How the sale value of a business is properly determined

The value of a business is commonly a large portion of its owner’s net worth. Understanding what the business is really worth, or could be worth, allows an owner to make important decisions regarding key issues like retirement, estate planning and choosing a business successor.

A frequent question owners ask is, “What is my business worth?” The answer is not necessarily what the assets would sell for — a common misunderstanding of owners.

Smart Business spoke with James F. Schultz, principal at Cendrowski Corporate Advisors LLC, about how the sale value of a business is properly determined.

Learning what your organization is really worth can bring dividends

The first step is to hire an independent valuator to determine the realistic sales price of the business. This important step should be done by a professional experienced in merger and acquisition processes and in valuation analyses. The valuator will look at the business and use the standard valuation approaches of asset, income and market to estimate the enterprise value of the business.

For most operating businesses, the income and/or market approach will have the most influence in estimating the sale value of the business. Research is needed into the industry of the business to find trends and key economic factors driving profitability.

Next, a look at sales of comparable businesses in the industry can provide various multipliers of income factors that can be applied to the business. If comparable sales are not available, estimating proper investment returns on income based on risk/reward analysis will estimate value.

When applying the income approach, it may be necessary to identify synergies/cost savings created from the sale. This will enable the valuator to establish investment value (to an acquirer) rather than fair market value (to a hypothetical purchaser).

In cases where the return on investment is low and/or little labor is involved, the asset method may be more applicable.

What happens after the enterprise value is estimated?

The next step is to estimate what the purchaser will actually receive from the seller. Most sale transactions today are structured as asset sales rather than stock sales. In an asset sale transaction, specifically identified assets and liabilities of the selling company will be transferred to the purchaser. The purchaser will require all the fixed assets necessary to run the business, which can range from computer systems to manufacturing machinery.

In addition to the fixed assets, the purchaser acquires various intangible assets and rights relative to trade names, patents, goodwill, occupancy/lease rights, client lists and vendor lists, to name a few. The more difficult item to quantify is the level of working capital that the purchaser will require as part of the sale transaction.

The purchaser is looking to acquire an operating business and the necessary liquidity to allow the business to continue to operate in a smooth fashion without requiring additional equity amounts.

The items typically included in working capital are accounts receivable, inventory and accounts payable. The net value of those amounts need to provide a liquid cushion to continue business operations. The sale negotiations will normally determine the appropriate level of liquidity, and an adjustment of the purchase price may be required if the level is not met or if there is an excess when the sale closes.

In most cases, the purchaser will not assume liabilities other than trade payables.

After estimating the purchaser’s requirements, what are the final steps?

The final step is to analyze the existing balance sheet of the company for items that will not be transferred to the purchaser. This typically consists of cash, investments and other non-operating assets on the asset side, and all liabilities excluding trade accounts payable on the liability side. The net value from the combination of the aforesaid items is then added to/subtracted from the enterprise value. The result of that computation is the estimated net sale proceeds of the business.

In order to determine what the owner will be able to put in the bank, an estimate of the income taxes related to the sale transaction should be calculated. That amount is subtracted from the estimated sale proceeds to determine the after-tax cash available to the owner.

Insights Accounting is brought to you by Cendrowski Corporate Advisors LLC

 

Five steps to get everyone talking about your business

 

If you are in the game of building your business and your brand to become a market leader, you might just need to simply be more S.A.V.Y!

Consistently, there are four areas to address for your brand to stand out and be seen

Become more business S.A.V.Y.

Sales. Awareness. Value. You.

These four elements are required in any business and yet most brands focus on just one of these at any one time… and yet more sales of existing assets using a campaign generates awareness so you can inject new product lines into the business to add bigger value. An assessment of you and your brand’s key messaging and core values aligns you with your end game to create brand recognition and household name status.

Whatever stage of business development you are at, getting S.A.V.Y creates that next jump in both revenue and awareness for your brand. You could be in the build phase; this is early stage growth and you are building your brand.

