Recently, an attorney and financial planner called me to talk about a client who was discussing his ownership, management succession plans, and the life insurance associated with his “planning.” During our two-hour discussion, I learned about the client’s situation and was able to offer potential modifications to his current transition plan.
In a decision issued May 11, 2016, Vice Chancellor J. Travis Laster of the Delaware Court of Chancery ruled that the 31.1 million shares of Dell Inc. held by T. Rowe Price Associates for various investors had not been properly perfected, giving asset managers an abrupt incentive to be meticulous.
Dell Inc. engaged in a management buyout (“MBO”) in October 2013 that effectively took the Company private, leaving Michael Dell in control (75% of its stock) with a financial sponsor (25% of its stock). The majority of shareholders tendered their shares, and received the offered consideration. Certain shareholders dissented, setting in motion an appraisal proceeding in […]
The public stock markets are large, transparent, and liquid. Minority shares of thousands of public companies trade on a daily basis providing visible evidence of consensus pricing for each of them. At the end of the first quarter this year, the S&P 500 Index had a market capitalization of $18.8 trillion. That’s a lot of market capitalization. Shareholders of private companies do not enjoy the same level of financial transparency. In this post, we discuss the key differences between the public and private markets and the importance of regular valuations.
The Wall Street Journal reported that under an “obscure law,” shareholders of Delaware corporations can do just that, according to Section 220 of the Delaware Code, “Inspection of Books and Records.” The WSJ article discusses a number of startups with billion dollar plus valuations (“unicorns”) who are having to open their books to small shareholders as result of their requests under Section 220.
What if every private company had to disclose its financial statements, stockholder list, and other information relevant to valuation to any of its shareholders upon their written request?
We continue with our discussion of getting command of the numbers by discussing income statement adjustments. Normalizing adjustments are made in valuations to separate unusual or non-recurring or management discretionary items of income or expense on the income statement. The objective of normalizing adjustments is to develop historical, adjusted income statements and percentage income statements that can be used in the valuation process.
The following ten comments should provide a good overview of the concept of income statement (normalizing) adjustments for business appraisers and for attorneys.
We continue the series begun in the previous post based on my long-ago staff memo regarding “The ABZs of Solid Valuation Conclusions and Reports.”
The most frequent and often embarrassing errors that occur in valuation reports are the result of obvious issues or elementary mistakes. This happens when appraisers fail to “get command of the numbers.” Based on years of experience, I’ve listed 10 things a business appraiser must do to get command of the numbers.
While I am speaking from the viewpoint of a business appraiser in this series, the information provided will be helpful to attorneys who deal in matters pertaining to valuation.
In this walk down memory lane, I share excerpts from a piece I originally wrote for business appraisers in 1989 and updated in the mid-1990s entitled “The ABZs of Solid Valuation Conclusions and Reports.” If you were in business in the 1990s, this post will bring back memories. If you were not, you might enjoy an inside look at the climate of the time. Either way, it’s a fun journey.
Welcome to 2016! There will be changes to the focus of the blog in 2016. Read more about the changes here.
When I see stories in the financial press I often think of what lessons business owners can learn from the experiences of others. Perhaps there is a lesson to pay attention to basics in the emerging situation at Chipotle Mexican Grill, Inc. In this post, we consider Chipotle’s growth, decline, and the valuation relationship between expected growth and risk in light of the circumstances.
