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Global BV News and Trends December 2021

Business valuation news from a global perspective.

BV News and Trends December 2021

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

BV News and Trends November 2021

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

Global BV News: Latest issue of OIV Journal available

The spring 2021 issue of the journal of the Organismo Italiano di Valutazione (OIV), the valuation standards-setter in Italy, contains the following articles.

Valuation experts spar over fraudulent transfer matter

In the bankruptcy court, two valuation experts squared off in a case where the trustee argued that a cash transfer by the debtor was a constructively fraudulent transfer under the bankruptcy code.

Warning to Business Valuers Looking to Use New ESG Ratings

A hot topic today is environmental, social, and governance (ESG) factors and how to reflect the impact of these factors in business valuations and financial reporting. Data are starting to emerge to help quantify the impact of ESG—but analysts need to be careful in using these data.

Justifying hockey-stick projections

Valuation experts frequently receive from management what may appear to be an unrealistic forecast that starts off modestly but shoots up in future years as if by magic.

BV News and Trends September 2021

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

Examining the ‘Reasonably Objective Basis’ Concept for Projections

Recent developments have raised the bar with respect to how valuation analysts document financial projections and forecasts with regard to a “reasonably objective basis.” But what exactly is this concept and where can analysts look for specific guidance.

Yaquinto v. Thompson St. Capital Partners (In re Stone Panels, Inc.)

Trustee argued that a cash transfer by debtor was a constructively fraudulent transfer under the bankruptcy code. The Trustee was able to show that the transaction was an interest in property for which debtor did not receive reasonably equivalent value. The Trustee was not able to show that the debtor was insolvent at the date of the transfer or became insolvent as a result of the transfer. The debtor was engaged in a business for which the property remaining was sufficiently capitalized. It appeared that the debtor would have sufficient access to cash to service its obligations and operate its business in a sustainable way. The Trustee failed in its burden of proof.

Property Transfer Was Not Fraudulent Because Debtor Was Not Insolvent

Trustee argued that a cash transfer by debtor was a constructively fraudulent transfer under the bankruptcy code. The Trustee was able to show that the transaction was an interest in property for which debtor did not receive reasonably equivalent value. The Trustee was not able to show that the debtor was insolvent at the date of the transfer or became insolvent as a result of the transfer. The debtor was engaged in a business for which the property remaining was sufficiently capitalized. It appeared that the debtor would have sufficient access to cash to service its obligations and operate its business in a sustainable way. The Trustee failed in its burden of proof.

Damodaran’s strong feelings about ESG

A year ago, Professor Aswath Damodaran (New York University Stern School of Business) called it “the most overhyped, oversold concept in the history of business.”

Valuation of Specialty Pharmacies – Practical Considerations

Do you know the elements to consider when performing a valuation assignment for a specialty pharmacy? Join Jarrod Barraza for a dive into the industry and regulatory backdrop and recent history. Learn about the outlook and market trends with a focus on operational considerations. Discuss the valuation considerations, and hear from Mike Gerling, an expert in the specialty pharmacy industry, who will provide insight as an operator. With a focus on practical considerations when conducting ...

A Practical, Step-by-Step Process for Applying Invested Capital Premiums

For years, the valuation profession has debated the definition of a control premium, including its distinction from an acquisition premium. What began years ago as a relatively simple question—if there is a control premium, what should it be?—now includes analyzing such concepts as invested capital premiums and equity-based premiums, transaction synergies and strategic values, marketability, and levels of control. All are “key points” to keep in mind throughout the quantification of a control premium, say Tim Meinhart and Nate Novak (both of Willamette Management Associates), who led a webinar on this topic titled Evaluating and Applying Control Premiums earlier this year.

Van Vleet comments on use of SEAM in Ryan case

BVWire recently reported on the Ryan Trust v. Ryan case, a buyout dispute in which the Nebraska Supreme Court affirmed the district court’s decision to credit the valuation testimony of the expert for the late majority shareholder.

Defining Terms: Forecasts v. Projections—Why Does It Matter?

One area that can trigger some confusion is the difference between the terms “forecast” and “projection.” Some people use them interchangeably, but these are formal terms found in the literature, so they should be used appropriately.

In buyout dispute, ‘downward bias’ sinks expert’s fair value determination

In a bitter buyout dispute involving a successful private family business and featuring two veteran appraisers, the Nebraska Supreme Court recently affirmed the district court’s decision to unreservedly credit the valuation testimony of the expert for the late majority shareholder.

Business Combinations and Fair Value for Financial Reporting

Are you confused by business combinations? Join William Kennedy for this engaging session covering GAAP fair value standards and their application in business combinations. Hear a discussion of the nuances of the GAAP fair value standard and history of how it was developed as part of the GAAP-IFRS convergence project. Also learn how the valuation approaches and methods used in fair value assessment differ from valuation approaches used in a fair market value appraisal.

BVR Briefing - Control Premiums: A Deep Dive into the New Data on Invested Capital Premiums

June 2021 PDF

BVR (editor)

Business Valuation Resources, LLC

This briefing, based on a recent webinar with valuation experts Timothy J. Meinhart and Nate Novak (Willamette Management Associates) puts current and best thinking into one reference. It is all you need to ensure alignment with Control Premium thought leadership. The Briefing also covers the recently improved FactSet Mergerstat/BVR Control Premium Study, historically the most reliable, comprehensive transactional database, which now provides an invested capital premium as well as the corresponding implied minority discount. Learn more >>

Comparing Growth Rates Used in Discounted Cash Flow Valuations

Estimating growth in net cash flows is one of the key components in applying the discounted cash flow (DCF) method in valuing any company, reporting unit, or other business unit. This paper explains the underlying assumptions of the DCF method and demonstrates how to compare the most commonly used basis for estimating net cash flows (sometimes referred to as free cash flows), expected organic growth, to historic estimates of growth of the subject company and ...

Is It Time to Terminate the Traditional Terminal Value?

All corporate valuation models rely on very long forecasts of free cash flows. The only question is whether those forecasts are accounted for explicitly by using an extended valuation model or implicitly in an estimate of the terminal value after an explicit short-term forecast period of five to ten years. Given current computing technology, there are good reasons to use projections running out multiple decades. Doing so gives a clearer picture of the long-run issues ...

Recent Developments in Delaware Valuation Cases

This article discusses current developments in Delaware case law as they relate to valuation. It reviews all relevant Delaware Supreme Court decisions since 2017 and all relevant Court of Chancery decisions since 2019. We discuss the emphasis being placed by the Delaware courts on using discounted cash flow for valuations in related party transactions, as well as the substantial reliance on transaction price as the valuation measure in arm's-length transactions that have a satisfactory negotiation ...

BV News and Trends May 2021

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

Court of Chancery adopts deal price, adjusting for synergies and tax savings

In a statutory appraisal action, the Delaware Court of Chancery recently adopted the deal price minus synergies as the best indicator of fair value.

Illiquidity Discounts for Restricted Equity Securities with Random or Indefinite Liquidity Horizons

Illiquidity discounts depend on the length of the trading restriction period. Existing theoretical restricted stock discount models are adapted to situations in which the trading restriction period has a well-defined fixed length. In many scenarios, the private equity investor faces a liquidity horizon that may be random or indefinite rather than of known fixed length. Stillian Ghaidarov will review a simple and robust methodology that allows us to extend the use of restricted stock discount ...

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