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
Systemic Methodology Calculates Size Premiums
Building on the recent equity risk premium study we presented (BVU, Nov. 2005) and one of our latest telephone conferences (Top Controversies in Determining Cost of Capital, Feb. 1, 2006), this article offers a new method to ‘smooth over’ the debate on a ...
Rate & Flow: An Alternative Approach to Active/Passive Appreciation
In this summary article, we present an alternative model for determining active and passive appreciation in a marital dissolution.
View From the Other Side: Questions a Cross-Examining Lawyer Will Ask You
Attorneys preparing for a cross-examination are well aware that they won’t know more than a testifying expert about the expert’s field. Business valuation experts will be knowledgeable in concepts of valuation, types of valuation (market approach, income ...
Latest Study Available for the Empirical Method for Determining DLOM
The 2020 Discount for Lack of Marketability (DLOM) Study, recently released by Partnership Profiles, offers objective rate of return measures to implement the Johnson/Park empirical method. This method uses three approaches to measure the increase in return required to compensate investors for the lack of marketability of a subject interest.
Estimating a COVID-19 Marketability Discount for Small Businesses
A framework of thinking for developing a marketability discount for a majority interest on a small business in the wake of the pandemic.
Using Company-Specific Risk in the Delaware Chancery Court
For Delaware courts, discounted cash flow analysis has become the principal valuation methodology for determining going concern value of an entity. In Cede & Co. v. JRC Acquisition Corp., Civil Action No. 18658-NC, 2004 WL 286963, at 2 (Del. Ch. Feb. 10 ...
Seven Tips on Cost of Capital From the AICPA FVS Conference
There was great interest in the several sessions on cost of capital at the AICPA Forensic and Valuation Services Conference 2015 in Las Vegas. Speakers acknowledged that this is a topic that has evolved into a very complex area with a voluminous amount of ...
Getting Your Head Out of the Model: Due Diligence and Developing International Cost of Capital
The author presents specific due diligence guidelines for assessing the strength and weaknesses of international capital models.
Letter to the Editor: How Should the Value of Minority Interest Be Discounted?
This is in response to an article titled “Hot BV Topics From the AICPA FVS Conference” that was published in the January 2013 edition of Business Valuation Update.
Work File Checklist for Discount Rates Applicable to Various Assets
A practice aid based on the Mandatory Performance Framework (MPF) for the Certified in Entity and Intangibles Valuation (CEIV) credential.
Expert witness for IRS attacks size premium part of discount rate
At every one of the several merger & acquisition meetings that I have attended in recent months, both buyers and intermediaries consistently say that smaller companies usually sell at lower multip ...
International Cost of Capital: Cost of Equity/CAPM
There are many approaches to the development of both the equity and debt components of the cost of capital for countries other than the U.S. This article focuses on a select number of approaches applicable to development of the equity component of the int ...
Popular Real Estate DLOC Database Is Not Going Away
Valuation analysts who use the Partnership Profiles real estate database for estimating a discount for lack of control for family limited partnerships have expressed concern about the future of the database. This is a letter from Bruce Johnson with some important news about the database and some recommendations for adjusting methodology.
Adjusting Public Multiples: A Summary of Theories and Methodologies
While numerous appraisal texts and authorities discuss adjusting public valuation multiples derived in the context of the publicly traded company method, this is the first, centralized compendium of various related theories and methodologies. Business va ...
A SWOT model for quantifying the company-specific risk premium
The valuation community has refined and created methodologies that draw the art closer to a science, with varying degrees of success.
Using the Butler Pinkerton Calculator: A Case Study
In our valuation practice, we often find ourselves valuing privately held companies where the investor and the pool of likely buyers for the investment are not well-diversified. We have found the Butler Pinkerton Calculator (BPC) to be a great tool in dev ...
Questions a Trier of Fact Will Ask About Your Valuation
The fear of every valuation analyst is to be unprepared to answer a question in a deposition or on the witness stand. Here are some questions a judge or attorney will likely ask, either directed to themselves when reviewing your report or directly to you.
How Judges Compare Competing DCF Analyses
Two valuation experts are far apart in their opinion of value using the income approach. What does the judge focus on when comparing the two analyses?
How to Estimate WACC for a Cross-Border Valuation
One of these days, you will be asked to value a company located in a foreign country. One of the first questions you will have is: How do I estimate the discount rate? Of course, the overall concept is the same as for a U.S. valuation, but you need to ref ...
Determining a Distressed Debtor Company Discount Rate (Part 2)
The cost of capital represents the required return that must be earned if the value of the entity at issue is to remain unchanged. Cash flows are discounted at the cost of capital to determine the value of the emerging entity. A debtor company’s capital ...
Risk Free Rate Update
At the time I write this (the morning of Aug. 8, 2011), it appears that the initial reaction in worldwide equity markets to the turmoil in the euro zone and Standard & Poor’s downgrade over the weekend of the U.S. government’s credit rating has been to se ...
Empirical Method for Determining DLOM
The vast majority of business appraisers still rely on the restricted stock studies to determine a discount for lack of marketability (DLOM) in their standard practice of valuing a closely held, noncontrolling interest. These studies, shown in Exhibit 1 ...
Directions on report writing
When you think about it, writing an appraisal report has many similarities to driving a car. Just like obeying the rules of the road when driving a car, there are rules that should be obeyed when writ ...
DCF valuation should be improved
The discounted cash flow (DCF) technique is a staple of financial management textbooks, one might even say an idol not to be questioned. Our purpose is to show that the conventional way of computing D ...
The New Duff & Phelps Risk Premium Calculator
The new Duff & Phelps Risk Premium Calculator™ is available the first week in March with the newly updated 2011 Duff and Phelps Risk Premium Report. Designed by Roger Grabowski and James Harrington, the Calculator is a web-based application into which use ...