You could be in the renovate stage; this is a business with a mature brand or a brand that has been famous but is now lying dormant or in the refresh stage; this is somebody who is doing well but just needs a quick facelift to keep them ahead of the game. No matter which of these stages feels like your business, the road to success is always the same — more sales, increased awareness, bigger value and you leading the way.

Whether your business is large or small, the process is the same for small brands that want to be big and big brands that want to get bigger. Both sets of brands want to achieve stand out status and own their space in the market place. It just so happens there is a single roadmap for all businesses to follow; first, establish the game you are looking to play and then follow the five steps to achieve Brand Fame.

Five steps to achieve Brand Fame

With a suitably honed mind-set and the notion that it’s a game you fully intend to win, all you need now is a set of rules to set you to win in the most efficient and energy conserving way.

Rules you say?

1. Discover the DNA of your brand — Know your gap in the market place.

Know what your key message is, your core values are and what you want to be known for and what you want people to be saying about you and your brand when you have left the room.

2. Create and develop standard and bespoken tool kits that distinguish your brand from others and stand out from the crowd. Build your product vision and service offering so as to offer differing price points that engage multiple audiences on a sliding scale.

3. Connect your product to market using your ‘community’ as the new channel for distribution. Use Halo retail stores, pop ups, e-commerce or workshops and seminars to engage with your network to test and sell your products.

4. Communicate with a killer campaign; Create conversations and engage large audiences using print, digital and social media. Experiential events and partnerships reinforce your influencer following whilst simultaneously building your profile.

5. Evaluate constantly by setting your KPI’s and ROI’s to track your progress, measure your success and reassess your goals; fine-tune your vision and continual evolution of the “plan” to keep you on track with your big game.

Now it’s your turn….

It’s getting easier to build a famous brand, the world has changed to suit the business owner and today with all your tools in place it’s a much smoother journey. Your strong mind-set, entrepreneurial spirit and determination to win the game will be the key ingredients necessary to stand out in any crowded market place. Now go get business S.A.V.Y…

A serial entrepreneur, Linzi Boyd had set and up sold two businesses before the age of 24, her second company (a successful Footwear brand), which had seven global distribution channels, the shoes were recognized in the design Museum as design classics and she sold the business to Caterpillar. At 25, she was onto her third business, Surgery Group.  After years of working on building and developing brands, she published in her No.1 best seller “Brand Famous — How to get everyone talking about your business.”

How do you measure success? Hint: It’s more than just money

Too many people measure success in terms of the number of fancy cars they have, the size of their homes or the destination of their last exotic trip. All these badges of success are nice and probably more meaningful to those who have not yet achieved the monetary capabilities to enjoy a successful, albeit material, way of life.

FREE!

Soundview Live Webinar featuring a presentation by Michael Feuer a Q & A session. View and download at www.sbnonline.com.

But there is much more to true success than simple trinkets, toys and travel

Everyone from the shopkeeper to the Fortune 500 CEO must do business with all types of people. Some are truly exceptional and nice to boot. The majority are decent with good intentions.

There is, however, a certain minority that should be avoided like the plague. I’m not referring to those who are dishonest or immoral, since anyone with a modicum of experience has learned that it is just too costly and painful to deal with unscrupulous players.

I’m talking about another category of people — the insincere or time wasters, who might actually pay their bills but dealing with them is exhausting. Others have questionable business methods or behavior, and while their actions may not be illegal, their tactics should be. Next is the group consisting of those who you just don’t like or trust and would prefer not to be associated with, either in business or personally.

Herein lies the conundrum. Is it better to tell those who you don’t enjoy because of their personality, style or methods, “thanks, but no thanks,” and permanently walk away from an association? This is a tough decision for most companies, especially smaller companies and startups. The question becomes: Can you “afford” to cut the cord with certain paying customers even though you would rather have a root canal than have a conversation with them?

