Those who know me understand that I have a “thing” about counting steps. For years, my goal has been a minimum of 10,000 steps per day. In spite of my “thing,” when I looked at my steps for October, I found that I hit 10,000 steps on only 20 of 31 days. My average step count was about 7,000 steps on the days I didn’t reach the goal. On the last day of October, I set a challenge for myself — to achieve a minimum of 10,000 steps every day during the month of November.
The relationship between EBITDA and EBIT for any company over time is one measure of the capital intensity of that business. The greater EBITDA is relative to EBIT, the more depreciation and amortization (D&A) that is required to replace existing plant, equipment, and other acquired assets.
Given the transaction and valuation emphasis on EBITDA, it is important for business owners, advisers, and appraisers to develop a better understanding of the relationship between EBITDA and EBIT for individual companies at a point in time and over time, as well as in comparison to other companies.
Several months ago, I wrote a post about a recent ruling of the Tennessee Supreme Court addressing the issue of statutory fair value in Tennessee. The Supreme Court reversed the trial court and remanded the case for reconsideration. In my earlier post, I called this a “friendly reversal” because the Supreme Court reversed with what seemed to me to be an invitation for the trial judge to reach the same conclusion and to be consistent with the Supreme Court’s new ruling.
I recently delivered two presentations at the AICPA 2018 Forensic & Valuation Services Conference. This post provides a brief summary of my comments from the second presentation (Valuation Tax Panel), which provided three perspectives on the impact of the 2017 Tax Cuts and Jobs Act on business valuation.
If your company or your clients’ companies have formula pricing for their buy-sell agreements, the likelihood of future problems is high. It is just not possible to foresee all possible future circumstances when setting a formula today. The solution to these problems lies in a Single Appraiser, Select Now and Value Now valuation process.
Fixed price buy-sell agreement pricing mechanisms are not good and seldom work. The problems with these agreements can be “fixed” if the parties focus on the future and take steps today to solve future problems before they occur. In this post, I discuss two single appraiser processes to help solve these problems.
Last week, I gave a presentation titled “Intrinsic Value and Valuation Multiples” to a conference held by the Fairfax County (Virginia) Bar Association at the Omni Hotel in Nashville. My presentation discussed the intrinsic value standard of value in Virginia divorce-related valuations of closely held business assets. In addition, I talked about developing valuation multiples with credibility. This post addresses the intrinsic value standard of value.
Many years ago, I worked at what was then First Tennessee National Corporation, which is now First Horizon. My first and only boss during my tenure at First Tennessee taught me many things as a young analyst. Today’s lesson has to do with borrowing, this is a lesson that could be instructive for many owners of private businesses who may be averse to borrowing.
I wrote a memo, titled “ABZs of Solid Valuation Conclusions and Reports,” for Mercer Capital’s analytical staff in 1989. The introduction and conclusion to this memo were written for its republication in Valuing Financial Institutions, my first book, published in 1992. The memo is reproduced as written with the exception of a few [explanatory comments]. Nevertheless, I believe that this 1989 memo is worth the time to read or reread as we think about developing solid valuation conclusions and reports in 2018.