Business Valuation Update
- How to Review a Report’s Valuation Methodology
- Ideas for Solving Two Problems in the BV Profession
- How Do Your Firm’s Benefits Stack Up?
- Using Rule of Thumb Data to Uncover Cooked Books
Chancery Bases Fair Value Calculation on Income-Based Model
Flawed sales process makes merger price an unreliable indicator of fair value for statutory appraisal, Chancery finds; in accord with party experts, court uses discounted net income approach and adopts most of respondent expert’s inputs for its valuation.
Persuasive’ Defense Expert Testimony Defeats ESOP Overpayment Claims
Court says defense expert opinion provides “credible and persuasive” support for court’s conclusion that ESOP financial advisor produced sound fairness and valuation opinions prior to contested transaction; there was no overpayment for stock at issue.
Court Dismisses S Corp Tax Argument in Fair Value Buyout
In statutory fair value proceeding, court adopts income-based approach reconciling key differences in expert analyses regarding historical earnings period, tax rates, and normalization for intercompany transactions; court rejects market analysis.
Seven Models for Estimating the Cost of Equity in a Global Setting: The Pros and Cons
What is a good method for developing the equity component of international cost of capital using the capital asset pricing model (CAPM)? Jim Harrington, director at Duff & Phelps (U.S.) and co-author of the 2015 International Valuation Handbook – Guide to Cost of Capital, explains that you can use a number of models to estimate the cost of equity capital in a global environment, but there is no consensus among academics and practitioners as to the “best” model to use.
Expanding the Cost of Capital Horizon Beyond CAPM
We will see many advances in estimating the cost of capital in future years, as it is still relatively unknown how risk is priced. That was one of the messages of two sessions on cost of capital at a recent valuation conference. In addition, insights were offered on such topics as normalising the risk-free rate, the ERP, the size premium, and liquidity.
What to Do About Applying Size Premia in Australia
The size premium is an important valuation issue for two reasons: (1) it is difficult to estimate; and (2) its inclusion in deriving a cost of capital can have a material effect on the outcome of a valuation assignment. This article provides an overview of the current status of the size effect and size premia in Australia, examples of cases from Australian courts and tribunals in which size premia have been considered, and the issues and challenges faced in estimating size premia within the Australian market.
Asset Impairments: Issues, Challenges, and Guidance
As reporting season nears, companies will be required to assess the value of their assets held on the balance sheet and potentially record impairments against such assets. This can occur for a number of reasons but is typically due to adverse market conditions or a change in the market’s perception of a particular industry. Businesses continue to face difficulty identifying whether these changes mean that an impairment should be recognised and how to appropriately test for such impairments. Whilst Australian Accounting Standards Board (AASB) 136 sets out the indicators to consider when assessing whether an asset may be impaired, with the aim of ensuring that a company’s assets are carried at no more than their recoverable amount, the actual application is more problematic.
Why Valuation Experts Should Not Use the Term ‘Nonmarketable’
For the past two years, our firm has not used the term “nonmarketable” as a descriptive for a conclusion of value. We feel it is completely inappropriate to use a negative term when informing clients of the value of their controlling or minority interest. Rather, we use more positive terms that are part of a new paradigm of describing levels of value.
The Specific Risk Dilemma—Is It in the Eye of the Beholder?
How do you quantify company-specific risk in a discounted cash flow valuation? More specifically, how do you reflect the risk of anticipated new legislation or the possibility of delay in a new company project? In our experience, it is an important valuation consideration and is often something that a valuer has considerable difficulty in applying his or her judgement to assess.
Burkert on Advanced Business Valuation Report Issues: What Does Your Report Roadmap Look Like?
I recently reviewed a valuation report for an experienced appraiser. The body of the report started off with an introduction that focused on the engagement (premise of value, standard of value, type of report, etc.) and included a three-line reveal about ...
Delaware Chancery Court reaches huge fair value conclusion - Standard of review is “entire fairness”
A recent decision of the Delaware Chancery Court placed an amazing fair value of $38.05 per share on the stock of Emerging Communications, Inc. (ECM), which was acquired in a two-step going ...
Grabowski to Appraisers: Read More than Just the Back Page of Ibbotsons
In this exclusive interview, Roger Grabowski, ASA (Duff & Phelps, Chicago) discusses the recent Risk Premium Report (RPR) update, its strengths as well as its weaknesses, and plans for future expansion.
Cost of Capital Options Increase As ERPs Remain Stable
There no longer seems to be any debate about which study of U.S. historic capital markets is “definitive.” Now that 2007 updates are available to both Morningstar/Ibbotson’s Stock, Bonds, Bills, Inflation® (SBBI) Valuation Edition Yearbook and Duff ...
Valuing Assets Held by Private Equity Funds— New Guidance from PEIGG
In September 2006 the Financial Accounting Standards Board (FASB) released Statement of Financial Accounting Standards No. 157 Fair Value Measurements. While the FASB fair value standard is applicable to all areas where fair value is used in Generally Ac ...
Conference Report: IP Value Is at the Center of Transfer Pricing Tax Planning
"IP is the central and residual claimant to profits," began Wes Cornell (Ceteris) in his presentation at BVR's IP Valuation Summit on September 15. "Companies are aggressively moving IP and their profit and income streams to low-tax jurisdictions as a ke ...
Panel challenges traditional levels of value chart at the 20th Advanced Business Valuation Conference
The 20th annual American Society of Appraisers (ASA) Advanced Business Valuation Conference was a huge success, despite attendance of only about 325 compared to pre-Sept. 11 projections of 450 attende ...
The New Duff & Phelps Risk Premium Calculator
The new Duff & Phelps Risk Premium Calculator™ is available the first week in March with the newly updated 2011 Duff and Phelps Risk Premium Report. Designed by Roger Grabowski and James Harrington, the Calculator is a web-based application into which use ...
Duff & Phelps Decreases U.S. ERP Recommendation to 5.5% as of January 15
Duff & Phelps regularly reviews fluctuations in global economic and financial conditions that warrant periodic reassessments of the equity risk premium (ERP). Based upon current market conditions, Duff & Phelps is decreasing its U.S. ERP recommendation to ...
An In-Depth Review of the Duff & Phelps Risk Premium Calculator
The Duff & Phelps Risk Premium Calculator is an online tool used to calculate the cost of equity capital. The Calculator allows valuation professionals to enter inputs relevant to the specific valuation date and to the subject company being valued and yie ...
Duff & Phelps Moves Cost of Capital Data to Online Platform
Duff & Phelps is launching the online Cost of Capital Navigator, which will replace the print versions of the Valuation Handbook series.
The New Duff & Phelps Cost of Capital Navigator—(Some of) Your Questions Answered!
Responses to audience questions during the first public demo of the Duff & Phelps online Cost of Capital Navigator, which will replace the print versions of the Valuation Handbook series.
Applying Duff & Phelps to The Very Small Company
For most of us, valuing the small business is what we find ourselves doing most often. Sometimes it is difficult to make sense of applying public market data to our “mom & pop” pizzerias or construction companies. Consider the average market capitalizat ...
Book Review: Understanding Business Valuation: A Practical Guide to Valuing Small and Medium Sized Businesses, Third Edition
Need a great resource on any and all things BV? The newly released third edition of Understanding Business Valuation: A Practical Guide to Valuing Small and Medium Sized Businesses, by Gary Trugman occupies a prime spot in my office reference library.
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.
Global BVU News and Trends June 2018
Business valuation news from a global perspective.