For business people, the decision can be made based on analyzing whether the time, effort and displeasure of dealing with them overshadows the return on investment.

In most cases, the answer becomes obvious once a basic balance sheet is prepared reflecting the assets and liabilities of the relationship. The bottom line frequently reveals it would be more productive to cultivate a replacement customer with sustainability than to deal with the trials and tribulations of those who turn everything into a three-act drama, usually with an unhappy ending.

Among everyone’s most valuable assets are time, energy and reputation, which are measured many times by the company we keep. These assets cannot be squandered. As the old adage states: What comes around goes around. This phrase has a positive connotation in relationships where the more you like someone the more you trust them, and the more you trust someone the more you like them.

The overriding question is: What is the value of doing business with or having a personal relationship with only the people who you like and trust? The answer: Priceless.

Michael Feuer founded OfficeMax and in 16-years, as CEO, grew the retailer to sales of billion in 1,000 stores worldwide.

Today, as founder/CEO of Max-Ventures, his firm invests in and consults for retail businesses.

Serving on a number of boards, Michael is a frequent national speaker, and author of the business books “The Benevolent Dictator” and his newest book ”Tips from the Top.” His long running nationally syndicated Smart Business magazine column has received more than 10 awards for excellence.

Make your company more valuable by adopting one or more of these tips

Would you invest 100 percent of your net worth in a single company? While perhaps not planning to, many owners of small businesses find themselves in this position. Rebalancing requires selling a portion of ownership, at some point.

I’m often asked by owners contemplating a future transaction, “How can I make my company more valuable?” While the answer varies based on the situation, here are some things to consider.

Reduce key-person risk

Many business owners are their company’s hero. They make the top sales, take risks and make the tough calls. As a business grows, however, it needs a complete management team to drive success. Investors often eschew companies where one person holds the keys to most top sales relationships or where it appears there is just “one” member of management.

Investors such as The Riverside Co. want to see a balanced team, capable of growing the company to twice as large or more. Private equity firms typically provide equity ownership incentives across the management team to engage everyone fully, with equity rewards triggered through enterprise value growth.

Optimize your revenue stream

Outside investors seek revenue streams with predictability and a high likelihood of year-over-year growth. Here are some potential features to develop in your revenue stream:

  • Diversity: Outside investors prefer a customer base without significant concentrations — no more than 15 percent of revenue from a single customer is a good benchmark. Revenue from a variety of different industries and geographies is another plus.
  • Recurring revenue: Develop products or services that repeat in need, and track your customers’ behavior across many years of ordering to set and achieve repeat-revenue goals among customers. Avoiding one-time sales opportunities in favor of products or services driven by repetitive needs will increase the value of your company over time.

Form a board

Private equity firms often assemble a high-quality outside board of directors right after their initial investment. These experts provide grounded input on strategy, know-how specific to the company’s unique challenges and fresh, outside perspective.

Great board members include former CEOs who have experience bringing a similar business up the growth curve. If your company lacks one, assembling a thoughtfully composed board and establishing processes for meeting and reporting is a great step.

Tap proven resources

Well-deployed specialists can bring about great business improvements. At Riverside, we’ve built relationships with dozens of experts we have vetted over our 27-year history to help improve our 75-plus portfolio companies.

Called the Riverside Toolkit, this set of experts ranges in focus from pricing, strategic plans or production improvements to marketing and dozens of other tailored services. Identifying the most critical elements to your company’s success and finding and engaging proven, outside specialists can be an important step on the journey to increasing your company’s value.

No matter the size of your company, you can help increase value by applying one or more of these techniques. Adopting tactics used by experienced investors will make your company better regardless of your plans for it.

