We will see many advances in estimating the cost of capital in future years, as it is still relatively unknown how risk is priced. That was one of the messages of two sessions on cost of capital at a recent valuation conference. In addition, insights were offered on such topics as normalising the risk-free rate, the ERP, the size premium, and liquidity.
Are private companies worth less than public companies solely because they are not publicly traded or because of other identifiable factors (some of which would apply to various public companies as well)? A school of thought consisting of experienced and thoughtful experts believes they are. U.S. valuers Shannon Pratt and Roger Grabowski set forth this view ...
When we perform a business valuation, the valuer is constantly faced with addressing the highest and best use of a property, as well as different premises of value that can impact the conclusions. This article discusses an issue that arises regularly but is not necessarily addressed by the valuation analyst, namely economic obsolescence.
Startup businesses are an important part of the Australian business scene. For example, in 2014, venture capitalists invested over $500 million into more than 100 firms, driven largely by a $250 million investment from U.S.-based Insight Venture Partners into Campaign Monitor. Even without that large investment, in 2015, more than 40 companies in Australia received over $200 million in venture capital funding, with an average per-firm investment of $2.4 million.
In the July issue of Business Valuation Australia, we shared tips from Mel Abraham and Rod Burkert on how to use today’s tools and technology to build your valuation practice. In this issue, we bring you advice on how to boost your profile and distinguish yourself from other valuers.
Q: Do you do site visits of competitors of your subject company?
When Mel Abraham and Rod Burkert started their valuation practices, one of the first things they realised was how hard it was to figure out how to build a valuation practice as solo practitioners.
We recently valued an unsecured debt instrument issued by a large European infrastructure asset owner on behalf of a number of Australian superannuation funds. As infrastructure instruments (both debt and equity) are an emerging asset class for a range of investors, we thought it would be useful to share some of our insights on recent trends and issues from an investment perspective.
How does something as emotional and intangible as brands and someone as fact-based and conservative as an accountant fit together? Not particularly well, according to marketers and brand valuation specialists. When they say “accountant,” however, what they’re really referring to are valuation professionals who happen to practice outside of the world of marketing.
A taskforce of international valuation professionals assembled by the board of directors of the International Institute of Business Valuers (iiBV) issued its recommendations to the board regarding the contemplated development of a global business valuation accreditation.
For many people, establishing the value of an internet domain name appears to be a well-defined black-and-white process that considers a variety of economic variables and formulae to obtain a satisfactory conclusion. But, ultimately, determining that amount is much more an art than a science. Domain names are one of the few items whose value is truly specific, based primarily on the price a buyer is willing to pay and the seller to accept.
While compiling the recently published Dealtracker report, Grant Thornton’s growth advisors reflected on what makes companies successful and ripe for acquisition. The data consistently show that companies that have high growth and services, products, or IP that is valuable on a global scale will receive above-average EBITDA multiples on sale. This trend has been demonstrated over the 18-month reporting period from July 2014 to December 2015, with marginally higher multiples than recent years, driven by outperformance in the consumer discretionary, consumer staples, and financial sectors. The following summarises the trends highlighted in this reporting period.
Q: What valuation resource do you consider to be the most valuable?
Q: Do companies track the value of their corporate brand?
Risk and uncertainty are prevalent in all business decisions we make. Many working in valuations and finance are familiar with and use various “what-if” analysis tools and techniques within their spreadsheets such as scenario and sensitivity analyses. You can go further than this though, simply with the basic Excel software. Using simulations analysis, it is possible to quantify and analyse the impact of your input. Here, we look at how to undertake simple simulations analysis using nothing more than Excel and some of its lesser-known functions and functionalities.
Recently, India’s Serious Fraud Investigation Office (SFIO) announced it would probe the valuation of the Kingfisher Airlines trademark and whether the trademark was fraudulently inflated to get more funds from banks. The officials of the now-defunct airline, bank representatives, and a corporate finance advisory firm who had valued the brand are being investigated.
U.S. Federal Court’s Damages Model for SEP Infringement Fails Apportionment Rules: Commonwealth Sci. & Indus. Research Organisation v. Cisco Sys.
Apportionment is key to determining damages in all patent infringement cases. But apportionment in the context of patents that are essential to standardising technology, products, and services comes with its own rules. A guiding principle is that the royalty must only reflect the value of the patented technology’s superiority, not any value resulting from its being adopted due to standardisation. The U.S. Federal Circuit recently elaborated on this concept when it struck down a $16.2 million royalty award against Cisco, finding the trial court’s damages model failed to account for standardisation.
Determining reasonable compensation can be a challenging issue in a business valuation—and it can represent the largest earnings adjustment. Sometimes, the valuation analyst can establish reasonable compensation. Other times, you need to call in a compensation consultant. Mark Higgins, ASA, president of Higgins, Marcus & Lovett, a business valuation and litigation consulting firm based in Los Angeles, U.S.A, lays out the thought process he uses in deciding when to call in extra help.
Oil and gas firms are in an industry that is highly sensitive and subject to volatility in returns, so these firms use derivatives regularly to manage their risks. Many other companies, including private firms, now use derivatives. For example, an Australian manufacturer that buys parts from overseas may use forward contracts to hedge currency risk. A trucking company might use energy futures to stabilise profit margins. Some derivatives are traded on an exchange, but most derivatives are traded over the counter (OTC).
To celebrate the launch of its new graduate diploma of applied finance (business valuation), Macquarie University hosted a seminar titled “Perspectives on the State of Valuation in Australia.” The panel of valuation experts included Steve Bishop, Paul Brunker (Optar Capital), and Stephen Reid (Deloitte) and was chaired by Tony Carlton, director of the new program.
Overview. Valuing intellectual property and intangible assets is often a highly technical task. Valuation experts frequently use forms of discounted cash flow (DCF), and more specifically the multiperiod excess earnings method (MEEM), to value many intangible assets such as patents, customer relationships, commercial contracts, brands, franchise agreements, and licences.
More and more, valuators are asking how and when to use Monte Carlo to analyse how uncertainties influence value conclusions. Yet, despite the increasing attention, is anyone using it in business valuation? If so, in what circumstances?
The importance of international cooperation around standards and practices was addressed for the first time as more than a remote concept when The Appraisal Foundation (TAF) held its Business Valuation Roundtable in Washington, D.C. In fact, based on input from international regulators, there has been a palpable change of tone from “exploration” to “mandate.” The most tangible evidence is the joint effort to move ahead quickly on a new certification for valuation for financial reporting that will potentially be more robust than the current certifications.
Editor’s note: S&P Capital IQ provides these data and statistics from its Australian Q3 2015 Capital Market Update. S&P Capital IQ analyses capital markets, trends, and market performance to provide key insight into Australian and New Zealand market activity. These data are printed with permission from S&P Capital IQ.
A “Lively Debate” panel hosted by the International Institute of Business Valuers (IIBV) discussed the considerations of new valuation professional organisations (VPOs) about appropriate levels of professional standards. The panel, which covered education standards and quality initiatives, was held during the annual meeting of the International Valuation Standards Council (IVSC) in Paris. Here is what you need to know about some of the insights and perceptions from valuators from around the globe.