Going-Concern Value

The value of a company as an ongoing entity. This value differs from the value of a liquidated company's assets, because an ongoing operation has the ability to continue to earn profit, while a liquidated company does not.

Investopedia Says:
This value includes the liquidation value of a company's tangible assets as well as the present value of its intangible assets (such as goodwill). The going-concern value is worked into the purchase price of a company, and is the main reason why the purchase price of a company tends to be higher than the current value of the assets of the company.

For example, the liquidation value of Widget Corp. is $10 million. This sum represents the current value of inventory, buildings and other tangible assets that can be sold assuming that the company is completely liquidated. However, Widget Corp.'s going-concern value could very well be $60 million, as the company's reputation of being the world's leading widget producer and its ownership of patents and associated rights for widget production mean that the company should have a large steady stream of future cash flows.

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Value of a company as an operating business to another company or individual. The excess of going-concern value over asset value, or Liquidating Value, is the value of the operating organization as distinct from the value of its assets. In acquisition accounting, going-concern value in excess of asset value is treated as an intangible asset, termed goodwill. Goodwill is generally understood to represent the value of a well-respected business name, good customer relations, high employee morale, and other such factors expected to translate into greater than normal earning power. See also Goodwill.

The entire value of a business, which includes not only its Assets if Liquidated but also the premium often commanded by a business for being a unified organization with customers, an existing work force, market share, credit lines, and so on.
Example: The Hyton Hotel Company had a going concern value of $100 million, based on the Market Price of its stock. The total value of its tangible assets (land, buildings, and furniture and fixtures) was appraised at $60 million. The value of intangible assets, including its reservation system and goodwill, was $40 million.

The value inherent in an active, established company as opposed to a firm that is not yet established.

The value of the assets of a business considered as an operating whole.

As a component of business value, going concern value recognizes the many advantages that an existing business has over a new business, such as avoidance of start-up costs and improved operating efficiency. In this sense, the going concern value of a firm represents the difference between the value of an established firm and the value of a start-up firm.

Going concern value also indicates the value of a firm as an operating, active whole, rather than merely as distinct items of property. U.S. bankruptcy law, for example, has recognized the need to preserve going concern value when reorganizing businesses in order to maximize recoveries by creditors and shareholders (11 U.S.C.A. § 1101 et seq.). Bankruptcy laws seek to preserve going concern value whenever possible by promoting the reorganization, as opposed to the liquidation, of businesses.

Going concern value also implies a firm's ability to generate income without interruption, even when ownership has changed (Butler v. Butler, 541 Pa. 364, 663 A.2d 148 [Pa. 1995]).

Going concern value is distinguished from the concept of good will, which refers to the excess value of a business that arises from the favorable disposition of its customers. Good will may include the value of such business elements as trade names, trade brands, and established location.