This Valuation Video recounts two recent disputes over gift/estate tax appraisals with the Internal Revenue Service. In one case, Mercer prepared the original appraisal, which was challenged. In the second matter, Mercer was called to prepare an appraisal for Tax Court because of the unavailability of the original appraiser. You won’t read about either of them anywhere else because they settled quietly and favorably for the taxpayers.
I spoke earlier this week at the Pennsylvania Institute of Certified Public Accountants in King of Prussia, PA. After getting somewhat lost in the King of Prussia Mall, the largest mall by number of stores in America, I talked about simplifying complex valuation concepts for judges and juries and also about buy-sell agreements. This Valuation Video tackles one of my topics, the adage about a picture being worth a lot of words when talking about Fair Market Value.
How can you use bank valuation concepts to influence how you think and how you lead? That’s the question that I asked in a recent session at the Best Banks in America Super Conference put on by the Emmerich Group in Minneapolis. In this video, I discuss how basic concepts of valuation can help us think about how we look at banks and how we lead when we manage those banks.
Kashmiry v. Ellis is a recent Ohio appellate case regarding the buy-sell agreement portion of a shareholders’ agreement. The case reinforces a number of things I have been “preaching” about for years. If a buy-sell agreement has provided for an annual valuation by agreement of the parties, then the parties must reach agreement annually. If the agreement then provides for a valuation mechanism to determine the price following a trigger event, then the valuation process should be clearly defined and workable.
It is a fact that for every use of the single period income capitalization method, where a single assumption about expected earnings is made as a representative of “expected” earnings, there is an implied forecast of earnings and an implied use of the discounted cash flow method. This Valuation Video provides two looks – and two forecasts – for a company that might have been prepared by two different appraisers. The question addressed in this Valuation Video is whether the “forecasts” used in single-period income capitalizations are reasonable and the best representation of near-term expected cash flows and their future growth. I think the perspectives offered will be worth your time to listen to the video or to read the transcript.
The WACC, or Weighted Average Cost of Capital, is an enterprise level discount rate used in capitalizing debt-free income measures and in terminal value calculations for DCF methods. There is virtually no readily available market evidence regarding WACC. On the other hand, there is substantial relative and comparative information available regarding EBITDA multiples. This video post discusses how to convert a WACC, which most market participants and appraisers know little about, into an EBITDA multiple for a company based on its own unique circumstances. And, as promised, we do so in three easy steps.