Business Valuation Update

In the July 2022 issue:
  • An Actual Brand Valuation Report a Court Rejected as ‘Speculative’
  • Highlights From the 2022 NYSSCPA BVLS Conference
  • How Judges Compare Competing DCF Analyses
  • Misusing the Market Prices of High-Vote Shares When Estimating a Discount for Lack of Voting Rights, Gilbert E. Matthews
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Welcome to Business Valuation Update
The Business Valuation Update (BVU) has been the voice of the valuation profession since its inception in 1995. Each monthly issue includes new thinking from leading professionals, detailed reports from valuation conferences, analysis of new business valuation approaches, coverage of “landmark” legal cases in key business valuation issues, regulatory and standards updates, and much more!  Learn more and subscribe >>
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15 Tips for Valuing Intellectual Property Using the Multiperiod Excess Earnings Method

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.

A Perfect Valuation Report for Tax Purposes: Missing Pieces of the Puzzle

Many articles have been written and many debates had about what makes a good business valuation report, especially when determining a market value for Australian taxation purposes. Like many valuation professionals, I believe this is not just a matter of high mathematics, where each input and variable can be easily defended by the logic of readily available theorems. Compiling a good business valuation report requires extensive knowledge of businesses and industries; an understanding of economic, financial, and political environments; technical proficiency in applying both quantitative and qualitative judgment; and wisdom in writing a meaningful report.

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 ...

Top Experts Talk ‘Best Practices’ in Valuing Intangibles For Financial Reporting

It’s one of the top growth areas for BV analysts—valuing intangible assets for financial reporting, and recently we gathered three of the leading authorities in this relatively new and nuanced area for a roundtable of “best practices” and valuation techni ...

Thousands at Valuation 2000

Discounts & Premiums Meet Levels of Value: The Final Chapter Presented by Z. Christopher Mercer, ASA, CFA. Mercer's presentation continued the exploration of the "levels of value" outlined ...

What is new in the second edition of Cost of Capital?

Reviewed by Harold G. Martin, Jr., MBA, CPA, ABV, ASA, CFEX Cost of Capital: Estimation and Applications , 2nd ed., Shannon P. Pratt. John Wiley & Sons, Inc., 2002. Available from Business V ...

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.

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.

New Government Contractor PPA Work Requires Careful Customer-List and Backlog Analysis

The government contracting sector continues to be a major source of merger and acquisition activity despite the unsettled nature of the economy. General Dynamics and Lockheed Martin, two of the largest companies in the industry, have maintained their acqu ...

The Adjusted Present Value: An Alternative Approach to the Effect of Debt on Business Value

The market value of a business’ assets is equal to the value of its two funding sources, debt and equity. In their seminal work, Modigliani and Miller’s1 Proposition 1 asserts that in a perfect market and ignoring income taxes, the relative amount of deb ...

Work File Checklist for the Tax Amortization Benefit

A practice aid based on the Mandatory Performance Framework (MPF) for the Certified in Entity and Intangibles Valuation (CEIV) credential.

Cost of capital controversies: It’s time to look behind the curtain (Part 3 of 3)

The authors provide a very lucid and readable discussion of the specific company risk and beta components of the cost of capital.

Alternate Valuation Methods in the Era of COVID-19

The authors address the impact of COVID-19 on the capital markets and offer alternate valuation methods that should be considered in these turbulent times.

Market Multiple Adjustments: Get a Grip on GRP

A follow-up of an earlier article that focuses on the attributes of growth, risk, and profitability (GRP) in a benchmark analysis of guideline companies.

Discount Rate, Risk & Economic Damages: Practical Considerations

When calculating damages awards in litigation, it is undisputed that the plaintiff’s projected economic losses must be discounted to their present value to avoid over-compensating for the harm caused by a defendant’s wrongful act.

The Cost Approach May Be the Best for Construction Firms—Here’s Why

The nature of construction firms is such that the use of some valuation approaches may pose problems. Although the valuation of construction firms may be speculative, in many cases, the U.S. Tax Code and the Financial Accounting Standards Board’s Accounti ...

9 Ways to Improve Your BV Report Writing

I started doing business valuations in the mid-1980s. Since that time, I have prepared and reviewed more valuation reports than many practitioners and fewer than some others. Still, my experience to date has allowed me to identify, and admire, a well-craf ...

A Preview of the New Benchmark Resource for Industry Cost of Capital

Duff & Phelps published the 2014 Valuation Handbook ‒ Guide to Cost of Capital in March, providing key year-end data previously available in the Morningstar/Ibbotson SBBI Valuation Yearbook and the Duff & Phelps Risk Premium Report. The Guide to Cost of C ...

BVR and Duff & Phelps Cost of Capital Platforms Go Head-to-Head at VSCPA

Both platforms give similar results when estimating the cost of capital for private firms. They were put through their paces at a recent conference presented by the Virginia Society of CPAs.

Valuers and Forensics Experts Converge at the 2019 AICPA FVS Conference

A mix of topics had something for everyone at this conference. Of note were some excellent sessions on expert testimony and there was a definite emphasis on fair value for financial reporting.

Getting Your Head Out of the Model: Valuing a Multinational Company

Editor’s note: There is little guidance on the valuation of multinational companies. There are models that can be used, but they should not be used blindly. The inputs to the models must be carefully considered because there is no one-size-fits-all method ...

Musings on the Cost of Capital

A veteran appraiser presents an interesting retrospective on the cost of capital and offers some observations on current practice.

GF Data Resources’ Private Equity Data: Applications for Business Valuation

Like most business valuation professionals, I am constantly on the lookout for objective private company transaction data. It’s been particularly difficult to find financial and acquisition data on deals where the buyer is a private equity firm—even thoug ...

The Implied Private Company Pricing Model (IPCPM) Ko = (FCFF1 / P) + g

Editor’s Note: The authors have developed a model designed to be more reliable than the build-up method for estimating the cost of capital of a small privately held business. This model uses the authors’ new Implied Private Company Pricing Line 2.0 (IPCPL ...

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.

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