Cheryl Strom, associate director of origination

The Riverside Co., a global private equity firm that has invested in more than 380 companies with up to $300 million in enterprise value.
(216) 535-2238
[email protected]
www.riversidecompany.com

Strong job growth: How the Houston economy continues to remain healthy

John S. Parsley, SIOR, Principal and Director, Houston office, Colliers International

I am bullish on Houston and proud to be part of a “can do” attitude in Texas. The bottom line is that our Houston economy continues to remain healthy, with overall leasing activity strong in the second quarter of 2012. The main driver in the Houston market is simple — strong job growth.

Our city added almost 90,000 jobs between May 2011 and May 2012 and our unemployment decreased to 6.9 percent, from 8.1 percent one year ago. Landlords continue to report strong velocity in leasing activity, resulting in over 1.4 million square feet of positive absorption in the second quarter, pushing the year to date total to 2.4 million square feet.

With all the positive news, the key is the energy sector. Some of the recent growth includes the expansion in North Houston and Woodlands, including Exxon Mobile’s North Houston Campus, which is under construction, and Anadarko’s second corporate tower in the Woodlands. Other submarkets are growing, including Phillips 66’s recent announcement regarding plans to build a headquarters in West Houston, along with Apache’s acquisition of the Galleria area land for a new headquarters building.

Although obviously one of the strongest office markets in the country, I believe the Houston market still will face some challenges due to mergers and company consolidations that will result in new sublease space hitting the market. At the end of the second quarter overall, we had almost 1.1 million square feet of sublease space available citywide, and in the CBD there is 360,500 square feet available, primarily in the Class A properties.

With the strength in our economy, our clients are now making longer term lease commitments (5-10 years) compared to a year ago. Landlords are now evaluating their tenant mix in their buildings, and if the tenant prospect has solid credit, they are offering aggressive tenant allowance packages to entice them to commit long term.

John S. Parsley, SIOR, is the principal and director of the Houston office of Colliers International. Reach him at (713) 830-2140 or [email protected]

Diligence required to improve company value

Scott L. Fields, Partner, Houston office, BKD, LLP

Recovery continues to be slower than most businesses would prefer. Part of the slow growth is due to concern from many business owners regarding whether they can trust some of the leading economic indicators released in the past few months.

On a positive note, recent trends have shown that unemployment is being reduced overall. The National Association of Manufacturers also reported that more than 31,000 new U.S. manufacturing jobs were created in February. This increase, however, is tempered with the belief that many unemployed individuals have simply given up on job searches, as they have now been out of work for an extended period. The end of their search effort causes many to fall off of the tracked statistics. This may be causing some lower-than-actual unemployment numbers to be reported. In addition, a recent University of Michigan study showed consumer confidence figures have fallen slightly due to weakening perceptions about the economic environment.

Two other areas facing business owners have caused them to move at a slower pace when considering expansion, acquisitions and hiring of additional employees. These two areas are taxes and the looming health care changes. With the potential for higher taxes and higher health care costs on the horizon, many entrepreneurs are taking a wait-and-see approach. Thus, the reports of companies continuing to pay down third-party debt and stockpile cash still exist.

It seems businesses have returned to profitability as a result of their concentrated efforts implemented to endure the economic downturn. The threat of losses, liquidity issues and, in some cases, covenant violations forced many businesses to lean up operations, challenge spending and do more with less. As a result, many are producing more with fewer resources and have improved their processes. Earnings levels have improved, but most results are still below the levels experienced in the mid-2000s.

Also of concern is uncertainty in foreign markets. While we have had a credit and debt crisis here, overseas trouble has many business owners contemplating international business relationships and opportunities. In the mid-2000s, many production jobs were moved overseas to benefit from inexpensive labor. With the current domestic economic conditions and the lack of stability driven by the uncertainties in the Eurozone, there are rumblings that U.S. companies may work to grow domestic manufacturing and pull jobs back to the U.S. Innovations also are occurring in certain niche areas, and the shrinking cost advantage of outsourcing production is becoming more evident. Job growth continues to be a major focus domestically, and labor negotiations of major industries, such as auto makers, have demonstrated the desire for large companies to guarantee sustainability and promise to keep jobs in the U.S.

