BV News and Trends April 2024
A monthly roundup of key developments of interest to business valuation experts.
More from Hitchner’s BV Myth Busters
They’re up to Myth No. 12, which is, “to value a minority interest in a private business, you must first value it on a 100% control basis.”
Review of Surveys on Cost of Capital Data Sources and Inputs
The Kroll Cost of Capital Navigator continues to be widely used and accepted for estimating cost of equity (COE). But BVR’s Cost of Capital Professional has been gaining considerable steam since its launch in 2018, according to a BVR survey. Some other resources for estimating the cost of capital have also seen an uptick in usage.
BV News and Trends March 2024
A monthly roundup of key developments of interest to business valuation experts.
Kroll-recommended ERP remains at 5.5%—for now
The latest cost of capital infographic from Kroll has the firm’s recommended U.S. equity risk premium reaffirmed at 5.5% when developing USD-denominated discount rates.
Lower ERP likely for 2024, predicts Kroll
One of the “pivotal” trends for 2024 is a likely drop in the equity risk premium (ERP), predicts Kroll in its list of “10 Trends Shaping 2024.”
Damodaran posts his second data update for 2024
Focusing on the equity markets in the U.S. and across the world, Professor Aswath Damodaran (New York University Stern School of Business) has posted his second data update of 2024.
Damodaran posts his first data update for 2024
At the beginning of each year, Professor Aswath Damodaran (New York University Stern School of Business) generously posts a great amount of data on his website that include risk-free rates, equity risk premiums (ERPs), corporate default spreads, corporate tax rates, country risk premiums, and other data—all of which are free.
Kroll conducts survey of cost of capital inputs
In the last issue, we presented results of several surveys on the various resources practitioners use for estimating cost of capital.
Update on Current Inputs for Valuations Amid High Inflation
Carla Nunes and Jim Harrington, both with Kroll, present two very helpful charts on long-term inflation expectations and projections for long-term real GDP growth. The charts include the sources for developing the estimates.
Update on guidance regarding the company-specific risk premium
Expect to see an exposure draft of guidance on the company-specific risk premium during the first half of 2024, reported Christopher Armstrong (KPMG), at the winter edition of the ASA’s Fair Value Conference last week.
BV 2023, Year in Review: Top 10 List
The year 2023 was full of change. How have high interest rates and market volatility impacted the cost of capital and minority discounts? What were some of the top cases impacting business valuation? What does the new lease accounting standard mean for valuations? What has changed in tax regulation? In this webinar, we highlight 10 major topics that impacted business valuation in 2023 and discuss implications to valuators in the upcoming year.
BV News and Trends November 2023
A monthly roundup of key developments of interest to business valuation experts.
Global BVU News and Trends November 2023
Business valuation news from a global perspective.
Practical Considerations in Normalizing the Risk-Free Rate
Some valuation firms and practitioners have advocated that the risk-free rate of return (Rf) should be normalized when it is believed to be too low because of Federal Reserve Bank policies. Recent arguments for doing so have been based on technical economic analyses but have ignored practical aspects of normalizing Rf. This article is intended to address those practical considerations.
BVResearch Pro adds to its archive of the ASA’s BV Review
Among many other resources, the BVResearch Pro platform contains the full archive of the Business Valuation Review going back to 1982.
Implied Control Premiums Through Delaware Appraisal Decisions
The valuation industry has utilized the concepts of control premiums and corresponding discounts for lack of control (DLOC) for decades. There has been considerable debate regarding the application of control premiums paid to acquire public companies, given the likely existence of synergies embedded within those premiums. This article analyzes implied control premiums using Delaware Court of Chancery (the “Court”) decisions in which the Court determined the fair value of the shares of formerly public companies.
BV News and Trends August 2023
A monthly roundup of key developments of interest to business valuation experts.
Global BVU News and Trends August 2023
Business valuation news from a global perspective.
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.
BV News and Trends June 2023
A monthly roundup of key developments of interest to business valuation experts.
Kroll lowers recommended ERP to 5.5%
Kroll has decreased its recommended U.S. equity risk premium (ERP) from 6.0% to 5.5% when developing USD-denominated discount rates as of June 8, 2023.
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.
Understanding Control vs. Lack of Control and Applicable Discounts
Please join us for a refresher course on premiums and discounts related to control (or lack of it). Topics covered will include: when discounts for lack of control apply, elements of control, levels of control, what to look for in governing documents regarding the rights of non-controlling owners, developing a non-controlling value directly versus indirectly, control premiums and various sources for premiums and discounts for both operating companies and holding companies, such as Mergerstat, Partnership ...