Adjusting WACC for ESG: ±100 basis points proposed
When assessing environmental, social, and governance (ESG) factors on valuation, unless there is an impact to cash flow, risk, or growth, ESG has no effect on business value.
Chancery Court Determines Value of Shares by Applying Average of GPCM and DCF Methodologies
In a long and complex opinion, the Delaware Court of Chancery determined the value per share of stock in a former stockholder’s appraisal action. The per-share value was reached by ascribing equal weight to adjusted versions of the comparable companies analysis (GPCM) the stockholder advanced and the discounted cash flow analysis the company advanced. The other methodologies were rejected. The use of the GPCM represented the first use of that method in some years.
HBK Master Fund L.P. v. Pivotal Software, Inc.
In a long and complex opinion, the Delaware Court of Chancery determined the value per share of stock in a former stockholder’s appraisal action. The per-share value was reached by ascribing equal weight to adjusted versions of the comparable companies analysis (GPCM) the stockholder advanced and the discounted cash flow analysis the company advanced. The other methodologies were rejected. The use of the GPCM represented the first use of that method in some years.
New book on ESG and BV
Valuation and Sustainability—A Guide to Include Environmental, Social, and Governance Data in Business Valuation is a new book edited by Dejan Glavas (ESSCA, School of Management, Boulogne-Billancourt, France), who also wrote several chapters.
Global BVU News and Trends July 2023
Business valuation news from a global perspective.
Valuers Run the Risk of Mismatching Inflation Assumptions
During a presentation in the United Kingdom, Nick Forrest (UK Economics Leader for PwC) made some observations that should resonate with business valuers worldwide. In the UK, the Bank of England established its target inflation rate of 2%, but inflation varies hugely from this target, even during noninflationary periods, depending on which factor an analyst uses.
Damodaran Continues His Explosive Remarks About ESG
At the ASA Spring Fair Value Conference in New York City on May 4, we did not expect to hear any glowing words about the environmental, social, and governance (ESG) movement from Professor Aswath Damodaran (New York University Stern School of Business). In his blog, he has been very vocal in his strong criticisms of ESG as a “weapon of mass distraction” and a “gravy train” for consultants, investment managers, scoring/ratings providers, and those pushing for more disclosures.
Global BV News: New edition of Valuation and Common Sense by Fernandez
The eighth edition of Valuation and Common Sense by Professor Pablo Fernandez (IESE Business School, University of Navarra) is now available—and it’s free if you click here.
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 ...
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.