The Case of the Missing Post-Acquisition Income

One of my favorite games as a kid was the murder-mystery classic Clue.  Do you remember trying to deduce the culprit, the murder weapon and the room in which the attack took place?

“I think it was Colonel Mustard in the kitchen with the candlestick.”

“I think it was Mrs. Peacock in the hall with the knife.”

“I think it was Mrs. White in the billiard room with the lead pipe.”

Clue was a great “whodunit” game in which players had to use their sleuthing skills to piece clues together to solve...

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A Peek the Behind the Curtain: The Secrets to Business Valuation

I have always been intrigued by magic.  It is not often that a magician reveals his secrets, but I recently watched a movie, Now You See Me, in which the magicians actually revealed the secret to their performance.  In an early scene of the movie, a volunteer from the audience at a magic show in Las Vegas is transported across the globe into a bank vault in Paris.  Later, it is revealed that the volunteer was not actually transported, but simply dropped through a trap door into an exact replica...

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What Cosmo Kramer Can Teach Us About Working Capital and Capital Expenditures in a Business Valuation

In my opinion, Seinfeld was one of the best true-to-life sitcoms in television history because the storylines drew from actual events in the writers’ lives.  One of those recurring storylines was the spirited discussions surrounding Cosmo Kramer’s never-ending business schemes; in particular, in the episode “The Voice” - Kramer (reading the newspaper): Look at this – they are renovating the Cloud Club.

Jerry: Oh, that restaurant on top of the Chrysler building? Yeah, that is a good idea.

Kramer:...

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The Valuation Artist

No, that is not a typo in the title.  Being a good valuation analyst requires a considerable amount of artistic ability.  When most people think of their accountant, they probably do not picture someone terribly creative or artistic.  However, valuation analysis is one of the few areas of accounting that is subjective and doesn’t involve one single “correct” answer.

To be clear, valuation work is largely based on scientific evidence and procedures that have been tested and proven over time.  

After...

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How many ways can you spell value? Not one, not two, not three...

Let’s say you have a need to obtain a business valuation and you have a group of advisors offering assistance.  One advisor says something about equity value and another says something about invested capital value.  Do you know the difference?  If you find yourself in a situation in which these terms are tossed around, then you should be aware that there are different ways a company’s capital structure can be measured.  Common valuation terms that relate to a company’s capital structure are...

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The Muck Stops Here: The Two Things Rambo Can Teach Us About Unrecorded Liabilities

Rambo: First Blood Part II is one of those movies that I have to stop and watch whenever I come across it while channel surfing. I can’t think of a movie that has more unintentionally hilarious moments: Rambo cracking his knuckles around a microphone and threatening his old commander at coincidentally the same time as a massive lightning and thunder strike; Rambo blowing up the bad guy leader with an exploding-tip arrow; Rambo miraculously dodging thousands of bullets in an hour and a half. ...

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How Does Risk Impact the Required Rate of Return?

Here is the short answer:  risk and the required rate of return are directly related.  As risk increases, the required rate of return increases.  As risk decreases, the required rate of return decreases.  Let’s take a closer look at what that means and how it affects the value of a company.

Be careful not to confuse actual rate of return with required rate of return.  The former reflects historical financial performance and calculates the company’s actual return on investment while the latter...

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Free Offer Friday: Accounting, Tax & Valuation Considerations When Issuing Stock Options E-Book

Interested in learning more about the accounting, tax and valuation considerations you should take into account when issuing stock options?  After reading this e-book, you'll have a better understanding of these basic valuation concepts:

  • Stock option landscape
  • Accounting & tax ramifications of issuing stock options
  • Practical considerations when issuing stock options
  • The Backsolve Method

Click here to download our free e-book.

For more information on our Valuation & Litigation Advisory Services,...

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Control is worth its weight in Ari Gold?

When Ari Gold, a character from the HBO critically acclaimed series “Entourage”, was negotiating the purchase of the McQuewick Agency with Terrence McQuewick, Ari’s former boss and sworn enemy, Terrence was offering to sell the Agency to Ari without the consent of Terrence’s other partners.  It was obvious that Terrence didn’t obtain his partners’ approval given their reaction once Ari took control of the Agency (they were less than pleased). 

The story line in this episode isn’t far from...

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Buyers and Sellers Can Bridge Gap With Earnouts, But Must Know Accounting Rules

I’m pretty sure my first experience with earnouts came at the lunch table with my buddies in grade school. “I bet you I can throw my sandwich wrapper into the trash can from here.” “Oh yeah?” “Yeah. I’ll bet you a dollar.” “You’re on.”While transaction earnouts involve many more dollars than my story, as well as much more complex terms, the concept is generally the same — an earnout is a payment based on performance. For example, a deal may include a $20 million cash payment and an earnout that...

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