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
Cost of capital controversies: It’s time to look behind the curtain (Part 2 of 3)
This article discusses and compares two sources of size premium data and it touches on the subject of the supply-side equity risk premium.
Equity risk premium: What is the current evidence?
Are you aware of recent research questioning the use of those realized equity premiums as an estimate of the equity risk premium (ERP)? Or do you simply choose to ignore the research?
Dynamic Defense and Government Services Market Creates Opportunities for Valuation Practitioners
The defense and government services sector faced an uncertain climate in early 2010, but by the end of the year, the levels of M&A activity had risen to a level not seen since the 2006-2007 peak. Increasing M&A activity always drives demand for business v ...
Why Do Private Firms Linger on the Selling Block?
The time it takes to market and sell a privately held business continues its downward trend. The length of time depends on many factors, but there are three key variables: industry, price, and the month the sale listing appears. This is revealed in the la ...
Valuation Issues in the Coming Wave of Goodwill and Asset Impairments
Widespread stock price declines and recessionary conditions will significantly affect corporate valuation and financial reporting of goodwill and long-term assets. The S&P 500 index, which represents a broad cross-section of the economy, declined by about ...
The Marketing Period of Private Sales Transactions
The concept of marketability deals with the liquidity of the interest—that is, how quickly and certainly it can be converted to cash at the owner’s discretion. How quickly and certainly an owner can convert an investment represents two very different va ...
BV News and Trends November 2023
A monthly roundup of key developments of interest to business valuation experts.
Practice-Building Tips From the AICPA FVS Conference
The largest event of 2024 was the AICPA & CIMA Forensic and Valuation Services (FVS) Conference. While there were many excellent technical sessions, there was good attendance at sessions that related to the management of a valuation or forensics firm or practice—a topic that is gaining in importance in the profession. This article is a recap of those sessions.
The Strategic Premium: An Inside Look at M&A Prices
Synergistic/strategic value should not be combined into one level in the typical chart that shows levels of value. Some buyers pay a “strategic premium” that propels strategic value to the top of the value chart and well in excess of the expected synergistic value. The author uses real-world examples to illustrate this concept.
Adjusting the Restricted Stock Transactions to Estimate Marketability Discounts
The courts have been critical of using restricted stock studies to estimate a discount for lack of marketability (DLOM). In particular, they question the use of averages culled from historical studies without specific reference to subject companies and st ...
BV News and Trends January 2024
A monthly roundup of key developments of interest to business valuation experts.
Bank Valuations in the Current Debt Climate: a Focus on Earnings Quality
Investors have often viewed banks as less volatile than non-financial companies due to several factors, including a high level of regulatory oversight, less variance in earnings from period to period, and favorable dividends. However, investors’ traditio ...
The Evolving Landscape of Intellectual Property That Impacts Valuation
A growing number of developments in the landscape of IP creation and commercialization are impacting IP valuations, or have the potential to do so.
Tax-Affecting and Beyond: Dela. Radiology Experts Discuss ‘Landmark’ Case
Eighteen! That is the precise number of minutes the minority shareholders’ forensic and valuation expert, John Mitchell, testified on direct in Delaware Open MRI Radiology,1 a “landmark” case on tax-affecting, fair value pricing, and judicial appraisal.
Quantifying Company-Specific Risk: A New, Empirical Framework With Practical Applications
In this article, the authors have refined their earlier work1 by providing a detailed example of how to select a company-specific risk premium (CSRP) for a privately held company using benchmark CSRPs derived from guideline publicly traded companies.
Overview and Implications of a Qualitative Assessment for Goodwill Impairment
On Sept. 15, the Financial Accounting Standards Board (FASB) published the Accounting Standards Update (ASU) No. 2011-08 related to Topic 350, Intangibles-Goodwill and Other. Traditionally, a two-step test for goodwill impairment has been performed, inclu ...
Tales From the Trenches: Think Twice About Adding M&A Services to Your BV Practice
Expanding into M&A services might appear to be a great growth area for your existing business valuation practice, but the author believes that this strategy may be fraught with danger and may do more harm to your existing practice than help to grow it.
Evolving Issues in Proving Lost Profits in Commercial Litigation
The authors provide a formal model of lost profits with a special focus on measurement of expenses, how “time” is a factor, and special efforts the expert needs to make to reduce the chances of failing a Daubert challenge.
Medical A/R: Top Issues That Impact Your Valuations
Like many aspects of valuation, valuing medical accounts receivable is as much an art as it is a science. Many small businesses and virtually all professional practices use the cash method of accounting. Under this method, accounts receivable are not ref ...
Global BV News and Trends September 2021
Business valuation news from a global perspective.
A Veteran Valuer’s Guidance on COVID-19 and the ‘Soul’ of a Business
An interview with Robert Schlegel, FASA, MCBA (Houlihan Valuation Advisors), in which he gives his perspectives on our current economic environment and how that affects the business valuation community.
BV News and Trends March 2024
A monthly roundup of key developments of interest to business valuation experts.
Damage Computations in Finder’s Fee Litigation—Issues for the Expert
Litigation by those seeking to obtain a finder’s fee for their role in bringing parties to the table in a transaction is ubiquitous. A finder is a party who brings potential transactors together to complete a transaction without participating in the nego ...
One Solution to the Option Pricing Overvaluation Problem: Using Down and Out Call Options
Introduction Recent articles have pointed to concerns about the validity of using option pricing models (OPM) to determine the value of common stock in 409(a) valuations. At issue is the question of whether OPMs provide appropriate methodologies to estab ...
DLOMs in N.Y. Statutory Fair Value Cases—A Follow-Up to Matthews
As an appraiser, I have had the opportunity to prepare many valuations for New York statutory fair value cases, and I have testified in some of them. I’d like to weigh in on the topic of discounts for lack of marketability (or DLOMs) as a follow up to the ...