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Fair Value Measurement Auditing: The How To’s of MPF (A BVR Workshop)
Learn how the new Mandatory Performance Framework (“MPF”) for valuation professionals will help the auditing of fair value measurements, including the extensive documentation and analysis required by the MPF.
The Wisdom of the Pastrami Sandwich: The Secret Sauce for Delivering Compelling Expert Testimony
In this workshop, forensic expert Michael Kaplan and jury trial consultant and communications specialist Jesse Wilson identify and explore the powerful storytelling skills that transform technically accurate, matter-of-fact testimony into a story that will persuade the jurors. Through the expert testimony of our attendee volunteers, Jesse and Michael demonstrate the incorporation of these skills into expert testimony, transforming otherwise factual and accurate testimony into powerful stories that become compelling expert testimony.
Harvesting Knowledge: The Valuation of Wineries
A winery is a unique business that is easy to understand but difficult to value. This presentation will dig into the anatomy of a transaction and how deals are priced and closed as well as the valuation of a winery for compliance purposes. These different scopes of work present different challenges that focus on a buildup of value and assets combined with a fundamental understanding and value of consolidated cash flows. We will present two ...
Valuation Jubilee: Celebrating BVR’s 500th Event
Don’t miss the all-star lineup for the "Valuation Jubilee: Celebrating BVR's 500th Event." Spend a half day listening to this master class session and learn from the profession's thought leaders as they deliver concise lessons that make an extraordinary impact on your practice and career. Hear expert after expert share the knowledge they’ve gained throughout the years. The business valuation profession has progressed (and so has BVR, remember our teleconferences, anyone?), and we are excited ...
Price and Value: Discerning the Difference, an Advanced Workshop
As any appraiser will tell you, there is a fundamental difference between price and value, often highlighted by the sale of a recently appraised business at a price far from the assessed value. In this case, the gap between price and value may be of small consequence; in the assessment of underlying assets, market comparables, and with appraiser bias, this gap can jeopardize even the most reasoned and objective determinations of value. In Price and Value ...
Business Valuation Cases in Brief
Erin Hollis provides updates on six recent business valuation cases.
Editor's Column
Editors Column by Susan L. Mueller, ASA, CFA, CFP Managing Editor Beginning with this issue, you will notice the inside pages of Business Valuation Review are printed on coated paper. Also, the back covers design changed to meet the needs of current U.S. Postal Service scanning machinery. The CFA Institutes Financial Analyst Journal is one of the journals I use as inspiration for ways to improve the appearance and content of the Business Valuation ...
Editor's Column
A rundown of the articles included in the Winter 2016 issue of ASA Business Valuation Review.
From the Chair
As if we weren’t busy enough, we now have a second job: figuring out all the ways that our valuations (and models) are affected by H.R. 1 (aka the Tax Cuts and Jobs Act). Read on to learn about two ways the ASA is here to help.
Petroleum Property Income and Market Valuation Approaches (Transactions Beware!)
Characteristics exhibited by producing liquid-rich shale formations often cause inaccurate forecasts of natural gas and oil production when multistage hydraulic fracking is used for extraction. Poor cash flow estimates can be avoided by practicing due diligence when appraising petroleum property value and income. Due diligence is satisfied by comparing volumes recorded on actual royalty check stubs or monthly statements to state-reported production volumes, by relying on petroleum reserve appraisals instead of transaction multipliers or rules ...
Equity Volatility Size Adjustments by Industry
This article provides a means for determining equity volatility size adjustments in estimating lookback equity volatilities for eleven different industry sectors based on twenty years of historical data. The industry-specific size adjustments can be used for estimating volatility for common equity in privately-held or illiquid publicly traded companies. Consistent with an earlier article, I find that size adjustments vary significantly among industries, but I also find relatively minor differences for any given industry based on ...
Unlocking the Value of ESG: Report from the International Valuation Standard Council
This report provides an overview of the work carried out by the International Valuation Standard Council (IVSC) over the past two years in relation to unlocking the value of environmental, social, and governance (ESG) criteria within the valuation process, including a summary of the recently published IVSC ESG perspectives papers and internally generated intangibles. The report also illustrates some key findings from the IVSC ESG survey for firms, investors, and valuation providers and advises when ...
Testing the S-Corp Value Premium for Realism and Reasonableness
For almost fifty years, the field of finance and the valuation profession have deliberated over the potential impact of taxation on security prices and costs of capital as well as the value effects of the tax attributes of pass-through entities (PTEs). Hundreds of papers on these topics have been published. Analytic models that offer various approaches to problem resolution have been proposed. Some have been widely used. Debates have been held in court and out.
