‘The “Normalized” Risk-Free Rate: Fiction or Science Fiction?’
That’s the title of a new paper from Pablo Fernandez, a professor in the department of financial management at the University of Navarra—IESE Business School in Spain.
Valuing Micro and Small Businesses in the Shadows of COVID-19
Valuing micro and small businesses in the shadow of COVID-19 is daunting. COVID-19’s effects on the economy has magnified risk and uncertainty for small business, making the job of valuators more difficult. Join small business broker, attorney, valuation professional, and author Gregory Caruso for a deep dive into problematic areas of actual small-business valuation cases. With a review of how the theory ties into the actual application of methods using best practices and professional judgment ...
Analyst develops a COVID-19 marketability discount
Valuation analysts have several ways to reflect the extra risk of COVID-19 on businesses, such as adjusting the cash forecast and tweaking the company-specific risk premium (CSRP).
Article says the size effect didn’t vanish—it never existed
The hits keep coming to the existence of the size effect.
BVU News and Trends September 2020
A monthly roundup of key developments of interest to business valuation experts.
Global BVU News and Trends September 2020
Business valuation news from a global perspective.
Latest paper in the size-effect debate
Some appraisers believe that the size effect has diminished or disappeared since it was first documented in 1981.
Global BV News: New module added to Duff & Phelps Cost of Capital Navigator
A new international industry benchmarking module will be available in late October for the Duff & Phelps Cost of Capital Navigator.
What do KPMG and BDO have to say about current valuation and forecasting approaches?
COVID-19 dominates a lot of the discussion in the latest edition of KPMG’s 3Q2020 International Valuation Newsletter (IVN), though, as editors Johannes Post and Rolf Langenegger note, it ‘is not the only issue.’ BVWire—UK readers looking for a good summary of the effects the pandemic has had on UK and global markets should turn here, even though the effects on private companies, the LSE, and other markets are now familiar to everyone.
What factors contribute to inconsistent business valuation multiples?
Three professors at the Leipzig Graduate School of Management reviewed 1,149 recent private equity cross-border transactions to determine the consistency of the business valuation metrics.
BVU News and Trends August 2020
A monthly roundup of key developments of interest to business valuation experts.
D&P offers infographic on cost of capital amid COVID-19
Which financial market and economic indicators did Duff & Phelps take into consideration when it arrives at its recommended U.S. equity risk premium and accompanying normalized risk-free rate?
The Market Price of Risk: Quantifying a COVID-19 Equity Risk Premium Using High-Yield Bond Pricing
The authors demonstrate how a high-yield option-adjusted spread is used when doing appraisals of private companies while considering the market volatility and economic slowdown caused by the COVID-19 pandemic.
BVU News and Trends July 2020
A monthly roundup of key developments of interest to business valuation experts.
D&P lowers U.S. normalized risk-free rate to 2.5%
Duff & Phelps has decreased its recommended U.S. normalized risk-free rate from 3.0% to 2.5% for use as of June 30, 2020, according to a client alert.
Using a size premium could trigger Daubert trouble, says new article
Adding a size premium to the cost of equity could make an expert’s testimony subject to a Daubert challenge, says Clifford Ang (Compass Lexicon) in a recent article.
Class-Action Litigation Involving ERISA/ESOP Valuation Issues
Join James F. Joyner and attorney Richard Pearl for unique insight into ESOPs and valuation principles. The general trend in ESOP transactions and valuation has been to acquiesce to fundamental changes because of the threat of litigation, even though ERISA or valuation principles do not require changes. Many defendants have been unable to adequately educate courts on some key issues. Get both the valuation and attorney perspective on how to address these issues.
BVR Briefing – The Real Story of COVID-19 For Valuation and Litigation Experts
September 2020 PDF
Mark Dietrich
Business Valuation Resources, LLC
More concern about the validity of the size premium factor
Most business valuers consider a size premium when calculating cost of capital for financial reporting purposes.
Assessing Additional Economic Risk Due to COVID-19
A template that can serve as a framework of thinking about the impact of the coronavirus on a subject company. The author presents a series of questions that help assess the short- and long-term risks with respect to the subject company’s industry, physical operations, financial issues, and firm management.
Valuing Residential and Commercial Construction Companies
Cash flow seasonality, bid requirements, license particulars, economic forces, and ubiquitous litigation are all hallmarks of the residential and commercial construction industries and all unique factors when appraising a construction company. Join What it’s Worth guide author and expert Pasquale Rafanelli for a full inspection of residential and commercial construction company valuation issues from accounting methods to value drivers. Avoid the common valuation mistakes that appraisers make and learn to answer the one question on ...
The Balance Sheet and its Correlation to Company Specific Risk
The pandemic is teaching us that businesses, small and large, and their balance sheets are important not just from handling a pandemic, but also from sustaining operations. Understanding assets, and which matter, will help analysts determine the specific company risks. Expert Josh Shilts discusses which categories are important in understanding risk and what ratios and other analyses can be used to measure risk. Identifying and linking balance sheet financials to company-specific risk is a critical ...
New business valuation resource from Professor Fernandez captures low market returns
Pablo Fernandez continues to release research that may assist UK business valuers working on reports with valuation dates in Q1 2020.
How to value uncertainty whilst keeping your clients’ confidence
Chris Thorne tells BVWire—UK that ‘most valuer’s Inboxes at the moment are full of comment about the difficulties of undertaking valuations,’ but he’s still receiving requests for advice about ‘providing a suitable warning in their reports that their valuations are subject to material valuation uncertainty.’
AICPA issues FAQs on valuation considerations related to the CARES Act
The latest in a series of very useful material from the AICPA is a document that includes FAQs that address questions about the impact of the CARES Act on business valuation.