BVU News and Trends May 2020
A monthly roundup of key developments of interest to business valuation experts.
Duff & Phelps raises US ERP from 5.0% to 6.0% for 1Q valuation dates
D&P has increased its recommended U.S. equity risk premium (ERP) from 5.0% to 6.0% for use as of 25 March 2020.
D&P increases recommended U.S. ERP to 6.0%
Duff & Phelps has increased its recommended U.S. equity risk premium (ERP) from 5.0% to 6.0% for use as of March 25, 2020, according to a client alert.
BVU News and Trends March 2020
A monthly roundup of key developments of interest to business valuation experts.
Valuation underpinning contested stock sale reflects fair value, Court of Chancery says
In a breach of fiduciary duty action arising out of a controversial stock sale, the Delaware Court of Chancery dismissed the plaintiff’s attacks on the underlying valuation, noting the appraiser was “exceptionally knowledgeable about the industry” and held “informed beliefs” as to the company’s specific structure.
Two new resources for 2020 UK ERP, risk-free rate, and other indicators
Pablo Fernandez, professor of finance at the IESE Business School, is surveying business valuation professionals in the UK to determine what cost of equity assumptions they are using for 2020.
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.
Current BUM and CAPM cost of capital rates now available from BVR’s Cost of Capital Pro
Year-end 2019 data are now available in BVR’s Cost of Capital Professional.
YE2019 data are now in the Cost of Capital Professional
Year-end 2019 data, including risk-free rates, industry risk premia, equity risk premia, and size premia, are now available in BVR’s Cost of Capital Professional platform.
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.
Implied ERP at 5.2% per Damodaran’s data update
Professor Aswath Damodaran (New York University Stern School of Business) has done his annual posting of data updates on his website that include risk-free rates, equity risk premiums, corporate default spreads, corporate tax rates, country risk premiums, and other data.
Coster v. UIP Companies, Inc.
In breach of fiduciary duty action, court says stock sale passes enhanced fairness review; appraiser valuing real estate investment services company before sale is eminently qualified and knowledgeable about industry; capitalized cash flow method “generated a reliable indicator” of company’s value.
Valuation Underlying Controversial Stock Sale Satisfies Highest Scrutiny
In breach of fiduciary duty action, court says stock sale passes enhanced fairness review; appraiser valuing real estate investment services company before sale is eminently qualified and knowledgeable about industry; capitalized cash flow method “generated a reliable indicator” of company’s value.
The most common error in DCF analyses? Following the recipe.
Pablo Fernandez, the professor of finance at IESE Business School, remains one of the most thoughtful observers of business valuation practices.
Pablo Fernandez on common errors using WACC
A new paper presents a real valuation a well-known investment bank performed using two usual methods that are supposed to provide the same value.
New Meta-Analysis Study Reveals Diminished Size Premium
There have been many studies on the size premium but with conflicting results. Now, the first “meta-analysis” of the size premium provides an estimate that is smaller than what many people believe, according to a new paper.
Musings on the Cost of Capital
A veteran appraiser presents an interesting retrospective on the cost of capital and offers some observations on current practice.
BVU News and Trends December 2019
A monthly roundup of key developments of interest to business valuation experts.
Research paper finds the size premium mostly nonexistent
“Investors require no premium to hold small stocks over big stocks in normal times,” says a recently updated paper on the size premium.
BVR and Duff & Phelps Cost of Capital Platforms Go Head-to-Head at VSCPA
Both platforms give similar results when estimating the cost of capital for private firms. They were put through their paces at a recent conference presented by the Virginia Society of CPAs.
D&P lowers its normalized risk-free rate to 3.0%
Duff & Phelps has decreased its U.S. normalized risk-free rate from 3.5% to 3.0% effective 30 September 2019, the firm says in a statement.
BVU News and Trends October 2019
A monthly roundup of key developments of interest to business valuation experts.
D&P lowers its normalized risk-free rate to 3.0%
Duff & Phelps has decreased its U.S. normalized risk-free rate from 3.5% to 3.0% effective Sept. 30, 2019, the firm says in a statement.