#2: Handbook on Business Valuation for Business Owners

The Gordon Model and Equity-Based Multiples

banner_handbook2

In the last post, we talked about the basic valuation equation. This equation is derived from something called the Gordon Model (and a couple of other names). We said before that valuation is a combination of art and science. It is time for a bit of the science. We’ll introduce a few equations in support of the basic valuation equation, so don’t let this bother you. After we see the “science” underlying this equation and understand a few more things about valuation, we can talk about more interesting questions.

#1: Handbook on Business Valuation for Business Owners

Value is [Not] Easy and Fair Market Value

banner_handbook-bv-for-business-owners

While the basic valuation equation is simplistic, business valuation is not as easy as the equation may suggest. In this post we discuss some of the basics and how it intersects with fair market value, a prevalent standard of value that business owners are commonly required (or find desirable) to obtain in their normal course of business.

Trump’s Proposed Corporate Tax Cuts and Private Company Values

Will EBITDA Multiples Increase 25%?

banner_corporate-tax-cuts

With the election of Donald Trump as the 45th President of the United States, the stock market has rallied in what has come to be called the Trump Rally. The Trump Rally has been fueled in part by the anticipation of cuts in corporate taxes, which was a campaign and early-presidency goal. Something is happening with the multiples of earnings placed on public shares. So what is likely to happen to multiples for successful private companies if the Trump tax cut is implemented? Let’s take a look.

Would You Rather Drive a Tesla or a Ford?

Which Stock Would You Rather Own?

banner_tesla_ford

In mid-2015, I commented on the apparent anomaly of a financing round for Uber that had an implied market value of equity (MVE) in excess of that of FedEx (FDX). At the time, Uber’s implied MVE was $51 billion, and that of FedEx was $48 billion. My post addressed some of the issues that I saw at the time. Similarly, last week, I read an article in the Wall Street Journal titled “Tesla, on a Hot Streak, Passes Ford in Investor Value”. That caught my attention, because Tesla is young and quite small and Ford is 100 years old and quite large. Why then does Tesla have such a high valuation?

Thinking About Selling Your Business? Don’t Wait to Fix Your Buy-Sell Agreement

banner_do-not-wait-bsa

The story in this post represents a composite from recent discussions with clients revolving around the question – “If a sale in the foreseeable future is a possibility, should you bother to be sure that your buy-sell agreement is in good working order?”

Capitalizing EBITDA

CapitalizingEBITDA

I have used this blog (and my former blogs) as a place to develop new materials. In late 2014, I began a series of posts to develop a means of building multiples of EBITDA using what I call the Adjusted Capital Asset Pricing Model. After peer review, I was encouraged to submit an article to the Business Valuation Review, which readers of this blog can obtain convenient access to.

A Short Introduction to Buy-Sell Agreements for Attorneys

Business Valuation Issues in Buy-Sell Agreements

zcm-10-20-16

Buy-sell agreements have been likened to business owners’ prenup agreements. They are certainly not romantic, but buy-sell agreements are among the most important and most neglected of corporate and legal agreements. What is not clearly understood, however, is that they are also business and valuation documents.

Valuation Implications of the Proposed Changes to Section 2704

Good News or Bad News? Maybe Not So Bad

header_valuation-implications-proposed-changes-2704

It is clear that the DOT/IRS are attempting, through Proposed Changes to Section 2704 of the Internal Revenue Code, to eliminate minority interest discounts and marketability discounts (DLOMs), even though those terms are not mentioned at all. I have read the Proposed Changes as a business appraiser and a businessman. They may have succeeded in eliminating “minority interest discounts” and “marketability discounts” as those terms are currently used. However, I do not think they have succeeded in eliminating valuation discounts in fair market value determinations for family partnerships or other family entities.

My thoughts are compiled in a new whitepaper, “Valuation Implications of the Proposed Changes to Section 2704”.

An Integrated Theory for the Major Valuation Issues of Today

Overview of Coming Presentation at AAML Annual Meeting 2016

AAML

On November 4, 2016, I will be speaking at the AAML Annual Meeting addressing a topic that is near to my heart as a business appraiser: An Integrated Theory for the Major Valuation Issues of Today. While each of these issues is worthy of hours of coverage, I provide an overview these issues in my post today.