Business owners and their advisers sometimes fixate on the multiples, usually of EBITDA, obtained in transactions. Normally, these are transactions involving other businesses and other owners. However, company owners and managers should focus on building the level, sustainability, and expected growth of their earnings to maximize the value of their businesses.
This week’s post is about a very recent statutory fair value case involving a real estate holding company in New York. The case settled, favorably for the plaintiff/shareholder, after opening arguments at the beginning of trial. The key business valuation question was that of the appropriate marketability discount in a New York fair value determination. All the arguments are shared and analyzed. If you were the holding company, would you have settled?
In May, I’ll be speaking at the AAML/BVR National Divorce Conference in Las Vegas. My topic is “How to Present Complex Finance to Judges.” Given that every divorce trial I’ve seen has been a bench trial, the topic focuses on judges. However, many of the same presentation techniques are certainly applicable to juries, as well.
The idea for this post is simple. I’m asking readers to provide me with examples of the best demonstratives they have seen to present complex financial and valuation issues in court. I’ll also be talking about concepts and ideas, so any thoughts regarding conceptual approaches or philosophical approaches to court testimony would also be helpful.
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.
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.