Editor's Column
Business Valuation Review Fall 2010 Page 73 Business Valuation Review Volume 29 • Number 3 © 2010, American Society of Appraisers Editors Column Roger J. Grabowski, ASA the panic of 2008-2009. Rather the analyses and resulting adjustments we discussed therein became just as relevant in the summer of 2010. While the stock market has experienced a nice rally these past few months (and for that my 401k is especially thankful), I believe economic ...
Volatility of Financial Metrics: Important Data for Contingent Consideration Valuations
This article presents the first detailed statistical analysis of the volatilities of various commonly encountered financial metrics used in contingent consideration (and earn-out) agreements. The valuation of contingent consideration using an option-based methodology and non-equity volatilities is becoming more common in business valuation. We provide clear evidence that the volatility of five financial metrics—revenue; earnings before interest, taxes, depreciation, and amortization (EBITDA); EBIT, net income, and total assets—is strongly, negatively related to firm size and ...
Editor's Column
Business Valuation Review Summer 2010 Page 41 Business Valuation Review Volume 29 • Number 2 © 2010, American Society of Appraisers Editors Column Roger J. Grabowski, ASA The Federal Reserve has maintained low short-term interest rates despite becoming more optimistic about the U.S. economy. But maintaining interest rates that do not reflect underlying market risks can create a problem. The lack of influence of interest rates on the perceptions of risk and the ...
Let's Get Real About the Dividend Growth Model
The dividend growth model, sometimes called the dividend discount model or discounted cash flow model, is a commonly used tool for estimating the cost of equity capital, particularly in the context of utility rate setting and unitary appraisal. Although the assumption of constant growth in perpetuity is almost never realistic, the constant growth version of the model is still commonly used in practice. However, given modern computing technology, there is no reason not to use ...
Editor's Column
Editors Column Roger J. Grabowski, ASA Business Valuation Review is Now Electronic You should have each received notice of our new mode of delivery - electronic. We believe this will be a great benefit to our readership. As the number of electronically delivered journals accumulates in future years, you will be able to access all previously electronically delivered journals via the Business Valuation Review website as long as you maintain your subscription. We all ...
Oil and Gas Company Valuations
This article provides a primer on the analysis and valuation of exploration and production companies and related reserve engineering reports.
Part I: Appraiser Versus Real World Debates: How Many Appraisers Can Dance on the Head of the Private Capital Markets?
The largest unchartered territory on the business appraisal map is the private capital markets. These markets contain more than 99% of business entities comprising millions of companies and generate half of the gross domestic product of the United States and the world. Not only are the companies operating in these markets difficult to value, but there is no, one, unified agreed upon method of how to approach cost of capital determinations for valuation engagements. The ...
Letter to the Editor
I am writing because I see several things that concern me about our business valuation (BV) profession. I offer some thought-provoking remarks that hopefully induce a reaction from the journal’s readership.
A Methodology for Allocating Enterprise and Personal Goodwill
The purpose of this research is to provide a logical methodology for allocating the total goodwill of a professional practice between the element of personal goodwill attributable to the practitioner and the element of enterprise goodwill attributable to the professional practice. The methodology presented in this research includes four basic steps: (a) the identification of individual factors within a professional practice that are attributes of goodwill; (b) the objective determination of the comparative importance of ...
The Impact of Size and Leverage on Equity Volatility
Many valuation practitioners rely on equity volatilities when performing equity allocations, derivative valuations, discounts for lack of marketability, or contingent consideration analyses. Yet in contrast to other commonly accepted valuation adjustments, practitioners still appear hesitant to adjust historical or implied volatilities from publicly traded comparables for differences in size when performing these types of analyses, despite theory that these factors should impact equity volatility. Instead, preference is usually made in the industry to adjust equity ...
Creative Destruction and the Perpetual Growth Assumption
In determining terminal value in a discounted cash flow (DCF) valuation, it is usually assumed that a mature company will grow at a constant rate in perpetuity. The impact of creative destruction and disruptive innovation interrupts and reverses historical growth patterns. If to the extent that the assumption of constant perpetual growth is invalid, the commonly used growth model in DCF analyses will overstate terminal value and cause overvaluations. The perpetual growth concept needs to ...
The Biggest Business Valuation Myth
The traditional capital asset pricing model and buildup method have failed to adequately quantify the required rates of return for equity holders. This paper discusses how profoundly business appraisers, the courts, investors, auditors, and the general public have been misled into thinking that these methods are valid, and suggests a way forward.