Global BV News: New study of inflation and valuation in German firms raises concerns
A new paper finds that company-specific inflation rates assumed for the steady state are lower than the expected general inflation rates.
Adjusting the P&L for a Cannabis Dispensary Valuation
A sample valuation report for a cannabis firm reveals an interesting technique to get inside, and otherwise unavailable, information to help adjust the income statement.
BVU News and Trends April 2023
A monthly roundup of key developments of interest to business valuation experts.
A Model for Forecasting a Multiple-Location, Growing Business
Veteran valuation expert Gary Trugman (Trugman Valuation) had an engagement that involved a business that operated a franchise with multiple locations—and was required to open a lot more. This article shows in detail how he did the forecasting.
Global BV News and Trends March 2023
Business valuation news from a global perspective.
Artificial Intelligence and the Future of Valuation
Artificial Intelligence (AI) and its progeny (such as machine learning [ML] and robotics) are increasingly becoming reality. The AI explosion is underway. Where and when it comes to the neighborhood of Business Valuation is a subject that we as Valuation Analysts should be informed about. In this webinar, Jim Alerding will explore the new frontier of Artificial Intelligence and discuss how it might impact the valuation of a business. Alerding’s s advice is that AI ...
Long-run Growth Rates in Discounted Cash Flow Models
Long-run growth rates play a central role in all discounted cash flow models. This is true whether the goal is to estimate the value of a company or to estimate the cost of equity. It is well recognized as a matter of mathematics—although not always incorporated into practice—that the long-run expected growth rate cannot exceed the growth rate of the aggregate economy. What is less widely appreciated is that as an empirical matter the long-run ...
Adjusting Tech Company Financial Statements When Applying the Value Driver Formula
This article follows the authors' article in Business Valuation Review (November 2020) that explored typical errors when capitalizing cash flows in the terminal period of the Discounted Cash Flow Method. Since investments related to intangible assets are often expensed immediately through the income statement under generally accepted accounting principles, the article demonstrated that without significant adjustment, the value driver formula would likely overstate the net reinvestment into fixed assets and working capital when calculating the ...
Unlocking the Value of ESG: Report from the International Valuation Standard Council
This report provides an overview of the work carried out by the International Valuation Standard Council (IVSC) over the past two years in relation to unlocking the value of environmental, social, and governance (ESG) criteria within the valuation process, including a summary of the recently published IVSC ESG perspectives papers and internally generated intangibles. The report also illustrates some key findings from the IVSC ESG survey for firms, investors, and valuation providers and advises when ...
SEC climate proposal is key topic during KPMG panel
At the recent Global Financial Reporting and Valuation Conference, a panel of KPMG leaders shared their knowledge and insights on the evolving landscape regarding environmental, social, and governance (ESG) factors. During this session, audience members were particularly interested in how the SEC climate proposal can impact private companies.
New Research Strengthens Support for the Three-Stage DCF
Unpublished research from Roger Grabowski and Ashok Abbott reveals data on firm growth over three stages: startup, stabilizing, and long term.
BV News and Trends January 2023
A monthly roundup of key developments of interest to business valuation experts.
Business Valuation Update Yearbook, 2023 Edition
January 2023 PDF, Softcover (426 pages)
BVR (editor)
Business Valuation Resources, LLC
BV News and Trends December 2022
A monthly roundup of key developments of interest to business valuation experts.
Most firms can’t forecast impacts of ESG
A new global survey highlights the difficulty in quantifying the financial impacts of environmental, social, and governance (ESG) factors.
BV News and Trends October 2022
A monthly roundup of key developments of interest to business valuation experts.
Delaware Chancery Court Cites Differences in Cash-Flow Assumptions as Cause for Large Discrepancy in Value
In this appraisal action to determine fair value, petitioner Ramcell Inc. exercised its appraisal rights in asking for a statutory appraisal of the value of its 155 shares of Jackson Cellular Telephone Co. Inc. The respondent, Alltel Corp. (dba Verizon Wireless), had converted the 155 shares at a value of $2,963 per share. “Respondent’s expert opines that Jackson’s per-share value was $5,690.92 at the time of the merger. Petitioner’s expert has offered two appraisal ranges, opining that, at the high end, Jackson’s per-share value was $36,016 on the merger date.” Both parties agreed that the DCF method should be the sole method for determining the value. The Delaware Chancery Court, using that method, determined the fair value of each share at $11,464.57. The court noted that the disparity in the parties’ valuations was due to disagreements as to the inputs to the DCF model and how they should be calculated.
Ramcell, Inc. v. Alltel Corp.
In this appraisal action to determine fair value, petitioner Ramcell Inc. exercised its appraisal rights in asking for a statutory appraisal of the value of its 155 shares of Jackson Cellular Telephone Co. Inc. The respondent, Alltel Corp. (dba Verizon Wireless), had converted the 155 shares at a value of $2,963 per share. “Respondent’s expert opines that Jackson’s per-share value was $5,690.92 at the time of the merger. Petitioner’s expert has offered two appraisal ranges, opining that, at the high end, Jackson’s per-share value was $36,016 on the merger date.” Both parties agreed that the DCF method should be the sole method for determining the value. The Delaware Chancery Court, using that method, determined the fair value of each share at $11,464.57. The court noted that the disparity in the parties’ valuations was due to disagreements as to the inputs to the DCF model and how they should be calculated.
BV News and Trends September 2022
A monthly roundup of key developments of interest to business valuation experts.
‘ESG Ratings: A Compass Without Direction’
That’s the title of a new paper out of the Stanford Graduate School of Business that examines the concerns over the reliability of the various ratings schemes for environmental, social, and governance (ESG) factors.
Let's Get Real About the Dividend Growth Model
The dividend growth model, sometimes called the dividend discount model or discounted cash flow model, is a commonly used tool for estimating the cost of equity capital, particularly in the context of utility rate setting and unitary appraisal. Although the assumption of constant growth in perpetuity is almost never realistic, the constant growth version of the model is still commonly used in practice. However, given modern computing technology, there is no reason not to use ...
BV News and Trends August 2022
A monthly roundup of key developments of interest to business valuation experts.
Put ESG impact in numerator, not denominator
Currently, there is no empirical evidence to support including the impact of environment, social, and governance (ESG) factors in the cost of capital, so it should be reflected in the cash flows.
How Judges Compare Competing DCF Analyses
Two valuation experts are far apart in their opinion of value using the income approach. What does the judge focus on when comparing the two analyses?
Feedback wanted on ‘social value’
The Social Value Working Group at the International Valuation Standards Council has released its second paper in a series that examines whether “social value” can be a basis of value, the difference between social value and the social component of ESG, and whether the existing valuation principle of highest and best use can apply to social assets and social value.