There is also concern regarding the stability of the buying power of foreign markets. U.S. companies have continued to expand their penetration into foreign developing markets. The ultimate results of the various national debt issues in the Eurozone could create an economic ripple effect that could affect demand for U.S. products in many foreign markets. Also, the continued political changes and instability in eastern countries can create swings in energy prices and product demand in those markets. This creates difficulty in planning for growth and expansion — and correspondingly a fair amount of caution when it comes to the timing of capital investment and business expansion.

Merger & Acquisition Activity

While the aforementioned factors have slowed down private business owner activity related to expansion and acquisitions, another business segment seems to have picked up. Private equity groups and private investors have been much more active in recent months. There has been significant public discussion in the past 18 months regarding cash that is on the “sidelines” waiting to be invested. We have seen that as the economy begins to expand and smooth out, more M&A deals are being contemplated. Also, business valuations are returning to more normal and expected levels driven by those wishing to market their businesses, and banks are becoming more willing and involved in financing such deals. We view this as an encouraging sign and an indication of continued movement in the right direction.

Business Succession

Each business faces unique challenges, but all ultimately need to consider, plan for and execute a succession plan. Whether the plan involves selling the company to an unrelated third party, transitioning or selling the company to the next generation, an ESOP or some combination of these, this issue has to be addressed. The recent increase in merger and acquisition activity has been driven in a number of cases by exit strategies employed by many business owners. As the baby boomers continue to exit the workforce and leave their businesses, we will see more and more movement and opportunity in this M&A wave. When these decisions are made and the process starts, planning can have a significant effect on the company’s valuation and the ultimate profit realized by the owner. This truly is one of those areas where “an ounce of prevention (of negative results) is worth a pound of cure.”

Here are a few planning ideas that can be game changers when an owner is looking to improve value:

  • Perform due diligence on your business and your business processes and activities. Many sellers believe the diligence process is the buyer’s responsibility. While buyers will spend a great deal of time and effort on due diligence, performing self due diligence can overcome a number of surprises, allow the seller time to position its operations and activities to provide the greatest advantage and better prepare the seller for questions asked during the process. Being prepared when soliciting bidders also will likely increase the number of bidders you may be able to attract.During this process, you should consider reverse due diligence, or preparing the data that will likely be requested during the due diligence process. These are standard documents requested in most diligence engagements. Having this information ready on the front end adds value and helps move the process along. Delays in outside or third-party diligence have been proven to affect deal values.Also, have your company’s financial statements audited by a firm that potential buyers consider reputable. Audited financial statements provide immediate credibility.
  • Make sure you impress upon buyers the value of the company you are offering to them. Build a business case for why the company will continue to prosper and grow and what positive effects the existing infrastructure will have on such growth.
  • Document agreements with employees and third parties. It is important for buyers to mitigate the unknowns when buying a business, so the more documentation for contractual arrangements, the better.
  • Be proactive relative to unresolved or potential litigation. Review pending or threatened claims with your attorneys and be honest about what situations exist. Resolve issues as diligently as possible. Make sure to include all potential human resources issues that may exist.
  • Avoid accounting discrepancies, unusual transactions and changes in reporting methods. An audit, as discussed above, can assist with this. However, remember that any such instances will need to be explained and will be challenged by a buyer. Clouding facts will lead to more questions and may ultimately impact the value of your deal.

When it comes to the value of your company, you can never be too diligent. For more ideas on how to enhance value, contact a BKD advisor.

Scott L. Fields is a partner at the Houston office of BKD, LLP. Reach him at [email protected]

Article reprinted with permission from BKD, LLP, www.bkd.com.  All rights reserved.

Facebook shares sink 11 percent as reality overtakes hype

MENLO PARK, Calif., Tue May 22, 2012 – Facebook shares sank 11 percent in the first day of trading without the full support of the company’s underwriters, leaving some investors down almost 25 percent from where they were Friday and driving others to switch back to more established stocks.

