‘Breaking Bad’ in the Business Valuation Profession
The increasing use of calculation engagements seriously compromises the valuation profession’s historical standards of reliability and independence.
EBITDA Single-Period Income Capitalization for Business Valuation
The focus on the EBITDA of private companies is almost ubiquitous among business appraisers. Join Chris Mercer to learn about the relationship between depreciation (and amortization) and EBIT as one measure of relative capital intensity. This relationship, "the EBITDA Depreciation Factor," is then used to convert debt-free pretax (i.e., EBIT) multiples into corresponding multiples of EBITDA. Mercer presents analysis that illustrates why the pervasive rules of thumb suggest that many private companies were worth 4.0x ...
‘Breaking Bad’ in the BV profession
Just like the character in the hit drama series, some good appraisers are going “bad” by doing calculation engagements—dubbed “valuation meth” by Michael Paschall (Banister Financial Inc.) in a new article.
Read this case before writing your next valuation report
Not long ago, we were at a conference where the speaker asked the audience whether anyone was familiar with the Gallagher case.
Financial Modeling: Enhance Excel by Programming in R
R is a free software and one of the most popular programming languages with broad-based applications in finance. Join Clifford Ang, author of the financial modeling textbook Analyzing Financial Data and Implementing Financial Models Using R and instructor of the equity and bond valuations courses in R at DataCamp, for an introduction to financial modeling in R for those currently using Excel with an aim of helping you recognize how R can complement your Excel ...
Using Jensen’s Alpha to Separate Active and Passive Appreciation
The author presents an alternate approach (Jensen’s alpha) to segregating passive from active increases in the value of a marital asset. An example is presented of an automobile dealer.
Valuation for M&A
Most owners and managers operate their businesses without ever knowing what their company is worth, how much more a strategic buyer would pay to acquire it, what factors affect the company’s equity value, and whether they would be better off selling or exiting in some other fashion. Join Chris Mellen for a discussion of the metrics needed to measure company value, maximize that value, determine their return on investment in their company as part of ...
New edition of book on valuation for M&A
Now in its 3rd edition, Valuation for M&A: Building and Measuring Private Company Value lays out the steps for measuring and managing value creation in non-publicly traded entities.
Data and analytics in the M&A process
The use of data and analytics has taken on a particular importance in M&A and, when used properly, can transform the due diligence process, says a report from KPMG.
Valuing cryptoassets
It’s tricky, and the science is still emerging for valuing cryptoassets, says an article in MIT Technology Review.
Monte Carlo in court
During a recent webinar on the use of Monte Carlo for valuing distressed companies, an audience member asked: “Have the bankruptcy court and other courts accepted the Monte Carlo method?”
Valuations frustrate RIAs
A survey of the nation’s top registered investment advisors (RIAs) by PPB Capital Partners found that firms are encouraged to provide customized alternative investment solutions for high-net-worth clients, but such funds are unwieldy and expensive to operate.
Valuation Considerations for Venture and Early-Stage Companies
There are many challenges to overcome when determining the value of high-risk, early-stage companies. Valuations must consider not only acceptable methodology, but also the present economic and market conditions. This panel discussion features venture capitalist Laura Markley, attorneys Neil Bagchi and Patrick Connelly, along with valuation experts Liza Bowersox and Stuart Neiberg. They'll cover common best practices and guidance on techniques to value early-stage companies. Learn about corporate form, practical, and "real life" impacts of ...
Damodaran bares his FANG
Aswath Damodaran (New York University Stern School of Business) gives his update on the trials, tribulations, and valuations of Facebook, Amazon, Netflix, and Google—referred to as “FANG” by the professor—in his recent blog post.
Monte Carlo in Distressed Company Situations
The high amount of uncertainty when valuing a distressed company requires a professional to move beyond valuations basic tool set. Often, it isn’t even clear that a company can continue with operations, and this uncertainty brings fresh complications to consider. Hone your skills in this session looking at the key considerations when tackling a distressed company engagement. Join Jim Alerding and Matt Bernstein as they discuss how to identify key inputs and how to employ ...
Top five business valuation tips from recent training webinars
As a busy business valuation professional, you may not always have the time to attend training events. We’ve compiled the top five tips from recent BVR webinars on the most timely and important topics in the profession.
Return Models and Mean Reversion
For those with an accounting background, it can be challenging to think like an economist. Join Gary Schurman for a discussion on the transition from discounted cash flow models, which use accounting metrics, to return models, which use economic metrics. Learn the concept mean reversion, which is an economic fact of life and should be accounted for in your valuations. See examples of the mathematics of return models and mean reversion, and go beyond the ...
Book Review: Understanding Business Valuation: A Practical Guide to Valuing Small to Medium Sized Businesses, 5th Edition
A valuation expert reviews the newest version of one of the leading business valuation texts, written by Gary Trugman.
Book Review
A review of, "Understanding Business Valuation: A Practical Guide to Valuing Small to Medium Sized Businesses," 5th ed., written by Gary R. Trugman.
Estimating Terminal Values with Inflation: The Inputs Matter—It Is Not a Formulaic Exercise
Estimation of the terminal value of a business enterprise is a critical aspect of any corporate valuation. In a path-breaking article, Bradley and Jarrell showed that traditional constant growth methods for estimating the terminal value typically failed to deal properly with inflation. The premise underlying the Bradley-Jarrell analysis, namely, that inflation applies to a firm's capital stock in the same manner that it applies to other financial metrics, is straightforward. Unfortunately, the Bradley-Jarrell analysis is ...
The Essentials of CAPM Beta
Betas are misunderstood, misapplied, and, often, feared. A key feature of the CAPM is “beta” that represents an asset’s exposure to market risk. Practitioners using the CAPM or its modified form must determine a beta value to apply the model for cost of capital calculations. Join Dr. Michael Crain and Dr. Bill Kennedy for an exploration of the theory and evidence of CAPM beta, use of beta in valuation practice, and the link between capital ...
Getting Better Probability Estimates From Your Clients: A Practical Approach
Getting clients to provide probability estimates is a part of many valuation engagements but is one of the least rigorous and hardest to document and defend estimates in a valuation. In this program, James Walling will help you to understand the hidden bias in most probability estimates and offer a practical method for getting your clients to get past these biases and provide better estimates. This process will also provide a basis for documenting the ...
New edition of Understanding Business Valuation now available
In addition to revisions to existing material and examples, there’s new material on valuing stock options, preferred stock, debt, and startup ventures.
ASA BVers convene in Houston for the Advanced BV Conference
The conference sessions were an excellent mix of theory and practice—ideas that you can use in your practice right away.
Modeling and Pricing Event Risk
Many private companies are exposed to event risks such as the loss of a major customer. A common practice to account for this risk is to leave expected cash flows unchanged but add a few hundred basis points to the discount rate. Join Gary Schurman to learn how to build a quantitative valuation model that accounts for event risk and is consistent with economic theory. Learn the difference between diffusion and jump-diffusion asset price models ...