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Reliable Valuations for Small and Medium Enterprise: M&A Methods Win

If you have been involved in an M&A transaction and seen how different the M&A model is from the buildup method with public data, have you ever wondered why the M&A model isn’t a key valuation approach or wondered how M&A data differ in character from public market data? In this seminar, Jim Lisi explains why the M&A model with private data is the more reliable approach. The difference between deal data for whole companies ...

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 ...

The Absence of a Size Effect: Letting Go Of The Size Premium

Many valuation practitioners believe that there is a size effect and add a size premium to their CAPM cost of equity. In this talk, Cliff Ang will demonstrate why the underlying premise behind the size effect no longer holds and discuss the academic literature and empirical evidence on the absence of a size effect. He then dives into the related issue, which is why valuation practitioners should let go of the size premium.

Five need-to-know takeaways from the ASA annual conference

BVWire attended the ASA 2020 International Appraisers Conference held online October 12-13, and it was about as close as you could get to the experience of actually being on-site.

Recent Cases from the Delaware Chancery: What Appraisers Need to Know Now

Join Bill Kennedy for a summary of key valuation issues ruled on by the Delaware Chancery and Delaware Supreme Court. Get coverage of recent cases and discover trends seen in the courts. Learn how the courts have treated the different valuation methods in recent cases, as well as factors to consider when applying the methods. No matter where you practice, the takeaways from this session will help valuation professionals deliver a quality, litigation-ready report.

BVU News and Trends August 2019

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

New edition of Valuation and Common Sense by Fernandez

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.

Pablo Fernandez offers Valuation and Common Sense for free

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.

Business Valuation OIV Journal Spring 2019

Business Valuation OIV Journal has been created by Organismo Italiano di Valutazione (OIV), the Italian Valuation Standard Setter, to provide a forum for discussion and to foster cultural progress in the field of business valuation. In this issue, articles include "Company Valuation as Result of Risk Analysis: Replication Approach as an Alternative to the CAPM"; "Residual Income Model and Abnormal Returns: A Comparison to Factor Styles and Sell-Side Analysts"; and "Critical Issues When Valuating Small Businesses".

Business Valuation OIV Journal Fall 2018

Business Valuation OIV Journal has been created by Organismo Italiano di Valutazione (OIV), the Italian Valuation Standard Setter, to provide a forum for discussion and to foster cultural progress in the field of business valuation. In this issue, articles include "Implied Cost of Capital: How to Calculate It and How to Use It"; "Solvency II Framework in Insurance Equity Valuation: Some Critical Issues"; and "Bank Valuation Using Multiples in U.S. and Europe: A Historical Perspective".

Delaware Supreme Court Reproves Chancery’s Use of Unaffected Market Price in Aruba

Delaware Supreme Court overturns Court of Chancery’s fair value determination based on unaffected market price and awards petitioners deal price minus synergies as determined by company; trial court’s analysis rested on “inapt” agency-costs theory and raised due process and fairness concerns.

Verition Partners Master Fund Ltd. v. Aruba Networks, Inc. (Aruba III)

Delaware Supreme Court overturns Court of Chancery’s fair value determination based on unaffected market price and awards petitioners deal price minus synergies as determined by company; trial court’s analysis rested on “inapt” agency-costs theory and raised due process and fairness concerns.

BVU News and Trends February 2019

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

Fernandez on badly explained finance topics

A number of topics relevant to business valuers including CAPM, WACC, betas, ERP, and returns are in the latest paper by Pablo Fernandez (University of Navarra, IESE Business School), "18 Topics Badly Explained by Many Finance Professors."

The Absence of a Size Effect Relevant to the Cost of Equity

In this paper, I evaluate whether there is a size effect that is relevant to the cost of equity. I first analyze what model investors use to determine the required rate of return on their investment and find investors prefer the Capital Asset Pricing Model (CAPM) over other models, even those that include a size proxy. I also show that over the period 1981 to 2016, small stocks underperformed large stocks, which is inconsistent with ...

The Size Effect Continues To Be Relevant When Estimating the Cost of Capital

In this paper, I will review the size effect, potential reasons why one observes the size effect, and correct common misconceptions and address criticisms of the Size Premia (SP). Specifically, we demonstrate that the size premium critique by Cliff Ang is not warranted and that the alternative methodology proposed by that author is misleading and cannot be considered as an alternative to the Duff & Phelps’ SP. Subsequently, we will highlight some methodological issues with ...

BVU News and Trends June 2018

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

Chancery Defends Use of Market Price Citing Recent High Court Rulings

Court of Chancery denies petitioners’ motion for reargument, finding that, in light of high court’s Dell and DFC decisions, the decision to use the unaffected market price as the fair value indicator was not so “ridiculous” or “absurd” as to indicate the Court of Chancery misapprehended the law.

Verition Partners Master Fund Ltd. v. Aruba Networks, Inc.

Court of Chancery denies petitioners’ motion for reargument, finding that, in light of high court’s Dell and DFC decisions, the decision to use the unaffected market price as the fair value indicator was not so “ridiculous” or “absurd” as to indicate the Court of Chancery misapprehended the law.

CFOs surveyed on ERP

In a new paper, John R. Graham and Campbell R. Harvey of Duke University analyze the history of the equity risk premium from surveys of U.S. chief financial officers (CFOs) conducted every quarter from June 2000 to December 2017.

The New Duff & Phelps Cost of Capital Navigator—(Some of) Your Questions Answered!

Responses to audience questions during the first public demo of the Duff & Phelps online Cost of Capital Navigator, which will replace the print versions of the Valuation Handbook series.

Duff & Phelps Moves Cost of Capital Data to Online Platform

Duff & Phelps is launching the online Cost of Capital Navigator, which will replace the print versions of the Valuation Handbook series.

Verition Partners Master Fund Ltd. v. Aruba Networks, Inc.

In statutory appraisal proceeding, Court of Chancery says unaffected market price provides “direct evidence of the collective view of market participants” as to target’s fair value whereas deal-price-minus-synergies is a less reliable “indirect measure.”

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