Facebook’s debut was beset by problems, so much so that Nasdaq said on Monday it was changing its IPO procedures. That may comfort companies considering a listing, but does it little for Facebook, whose lead underwriter, Morgan Stanley, had to step in and defend the $38 offering price on the open market.

Even so, one source said Morgan Stanley’s own brokers were at one point “ranting and raving” about glitches that left unclear what trades had actually been executed.

Without a fresh round of defense, Facebook shares ended down $4.20, at $34.03, on the Nasdaq. That was a decline of almost 25 percent from Friday’s intra-day high of $45 a share.

“At the moment it’s not living up to the hype,” said Frank Lesh, a futures analyst and broker at FuturePath Trading LLC in Chicago, adding that some people may have decided to hang back and buy the stock on the decline.

“Look at the valuation on it. It might have said ‘buy’ to a few people, but boy it was awfully rich,” he said.

A spirit of enterprise

J. Patrick Duffy, ICSC, MCR, President of the Houston office of Colliers International and Chairman of the Colliers Retail Services Group

For over 50 years Colliers International has provided real estate solutions to many of Houston’s leading corporations, institutions, and small businesses.

Leading companies such as 3M, Crown Castle, Talisman, Christus Health, Fidelity and The Coca-Cola Company rely on them for strategic guidance and creative solutions. That’s why Colliers International is ranked the second most-recognized commercial real estate brand in the world by the Lipsey Company.

Smart Business spoke with J. Patrick Duffy, ICSC, MCR, the president of the Houston office of Colliers International and chairman of the Colliers retail services group, about how the company overcomes obstacles and employs innovation to be on the leading edge.

Give us an example of a business challenge your organization faced, as well as how you overcame it.

The commercial real estate market saw a significant drop in business after the capital market meltdown in 08. While A drop in volume was predictable, the length (time before recovery) and depth of the decline were very difficult to predict. We knew that we needed to tighten our belts and get ready for a few years of substantially decreased revenue. At the same time we saw the downturn as an opportunity to improve our efficiency and potentially grow our market share while our publicly traded competitors, who had more short term earnings pressure, were forced to make more drastic cuts. We made the decision to cut any luxuries from our operations but maintain the core support services that our clients and brokers required to achieve the best results possible despite the current market conditions. Our partners agreed that short term losses, while not preferred, were acceptable if required to maintain our services at a high level and to keep the skilled people with the organization.

We had cash reserves and no debt going into the downturn which made this decision possible and when we made the decision to acquire a friendly competitor and obtain a new office location in Sugar Land, our partners opted to add additional capital rather than use capital reserves for the expansion.

The result of this action was that we kept our brokers and clients happy, managed to break even while we grew the firm in a depressed market environment and grow our market share. We implemented weekly training and streamlined many of our processes during the downturn and are enjoying the fruits of those efforts now that the market has recovered.

In what ways are you an innovative leader, and how does your organization employ innovation to be on the leading edge?

Colliers has a robust international platform and is investing globally in training and information technology which gives us a real edge over most of our competitors. I was given the opportunity to be a trainer for Colliers University classes and have leveraged that additional training to bring the best practices of our global platform to Houston in weekly one hour training sessions. We are taking the best ideas from around the world and where appropriate, applying them here at home in Houston.

We have embraced social media and technology but a great deal of our “innovation” is just acknowledging that there is always a better way to do everything, looking for examples and embracing positive change.

What is the greatest lesson you’ve learned and how have you applied it?

Making sure that there is alignment within the organization as to who we are, where we are going and why is critical. We have a running two year plan that every person has a copy of and has had the opportunity to comment on. Having clear vision and a plan to make it happen energizes most people and makes work more fun. We try to keep it light but focused.

How does your organization make a significant impact on the community and regional economy?

