SoftBank Wants to Invest in Uber at a Discount to Its Latest Implied Pricing
What Will Happen?
In today’s post, we discuss Softbank’s proposed investment in Uber.
Interim Time
Recognizing This Important Concept Can Be Key to a Successful Life
What are you doing today to be sure you are ready to spend the time after you retire or sell your business, i.e., the rest of your life, in the style you desire with the resources needed to take care of you and your family and any other charitable desires you may have? This post […]
Business Valuation for Exit Planning
Recent Speech for the North Texas Exit Planning Institute
I spoke to the North Texas Chapter of the Exit Planning Institute on September 8, 2017 on the topic of Business Valuation for Exit Planning. I appreciated the opportunity to address the group.
Customer Attrition and Growth
Lessons Learned from Studying Bank Core Deposit Relationships
This post discusses how understanding core deposit intangible assets in a bank valuation taught me about customer attrition.
Buy-Sell Agreements
The "Words on the Page" Define the Valuation Assignment for the Parties or for Business Appraisers
The pricing mechanism is that part of a buy-sell agreement that defines how the price for transactions triggered under it will be determined. There are three basic types of pricing mechanisms: Fixed price buy-sell agreements. The price at which transactions occur is set by agreement of the parties within some buy-sell agreements. The price is set […]
Business Appraisal Review: A Helpful Tool in Litigation and Otherwise
Over the years, I have been called upon to review the work of other appraisers and damages experts. To a certain extent, the requirements for appraisal review come with the territory of being an expert witness. Appraisers for a side in litigation are often asked to review the work of the opposing expert. In the […]
Should Business Appraisers “Normalize” Long-Term Treasury Rates When Building Equity Discount Rates?
The idea of normalizing Treasury yields when building up equity discount rates has been around for about a decade. I do not believe that “normalizing” Treasury rates when building up discount rates is a procedure that should be used by business appraisers. This post provides the rationale for this position.
What Determines the Level of Value in Business Valuation?
Expected Cash Flow, Risk and Growth
In the last post, we talked about the traditional levels of value chart; however, by the mid to latter 1990s, many business appraisers began to realize that there were problems with using control premium data (used to “move” from the marketable minority level to the controlling interest level) to estimate minority interest discounts. The main issue was that most transactions involving the change of control of public companies, from which this data was developed, involved strategic control or synergistic acquisitions. The thinking led to the development of a new levels of value chart.
The Traditional Levels of Value Chart
There's More to the Story
Business appraisers have dealt with concepts related to the levels of value for many years. These levels of value are conceptual in nature and relate to where, on a continuum of value, a particular valuation interest should lie. Does the interest exhibit elements of control? The appropriate level of value should reflect this. Is there no control for a minority interest? The appropriate level of value should reflect this, as well. What about if there is no available market for the interest? The appropriate level of value should reflect this, also. It seems so simple and basic.
Differing Expert Witness Valuation Conclusions
Differences May Not Be the Result of Advocacy
Because of the large difference between the two appraisers, courts may assume that business valuation experts are being advocative. This judicial attitude is fairly widespread based on my experience, and accounts for many decisions where courts “split the valuation baby.” Perhaps, there’s more to the story. In this post, we discuss six sources of differences in valuation opinions between opposing experts.