For years, the valuation profession has debated the definition of a control premium, including its distinction from an acquisition premium. What began years ago as a relatively simple question—if there is a control premium, what should it be?—now includes analyzing such concepts as invested capital premiums and equity-based premiums, transaction synergies and strategic values, marketability, and levels of control. All are “key points” to keep in mind throughout the quantification of a control premium, say Tim Meinhart and Nate Novak (both of Willamette Management Associates), who led a webinar on this topic titled Evaluating and Applying Control Premiums earlier this year. Read more >>

How did surging stock prices affect M&A premiums all buyers paid in 2017? The Mergerstat Review highlights acquisition premiums paid using the seller’s five-day stock price prior to the announcement of the transaction, or essentially the premiums based on the equity value of the seller. Looking at the trends across all transactions, the numerous tables and charts in the Mergerstat Review show that premiums have steadily declined in most of the past five years. Read more >>

Discover how far last year’s M&A buyers were willing to go above the publicly traded share value with their offers. View a list of the five highest premiums offered for M&A transactions announced in 2017. Read more >>

Professor Aswath Damodaran (New York University Stern School of Business) has released new data posts and data sets updated for 2017 related to valuation and the cost of capital, including historical stock returns, implied equity risk premiums, country risk premiums, and more. Read more >>

The Delaware Court of Chancery recently cut short a challenge to a going-private merger when it dismissed the plaintiffs' complaint. The plaintiffs unsuccessfully argued the defendants breached their fiduciary duties when they favored the controller's lower bid over a third-party bidder's higher offer. Read more >>

Is there a consensus yet on the method to use for estimating a discount for lack of marketability (DLOM)? Find out by taking a short survey. Read more >>

The accounting, valuation, and legal professions are hard at work to defeat the Treasury Department's proposed Section 274 regulations. The new regs would curtail, if not entirely eliminate, valuation discounts in family-controlled entities. Read more >>

A number of leading valuation experts have called for the profession to speak with one voice and eliminate the confusion over the use of discounts. One valuation expert offers up some nomenclature and—more importantly—a framework that he hopes will help with this thorny issue. Read more >>

Shannon Pratt, Roger Grabowski, Jim Hitchner, Nancy Fannon, and the Honorable Judge David Laro of the Tax Court are just a few of valuation thought leaders dubbed by NACVA as “industry titans” who gave presentations at the organization’s 25th anniversary conference in San Diego Read more >>

The parties retained a sole appraiser, whom they both knew from past appraisals he had done of the company. Prior to formally engaging the appraiser, in a court hearing, both sides broached the issue of whether it was appropriate to apply a minority discount in valuing the plaintiff's shares. The court declined to weigh in on the subject, but told the parties the minority discount issue should form “part of the discussion” they needed to have over the valuation methodology. Read more >>

John Finnerty (Alix Partners) has developed a new version of his average-strike put option DLOM model that can be generalized to accommodate a restriction period of any particular fixed length. He presented the new model during a BVR webinar and asked the audience for comments and suggestions. He would also like some real data for testing purposes. Read more >>

The case featured experts whose professional backgrounds and valuation approaches could hardly be more dissimilar. Their value determinations were light-years apart. In trying to make sense of the conflicting testimony and achieve a plausible and fair result, the court decided it could not totally trust either valuation. Although it adopted the defense expert's valuation, it made two consequential changes to it. One was getting rid of the expert's admittedly high and insufficiently explained 35% discount for lack of marketability. Read more >>

A prior post that highlighted the article “NY’s Unfair Application of Shareholder-Level Marketability Discounts,” written by Gil Matthews and Michelle Patterson (both with Sutter Securities) has sparked calls for the BV profession to speak with “one clear voice” on this issue. Read more >>

A "new note" in the hotly debated NY DLOM issue was sounded in an article in the January issue of Business Valuation Update. In the article, “NY’s Unfair Application of Shareholder-Level Marketability Discounts,” Gil Matthews and Michelle Patterson (both with Sutter Securities) write that New York “stands alone in that it favors (and some lower courts believe requires) the imposition of a marketability discount on dissenting shareholders in fair value determinations. There is broad consensus that DLOMs should seldom, if ever, be permitted in appraisal or oppression cases.” Read more >>

The parties' most recent fight focused on whether the prevailing expert's DCF analysis embedded a marketability discount to account for illiquidity. If not, the trial court had to decided what the appropriate DLOM rate was. The plaintiff-selling shareholder argued in favor of a zero DLOM, the defendants-buying shareholders presented an expert valuation that specified a 35% DLOM, based on the expert's use of a market approach. Read more >>