We help companies acquire and dispose of the real estate that supports their business. That may be a single asset or a portfolio of properties. We assist existing companies expand or relocate to improve their profitability and prosper. We guide companies that are considering the Houston market understand the dynamics of this area and make good decisions about where to locate and how to control their occupancy costs for long term success.

We also take an active role in the community through work with charitable and community organizations. As an example, we hold a golf tournament every year to raise funds for a selected charity (new one each year). This year we are helping “Kids’ Meals” purchase and distribute over 20,000 meals to Houston pre-school aged children, living in poverty who are in need of food.

How have you added “value” to the products and services you provide to customers and clients?

Real estate is one of the largest expense (and asset) line items for any company after their payroll costs. By bringing our experience in locating the right real estate for their particular business and negotiating the best terms for the control of that real estate, lease or purchase, we can have a significant impact on the profitability and growth of a company.

In many cases we help our clients with creative solutions for disposing of assets that they no longer need or in the case of investment properties are ready for conversion to the next asset or cash. Our professionals average over 18 years of experience and work collaboratively to make sure that we bring the best ideas and implementation to whatever commercial real estate problem our clients may have.

What is your philosophy on going “above and beyond” for customer service?

There is nothing better than getting a “wow” out of a client. Put simply, that is our goal. Our mission statement is that we will “deliver a superior commercial real estate experience with an absolute dedication to exceeding our clients’ expectations.” That mission statement is framed and on everyone’s desk. We try to live it.

J. Patrick Duffy, ICSC, MCR, is the president of the Houston office of Colliers International and chairman of the Colliers retail services group. Reach him at (713) 830-2112 or [email protected]

Apple shares to soar to $1,001, says analyst

CUPERTINO, Calif., Tue Apr 3, 2012 – Apple Inc. shares are set to rocket to $1,001 within the next 12 months as it branches into new markets and expands its footprint in China, predicted Topeka Capital Markets analyst Brian White.

“Driven by an ever expanding portfolio of innovative products, a growing integrated digital grid, unmatched aesthetics and a brand that is able to touch the soul of consumers of all backgrounds, Apple fever is spreading like a wildfire around the world and we see no end in sight to this trend,” White wrote in an April 2 note initiating coverage of Apple.

Shares of Apple are trading up about 1.5 percent to $628.20 in early trade on Tuesday.

Many observers had once cast doubts that Apple could even hit $500 and $600 price targets. Today, the median price target on its shares stands slightly below $700, according to Thomson Reuters data.

Now Apple is the world’s most valuable company with an array of products that have shaken up the music, media and technology industries.

Facebook’s IPO filing prompts it to share information

SAN FRANCISCO – The social networking giant that coaxes 845 million people to divulge the most intimate details about their lives is one step closer to cashing in on its meteoric rise in what could be the largest initial public offering to come out of Silicon Valley.

Facebook Inc. filed papers Wednesday with the goal of raising $5 billion in a public stock sale that could come in May. The offering would be the largest among Internet companies, eclipsing Google Inc. in 2004 and Netscape Communications in 1995. Depending on demand, the company could be valued between $75 billion and $100 billion.

But in opening itself up for the first time, the famously secretive company also revealed the tough road ahead as it looks to continue its breakneck growth streak while fighting off competitors. In its own words, Facebook said it has to allay concerns of privacy watchdogs and government regulators around the globe while maintaining the loyalty of users as new user growth slows.

The regulatory filing with the U.S. Securities and Exchange Commission also unveiled the collective wealth that could be bestowed on the founder and many of his employees. The IPO could be a bonanza for Mark Zuckerberg, the 27-year-old founder, who owns 28.2 percent of the company and is its single largest shareholder. His stake could be worth as much as $28 billion, earning him the ninth spot on Forbes’ list of richest Americans and putting him in the same league as Microsoft Corp.’s Bill Gates and Oracle Corp.’s Larry Ellison.