Do UK business valuators struggle to explain themselves? Perhaps it’s because of ‘18 topics badly explained by many finance professors’
The confusion resulting from many finance practices isn’t your fault, says Pablo Fernandez (professor of finance, IESE Business School in Madrid) in a new and highly readable essay.
The 2019 edition of Valuation and Common Sense by Professor Pablo Fernandez (IESE Business School, University of Navarra) is now available—and it’s gratis.
One of the benefits of attending BV conferences in person is that you can also pick up some interesting things outside the formal sessions, such as during networking events, in the exhibit hall, or in the local watering hole after a long day.
Valuation and Common Sense (2019, 7th edition) ‘explains the nuances of different valuation methods and provides the reader with the tools for analyzing and valuing any business,’ Pablo Fernandez, professor of finance, IESE Business School, tells BVWire—UK.
The International Private Equity and Venture Capital Valuation (IPEV) Board’s current update reflects valuation guidance from IFRS 13, ASC Topic 820 (US GAAP), and other inputs and is available here.
In my last Perspective (November 2018), I touched on the importance of why using the “right” level of profit was important when comparing valuations of one’s firm to others on an earnings multiple basis (e.g., 4.2x EBITDA, 3.9x EBIT, etc.). Although there are various levels of profit that firms rely on for quick pricing indications, I focused solely on EBIT (earnings before interest and tax) and EBITDA (earnings before interest, tax, depreciation & amortization) for the sake of simplicity.
It’s not uncommon that business valuation analysts need to consider the contingent value and costs of earnouts paid to the management of acquired companies.
The authors discuss new rules in the transfer pricing landscape and a trend toward carving out the financial and economic study from the functional analysis.
Amid the ongoing debate over the use of calculation reports (see prior coverage), the author of the original article that sparked the discussion made an intriguing point.
In commemoration of the 50th anniversary of Willamette Management Associates, the firm has put out a special edition of its Insights publication.
A response to a rebuttal of the author’s previous article which strongly criticizes the use of calculation engagements.
Private Market Equity Prices and Transactions Costs: Generalized IPCPL Theory and Private Market Empirical Tests
Implied private company pricing line (IPCPL) theory is based on the fundamental assumption—taken from modern asset pricing theory—that two or more equity interests that have the same risk exposures and risk sensitivities must have the same expected rates of return. IPCPL theory, however, includes the additional assumption that transaction costs generally differ across equity interests and markets, and such differences influence expected rates of return. This study generalizes IPCPL theory to explain and predict the ...
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 ...
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 ...
A response to the recent controversy over the use of calculation engagements.
In last week’s issue of BVWire, we included some comments from readers about two articles (see “Calculation Report Controversy” link) we posted, one of which urges valuation experts to stay away from calculation engagements and a rebuttal article that disagrees with some of the points made.
Discover the four absolute rules of business valuation and hear the perspective of a veteran valuer on the current state and future of the valuation profession.
Are calculation engagements a good thing or bad thing for the valuation profession?
In a recent article by Robert Reilly and Casey Karlsen of Willamette Management Associates, a number of sources were mentioned for identifying arm’s-length intellectual property royalty rate data.
Some valuation experts are of the opinion that calculation engagements are not a good thing for the profession.
A formula that explicitly incorporates the assumed probability of renewal in the valuation of businesses that depend on contracts, licenses, or permits for their future cash flows; it builds on the Gordon growth model and the formula for the future value of a growing annuity.
When valuing a business that depends on contracts, licenses, or permits for its future cash flows, how do you take into account the risk of nonrenewal?
Learn how tax reform has impacted the world of business valuation and how to navigate key issues facing business appraisers, including how to adjust pre-Tax Act valuation multiples for post-Tax Act business valuations.
© 2018 Business Valuation Resources, LLC. All Rights Reserved. August 15, 2018 Webinar Handbook Due Diligence and Valuation in M&A: Conventional and Transformational Transactions Featuring: Paul Daddio (Baker Tilly) Ken Fleming (Baker Tilly) Due Diligence and Valuation in M&A: Conventional and Transformational Transactions Please note: This Handbook does not qualify for self study CPE credits. Copyright © 2018 Business Valuation Resources, LLC (BVR). All rights reserved. The materials contained herein represent the opinions of ...
The Business Valuation Committee of the American Society of Appraisers (ASA) has released its fifth business valuation Special Topics-Technical Paper: “Consideration of Stock-Based Compensation in the Valuation Process.”