”, which is close to but not identical with “fair market value”. If the valuation has to serve both a family transfer and a tax position, the engagement letter has to say so from the start.
Buy/sell triggers under the Companies Act 1993 may apply where there are existing shareholders. The Property (Relationships) Act 1976 becomes relevant if a successor’s relationship ends later and their shareholding is on the table. Trust structures and gifting bring their own questions, and those are ones for your lawyer and tax adviser rather than your valuer.
Most owners commission a valuation when the transaction is already happening. Two or three years out is better.
An early valuation is a planning tool. It surfaces the things that suppress value while there’s still time to do something about them: customer concentration, key-person dependency, thin management depth, a lease that expires at the wrong moment. Those take years to fix, not weeks.
Then re-value at the transaction date. The early number was for planning and the later one is the transfer price, and nobody should confuse the two.
Fealty’s fixed price for an internal transaction, which includes family transfers and management buyouts, is $4,900 plus GST. Expect 3 to 4 weeks once the information is in and the questions are answered.
Set against a business worth several million dollars and a relationship with your children that has to outlast the transaction, that’s the inexpensive part of the exercise.
Do I need a formal valuation to pass the business to my children?
Not as a legal requirement in most cases. You need one when a price is being paid, when siblings are being treated differently, when IRD will look at the transfer, or when you want the decision to be defensible to your family years from now. Those cover most family transfers I see.
How often should I re-value during a staged handover?
Usually at each tranche, using the same method and the same defined terms every time. Consistency is what stops the last tranche turning into an argument about whether the first one was fair.
Will IRD accept an independent valuation for a share transfer?
It’s far stronger evidence than an appraisal, provided the engagement letter specifies the tax purpose and the standard of value is consistent with the legislation. IRD publishes guidance on share transfers, and specialist tax advice is worth getting alongside the valuation.
What if my children disagree about the number?
That’s the argument the valuation exists to prevent. A report that explains its method, its assumptions and its conclusion gives everyone the same document to work from, and disagreement usually turns out to be about undefined terms rather than about the arithmetic. Involving them before the valuation is commissioned, rather than presenting it afterwards, helps more than anything else I’ve seen.
Fealty offers fixed-price independent business valuations for succession, family transfers and management buyouts. You know the cost before the work starts.
For most successions that’s the Independent Valuation at $4,900 plus GST, a full written report the whole family can read. See pricing and what’s included.
About the Author
Bruce McGechan, CVA — Fealty Business Valuations
Bruce McGechan is a Certified Valuation Analyst (CVA), credentialled by the National Association of Certified Valuators and Analysts (NACVA), and a Certified M&A Advisor. He has valued 90 privately held New Zealand businesses across many sectors. Based in Palmerston North and working nationwide, he prepares independent valuations for shareholder buyouts, succession and pre-sale planning, and relationship property and shareholder disputes. His work applies NACVA professional standards to New Zealand conditions — local transaction evidence, NZ tax settings, and the thin-market realities of owner-operated and mid-market companies.
Talk to Bruce: 021-245-8881