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Global BV News and Trends June 2021

Business valuation news from a global perspective.

BVU News and Trends April 2021

A monthly roundup of key developments of interest to business valuation experts.

Valuing Enterprise Cash Flows

The integrated theory of business valuation provides a conceptual framework for disciplined analysis of valuation questions. Too often, valuation analysts are tempted to view individual components of a valuation assignment on a piecemeal basis. Adhering to the integrated theory helps valuation analysts develop base valuation conclusions, discounts, and premiums that are rooted in a shared perspective of the subject company and the subject ownership interest. In Part 1 of the series, Chris Mercer and Travis ...

New paper on IBOR reform and valuation

For many years, interbank-offered rates (IBORs) have set the benchmark rate for lending on an unsecured basis.

The Size Effect: Should We Care?

I read the entire edition of Business Valuation Review (Volume 37, Issue 3, Fall 2018) focused on ‘‘the size effect.’’ I have the following ‘‘big picture’’ comments after considering all four articles together and title my letter: The Size Effect: Should We Care?

Total Beta—Where Does It Fit in Valuation Theory

The valuation of any company by the discounted cash flow method is divided into two different tasks: forecasting cash flows and discounting these same cash flows using the appropriate discount rate. The latter requires a good understanding of the risks faced by the subject company's cash flows to be able to determine the appropriate risk premia to compensate a typical willing buyer and satisfy a typical willing seller. There is a high level of ambiguity ...

Side Effect of COVID-19: Beta Changes Impacting Business Valuations

The COVID-19 pandemic is causing betas and other measures of risk commonly used in company valuations to appear to have changed. Beta is a critical component used by valuation experts when determining the discount rate in business valuation. Even small changes in betas can cause large changes in the discount rate and, consequently, can cause large changes in valuation. In this panel discussion, Dr. Roper and Cliff Ang, CFA, will describe how the COVID-19 pandemic ...

Cost of Equity and COVID-19: What to Do? (Update)

Using a forward-looking approach, implied volatilities, and total beta to determine an appropriate cost of equity to supplement one’s analysis during today’s unprecedented times.

Cost of Equity and COVID-19: What to Do?

A forward-looking approach, implied volatilities, and total beta are used to determine an appropriate cost of equity during “unprecedented” times such as we have now to supplement one’s analysis.

Delaware Court of Chancery says no to expert’s novel approach to beta calculation

In an appraisal proceeding in which the Delaware Court of Chancery favored the discounted cash flow analysis as the means with which to determine fair value, the court had sharp words for the company expert’s decision to introduce a new way for calculating equity beta.

Untested beta calculation KOs expert’s credibility and fair value conclusion

In a statutory appraisal case with several twists, the Delaware Court of Chancery recently agreed with the parties’ experts that a discounted cash flow analysis was the only way to determine fair value while rejecting, unequivocally, the company expert’s novel approach to calculating beta.

BVU News and Trends January 2020

A monthly roundup of key developments of interest to business valuation experts.

Manichaean Capital, LLC v. SourceHOV Holdings, Inc.

In appraisal proceeding, Court of Chancery adopts petitioner expert’s DCF-based model for calculating fair value, making slight adjustment to expert’s size premium; on beta calculation, court finds respondent expert’s novel approach “does not survive judicial scrutiny” and raises Daubert issues.

Novel Beta Method Occasions Rebuke From Court of Chancery in Appraisal Case

In appraisal proceeding, Court of Chancery adopts petitioner expert’s DCF-based model for calculating fair value, making slight adjustment to expert’s size premium; on beta calculation, court finds respondent expert’s novel approach “does not survive judicial scrutiny” and raises Daubert issues.

BVU News and Trends December 2019

A monthly roundup of key developments of interest to business valuation experts.

KPMG Germany offers updated cost of capital study—and database of IFRS impairment test WACC results

KPMG Germany collected WACC results from 312 companies in Germany, Austria, and Switzerland for its 14th edition of the ‘Cost of Capital Study,’ concluding that the average WACC across industries remains at 6.9%.

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).

Global BV News: KPMG Germany releases 2019 cost of capital study

Subtitled “The Calm Before the Storm—Rising Profits and Deflated Values?” the 14th edition of the Cost of Capital Study from KPMG Germany examines, among other things, the impact of regulatory interventions, scarcity of resources as well as digitalization on business models, their performance (cash flows) and their risk (cost of capital) by industry sector.

Back to the Future? Exploding the Income Approach

Seeing the future? Compensating for excessive compensation? The feared levering and unlevering! What to do? Well don’t discount the advice of this expert panel as they work their way through the income approach from top to bottom. Join Bethany Hearn, Brenda Clarke, Kevin Yeanoplos, and Bob Dohmeyer in this entertaining and engaging web workshop. Half this event will focus on the numerator with a curated selection of hot issues such as forecasting, free cash flow ...

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.

Details of the CUT method used in the Amazon case

Last week’s BVWire covered the 9th Circuit decision in the Amazon case that affirmed the U.S. Tax Court’s 2017 decision in favor of the company in a transfer pricing case.

Tax Court’s Amazon valuation ruling stands up to 9th Circuit scrutiny

The 9th Circuit recently affirmed the U.S. Tax Court’s 2017 decision in favor of Amazon in this key transfer pricing case, finding the governing regulations limited the definition of “intangible” to independently transferrable assets.

BVU News and Trends August 2019

monthly roundup of key developments of interest to business valuation experts.

9th Circuit Upholds Tax Court’s Valuation of Intangibles in Big Transfer Pricing Case

Appeals court affirms Tax Court ruling favoring taxpayer’s CUT method over IRS’ DCF to value various intangible assets transferred to European subsidiary; governing regulations limit definition of “intangible” to independently transferrable assets, excluding residual business assets, court says.

Amazon.com, Inc. v. Commissioner (II)

Appeals court affirms Tax Court ruling favoring taxpayer’s CUT method over IRS’ DCF to value various intangible assets transferred to European subsidiary; governing regulations limit definition of “intangible” to independently transferrable assets, excluding residual business assets, court says.

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