Business Valuation Update
- How to Review a Report’s Valuation Methodology
- Ideas for Solving Two Problems in the BV Profession
- How Do Your Firm’s Benefits Stack Up?
- Using Rule of Thumb Data to Uncover Cooked Books
What’s New and Noteworthy in the DP 2016 Valuation Handbook
It has now been three years since Duff & Phelps (DP) took the baton from Morningstar/Ibbotson (MI) to continue the production of arguably the key resource for cost of capital determinations in business and intellectual property appraisal. The Duff & Phelp ...
Is 6% Now the Best Estimate of ERP?
The Ibbotson® SBBI® Valuation Yearbook indicates that the equity risk premium is 7.1%, while Duff & Phelps indicates 4.9%. But Roger Grabowski and Shannon Pratt, speaking at the recent BVR/FAE Thought Leadership Workshop of Cost of Capital in New York Ci ...
Valuing real options; enhancing DCF to account for management flexibility
While an otherwise excellent financial analysis tool, traditional discounted cash flow (DCF) has one glaring drawback—it ignores management flexibility and so fails to value real world behavior. Fortu ...
And the Survey Says!
On October 17, the BV Wire posted a survey asking about some of the valuation issues long thought settled, with particular emphasis on elements of the discounted cash flow (DCF) method that, in practice, can still be troublesome.
Arriving at FMV Conclusion for Energy Properties Requires Engineering Expertise
The oil and gas sector is one of the hottest in the M&A market, driven by a strong demand for upstream assets. But valuing these assets, in particular oil and gas reserves that can be neither seen nor physically measured until produced for sale, presents ...
Special Issues When Valuing Private Equity Portfolio Company Private Stock
When a private equity (PE) firm acquires a controlling interest in a company in a buyout transaction, a new capital structure typically is put in place. The new capital structure may comprise senior debt, subordinated debt, preferred equity, common equity ...
Study Reveals DCF Usage by Top M&A Practitioners
Major investment banks routinely use discounted cash flow techniques to determine company value in mergers and acquisitions. However, the actual application of the methods is “far from routine,” say the authors of a recent study published in the Journal o ...
Recap of the ASA New York Fair Value Conference
Important takeaways from the recent conference on these topics: global cost of capital, ASC 718 valuations, ESG impacts on value, discount rate for intangibles, hard-to-value securities, SPAC warrants, and more.
Pitfalls to Avoid when Performing a Fairness Opinion
Boards of directors, trustees, and attorneys frequently rely on fairness opinions when evaluating merger and acquisition transactions, especially in the current economic environment. However, changes in regulations and case law have altered the landscape ...
FAS 157: Pathways and Pitfalls in Fair Value of Complex Investments
FAS 157, conceived in times of easy credit and a bubbly stock market, was born at a time of roiled equity and credit markets and a torrent of lawsuits, among them, those alleging mispricing of exotic securities. The usefulness of FAS 157 is likely to be ...
A Look Back: Including ESG in Valuation Models
Quantified the impact of environmental, social, and governance (ESG) factors and measuring their effects is not a new phenomenon. Thanks to the BVResearch Pro platform, here are two ways experts have done this before.
Work File Checklist for Discount Rates Under New Fair Value Regulations
Under the new requirements for fair value for financial reporting, valuation experts will be expected to have a certain amount of documentation in their work files. For holders of the new CEIV credential, a work file will be reviewed within the first year ...
Volatility and the DLOM
Volatility is an issue in most calculations of an appropriate discount for lack of marketability (DLOM) for a minority interest. Frequently, appraisers value the interest at some date in the past. Thus, they often use market data from before the valuation ...
A simplified method to value an S corp minority interest
This article proposes a method for valuing a minority interest in an S corporation.
Valuing companies with changing debt levels; Is the APV method better than the DCF?1
In this article, Mark presents the Adjusted Present Value (APV) method—an alternative to the DCF for companies with debt-to-equity ratios that are expected to change in the future.
How to Use the Income Approach on an FLP With No Income
The income approach is the valuation approach of choice for a family limited partnership. But what if you have a non-income-producing FLP? How do you use the income approach when there’s no income? This was one of the questions addressed during a recent w ...
The Valuation Paradigm of COVID-19: Using the DCF Method After an Economic Crisis
The challenge amid today’s market disruption is to revert back to the foundational elements of valuation and how to properly apply those “blocking and tackling” fundamentals during very untraditional times.
Exclusive Survey Reveals BV Research Sources of Choice
Information is the lifeblood of a business valuation practice. Your credibility and competitive advantage hinges on the sources of data you use. BVR recently collected data concerning research sources valuation experts rely on most. BVU has examined the p ...
Identifying pool of willing buyers may introduce synergy to fair market value
How many times have we, valuation consultants, read the definition of fair market value 1 and then arrived at an opinion of value without focusing on the characteristics of the "willing buyer"?
The Implied Private Company Pricing Line 2.0 K0 = (FCFF1 / P) + g
Most business appraisal assignments are for private companies with revenue less than $10 million. Current costs of capital (K0) estimation methods rely almost entirely on public security returns. Small privately held companies are different from public eq ...
Solving the Blockage Discount Dilemma
The International Glossary of Business Valuation Terms defines “blockage discount” as “the amount or percentage deducted from the market price of a publicly traded security to reflect the decrease in per share value of a block of those securities that is ...
Tips on Handling 10 Key Issues in Bankruptcy Valuations
A number of issues have emerged that analysts will encounter when performing a valuation in a bankruptcy context. During a recent BVR webinar, Robert Reilly (Willamette Management Associates) cautioned that valuation analysts who become involved in bankr ...
The Valuation of Restricted Stock Grants Based on Total Shareholder Return
Share-based payment awards have been a subject of formal valuation for financial reporting and tax purposes since the Financial Accounting Standards Board adopted FAS 123R for US GAAP in 2004. This significant step immediately made the previously less fam ...
How New QBI Deduction Impacts the Hypothetical Buyer and Seller, Part 2
Part 2 of a two-part article on the impact of the new tax law’s Qualified Business Income (QBI) deduction for pass-through entities in determining estimated after-tax cash flow at the investor level, as well as the related change in the fair market value of the entity.
Valuing Asset-backed Securities Can be Counter-intuitive
“The price of senior tranches in asset-backed securities tends to go up as the default rate, and the severity of the defaults, increases,” Daniel Kahn told attendees at the NYC ASA Current Topics in Business Valuation Conference.