Management Involvement in Purchase Price
Allocations
It is common for companies to bring in a third-party valuation
expert to value the intangible assets acquired in a business
combination for financial reporting purposes. It is important
to note that even...
On Friday evening, the S&P downgraded the United States’
sovereign debt rating to AA+ for the first time in our
history. While we all saw yesterday what a huge impact this
downgrade could have on our stock portfolios, there is also a
considerable effect on the process by which we as valuation
practitioners value closely-held companies. For years,
valuators have based their analyses of cost of capital on the
assumption that the U.S. debt is “risk-free.” For example,
our firm typically uses the...
3 ways to communicate with a valuation professional
Nothing's more frustrating than sitting down for a
consultation with a valuation professional and failing to fully
understand the process and how an appraiser arrives at a certain
value. To avoid...Read More >>
Nearly 90% of owners of family-run businesses believe that the
same family (or families) will control the business in five
years. Unfortunately, if history provides any indication,
only about two-thirds of those businesses will survive to the
second generation. The statistics deteriorate when it comes
to the third and fourth generations, with only 5% of family-owned
businesses surviving to the fourth generation. These
statistics illustrate a key challenge that today’s business owner
faces:...
Valuation for M&A: Building Value in Private
Companies
In the second edition of Valuation for M&A: Building Value
in Private Companies, Chris Mellen and Frank Evans build on
the strong base of knowledge of the book's first edition. While
this edition retains the key...
No Time Like the Present: Discounting Future
Damages
In commercial cases, plaintiffs often recover lost profits they
would have earned in the future but for the defendant's wrongful
conduct. In those contexts, valuation experts typically discount
future damages to present value. Click...
From business acquisitions to estate planning to shareholder
transactions, executives often run into situations in which
performing a business valuation is necessary.
The primary pressure point is when it is necessary to determine the
value of an ownership interest in a private company (non
publicly-traded) for any number of financial and business reasons.
Not anything that is traded on exchanges; we’re talking about
closely-held companies and small businesses.
With apologies to all of you non-basketball fans out there, this
blog entry will once again focus on LeBron James and his impending
free agency. After all, it is the primary (only?) sports
story in Cleveland this summer. As my colleague wrote in a
previous entry, LeBron’s decision to stay or go this summer
will have a dramatic impact the value of the Dan Gilbert’s
investment in the Cavaliers. Here’s another perspective on
how LeBron’s decision might be illustrative of the value of...
The Auditing Standards Board
recently released six clarified Statements on Auditing Standards
related to risk assessment, as part of its clarity project. This
project, which will redraft all standards over the next two years,
will make the auditing standards easier to read, understand and
apply, and falls in line with the Board’s objective to converge all
standards with the International Standards on Auditing.
As I surfed around on the internet the other night searching for
Black Friday deals (who goes to stores nowadays, anyway?), I
couldn’t help but wonder – how can companies sell products at just
a fraction of previously listed prices? The answer isn’t
terribly complicated. Retailers cut prices to increase
interest in products and fan the flame of pent up consumer
demand. This concept, coupled with most businesses being
closed on this day, results in stores being flooded with consumers
on the...
There
have been a series of recent economic, tax, and business valuation
developments that give incentive for business owners to accelerate
their consideration of the issue of succession planning. As
most business owners are already aware, there can be significant
adverse tax implications of shifting wealth to the next generation
if the proper succession plan is not in place. However, the
current environment offers a great opportunity for individuals to
minimize the tax liability associated with...
If you are like many companies these days, odds are the answer
to that question is “yes.” In the current weakened economic
environment, companies are learning that the goodwill that they
carry on the balance sheet is impaired due to the diluted value of
the entire enterprise.
The process of evaluating goodwill for impairment really is based
in a very simple mathematic equation under current accounting
guidance outlined in Statement of Financial Accounting Standards
No. 157, Fair Value...
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