Mercer and Harms tie BV together into one neat bundle

BVWireIssue #222-4
March 24, 2021

valuation methods & approaches
risk analysis, discount for lack of marketability (DLOM), quantitative marketability discount model (QMDM)

Business valuation is like one huge jigsaw puzzle, and practitioners can often find themselves focusing too much on the individual pieces. A framework of thinking is needed to help fit all the pieces together successfully. That’s where the “integrated theory” of business valuation comes in. This is a concept put forth by Chris Mercer and Travis Harms (both with Mercer Capital), who explain it in a series of BVR webinars.

It all jells: When you listen to Mercer and Harms, it seems as if everything you’ve learned about business valuation comes together in a very logical and understandable way. They contend that any question or challenge an analyst faces can be answered by paying attention to three elements: cash flow, risk, and growth expectations. True, it may seem as if you’ve heard this before, but not in the way they present it, which makes it all fit together very nicely. They also do a very enlightening demonstration of how the three approaches to value (income, market, and asset) are interrelated.

The first installment of the webinar series gave an overview of the integrated theory, and the second installment examined enterprise cash flows. The third and final installment of the series will be April 21, when they will delve into shareholder cash flows. BVR Training Passport holders have access to archive recordings of the first two, and they have a pass for the third. This series will definitely become a classic!

Extra: An excellent companion to the webinar series is the new, third edition of Business Valuation: An Integrated Theory, by Mercer and Harms.

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