Valuing Customer Relationships: The Do's and Don'ts of the Distributor Method
While the relief from royalty method and multiperiod excess earnings method are effective tools for valuing intangible assets such as customer relationships, they rely on market data that can be both highly subjective and of poor comparable value to the subject company. As an alternative, the distributor method provides appraisers with a market-based proxy for use in valuing customer relationships. Join experts Edward Hamilton and Sean Woodward to explore the strengths and weaknesses of customer ...
Valuation Adjustments & Potential Forensic Implications in Litigation
In a contentious divorce, shareholder dispute, damages matter, or other litigated corporate matter involving the valuation of a closely held business, the issues can be multifaceted and may require additional forensic investigative scrutiny. As such, it is important to consider the potential forensic implications of valuation adjustments as they may lead to other analyses. Join Karolina Calhoun for an examination of what adjustments you may need to consider and what to watch for in different ...
Brush up on your Excel skills for BV
There is a live online valuation class coming up that includes a good dose of Excel training for valuers of all skill levels.
What corporation tax rate should you use in your business valuations now?
The Finance Act 2016 set corporation tax for 2020-21 at 17%, but the Conservative party intends to increase the rate to 19% (and maintain that rate for the rest of the new Parliament).
What Black-Scholes-Merton modelling inputs should be considered when valuing early-stage enterprises for financial reporting
Option price models help analysts project values, particularly when assets have little history or highly volatile future outcomes.
Valuers and Bankers: Benefits of Cross-Training Between the Professions
When underwriting loans bankers appraise business assets from a different angle than valuation experts. These differences should be identified and utilized as a learning tool to provide a deeper understanding of the data used for the benefit of both professions.
Discover the magical functions of Excel for BV
Spreadsheets can be a valuation analyst’s best friend, or a worst enemy, according to Shawn Hyde (Canyon Valuations), a valuation practitioner and Excel enthusiast.
Applications of the Asset-based Approach to Value Operating Businesses
In this presentation with Robert Reilly and Weston Kirk they describe —and illustrate —the practical procedures related to the generally accepted asset-based approach to business valuation. First, explore the client situations in which the analyst should consider applying the asset-based approach. Second, review the generally accepted business valuation methods within the asset-based approach, including the asset accumulation method (AA method) and the adjusted net asset value method (ANAV method). Third, review the procedures for valuing ...
Valuing a Financial Advisor’s Book of Business
A court may not immediately recognize the value of a financial advisor’s collection of client relationships. The author illustrates this based on a case in which he was one of the testifying experts and also discusses various perspectives on the valuation.
A Masterclass in the Valuation of Family Limited Partnerships and LLCs (A BVR Web Workshop)
As professional appraisal methodology has advanced, so has the valuation of family limited partnerships (FLPs) and limited liability companies (LLCs). Adopting an analytical method for valuing FLPs and LLCs using the income and market approaches allows appraisers to more accurately and objectively determine a value that can withstand the scrutiny of IRS challenges. Experts Bruce Johnson, Jim Park, and Spencer Jefferies conduct case studies to teach the best practices for valuing noncontrolling, nonmarketable FLP and ...
Spend more time on the numerator, expert panel advises
Attendees at a recent online workshop were urged to spend more time on the numerator (forecasts) of the valuation equation rather than the denominator (cost of capital).
Tales From the Trenches: How to Successfully Use Statistics—Without Being a Data Guru
Mark Twain said there are “lies, damned lies and statistics.” Some valuation experts may be uncomfortable using statistics in an engagement. But you don’t have to be a statistics guru to successfully use them when the engagement calls for it. For instance, many damages litigations include the use of regression analyses and/or statistical sampling. Both are statistical methods of determining the amount of damages in a dispute.
A simple look at betas—and other inputs to the income approach
When estimating a company’s cost of equity, we all know investors adjust for varying levels of risk.
Case Study: How an expert business appraiser used DealStats to value a popular Italian restaurant in California
BVR’s most recent case study explains how a valuation professional used DealStats to help determine the value of an Italian restaurant and how the platform provided the real-world data necessary to arrive at a reliable value conclusion.
Private debt is now available for smaller UK companies ‘overlooked’ by clearing banks, BDO says
Steve Carr, corporate finance director for debt advisory of BDO London, commented in a client communication last month that BDO has ‘witnessed lots of instances where debt funds have provided solutions that clearing banks have been unable to match (albeit this comes at a price).’
Factoring Workforce Engagement Into a Business Valuation
Someday, a “workforce engagement adjustment” will be made to the calculation of the value of an assembled workforce, say a panel of speakers during a BVR webinar. In the meantime, all valuation experts should be taking this factor into account for any business valuation when assessing specific company risk.
How to address cyber risk in a business valuation
According to Inc. Magazine, 60% of successful cyberattacks force the target business to close.
Two new resources discuss the impact of business valuation for ‘complex’ financial instruments
In collaboration with RICS and IVSC, the iiBV have released their Valuing Financial Instruments video webinar earlier this month.
Deriving the Black Scholes Option Pricing Equation
In the valuation profession, the Black-Scholes option pricing model (BSOPM) is one of the most often used, yet least understood, valuation models. In this session, Gary Schurman will derive the BSOPM equation in an intuitive, albeit unconventional, way. Gain confidence in finding and eliminating arbitrage, understanding risk-neutral probabilities, and working in continuous or discrete time. Attend for advanced and technical training on one of valuation’s most popular models.
Workforce engagement and valuation
Someday, a “workforce engagement adjustment” will be made to the calculation of the value of an assembled workforce, say experts in an article in the October 2019 issue of Business Valuation Update.
Tales From the Trenches: How to Successfully Use Statistics—Without Being a Data Guru
Even though you may not be a statistics expert, you can effectively use statistical sampling and regression when the engagement calls for it. Here are some “in the trenches” examples that demonstrate that.
Avoid this inconsistency with the terminal value
Terminal value calculations use a perpetuity model that, when using Gordon growth, assumes cash flows occur at the end of each year.
Determining the FMV of Small Privately Held Promissory Notes
The appraisal of promissory notes is an area of business valuation that has not received much attention from academic journals. Appraisers are taught to use corporate bonds as comparable investments, but they are much too large and marketable to be used as a proxy for most privately held promissory notes. This article introduces the concept of using Business Development Company (BDC) rates to value small promissory notes.
A few recent research papers of note
These papers can be found at the Social Science Research Network.
Finding Comps in DealStats: Examples and Best Practices (A Free Webinar)
The market approach is required in most valuations, but taking hours to find comps? That’s optional. Join Adam Manson, Mitchell Cameron, and Oday Merhi, the team behind the world’s largest private-transaction database, for a review of 10 time-saving functions within DealStats. With five search scenarios, you will get firsthand lessons on how to maximize your DealStats experience. Be sure to get your questions answered in this free training session!