In a recent series of posts, we developed a means to develop direct and credible multiples of EBITDA applicable to specific valuation situations. This is important because EBITDA is part of the universal business language and is a term that appraisers, business owners and market participants understand. It is also important because until now, one way to capitalize EBITDA has been by using (often incomplete and/or dated) guideline transactions in other private or public companies. The other way has been through the use of guideline public companies, which may suffer in comparability based on size and many other differences.
Since writing the posts, I have had a number of opportunities to discuss the methodology with other appraisers and with clients. These conversations have encouraged me to write this single post to summarize this “new” method. In this post, we lay out the methodology for capitalizing EBITDA using the Adjusted CAPM in one place.
In 2012, I wrote a post on my former blog, Valuation Speak, titles Zynga and the High Cost of Concentrations. In that post, I talked about two key concentrations that were causing its stock price to be battered. The first had to do with a concentration in revenue in two games, Farmville and Mafia Wars. […]
Last week, I received an email from Janet, a recurring client asking to have a discussion with me about the value of recurring revenue. The question was interesting and stimulating and, I believe, of interest to many readers of this blog. This is a “first look” at recurring revenue. I plan to take at least a couple of other looks in the near future.
Buy-sell agreements are critical corporate documents. I’ve said that many times and in three books on the topic. This post is about a case in which the parties did not have a buy-sell agreement. They were involved in litigation over the buyout of one 50% owner (not in management) by the other (in management). There was a trial and, following the trial, a private settlement. I was involved in the case and so now am providing an analysis of the case.
New York’s Largest Corporate Dissolution | AriZona Iced Tea
Buy-sell agreements are critical corporate documents. I’ve said that many times and in three books on the topic. This post is about a case in which the parties did not have a buy-sell agreement. They were involved in litigation over the buyout of one 50% owner (not in management) by the other (in management). There was a trial and, following the trial, a private settlement. I was involved in the case and so now am providing an analysis of the case. The text of the analysis begins:
After several years of litigation involving a number of hearings and trials on various issues, a trial to conclude the collective fair value of a group of related companies known as the AriZona Entities occurred.
The Court’s decision in the AriZona matter was filed on October 14, 2014. I have not written about the AriZona matter because I was a business valuation expert witness on behalf of one side. The parties recently closed a private settlement of the matter, so there will be no appeal.
View Analysis of Case >
With oil prices dropping briefly below $40 per barrel on Friday (August 21, 2015) and the stock market dropping sharply in the recent past, investors in the public markets are being advised not to panic. The headline for the front page of the Saturday/Sunday Edition of The Wall Street Journal (August 22-23, 2015) reads “Stock Plunge Picks Up Speed.” In light of the circumstances, what happened to the value of closely held and family business in America over the last week?
When I read about Uber’s most recent financing, which valued its equity at $51 billion, I thought about FedEx Corporation, a Memphis-based company. I then wrote a blog post titled Uber Market Cap of Equity Exceeds that of FedEx. This past week, my thoughts about FedEx turned towards AutoZone, another Memphis-based company, as well as […]
Recently I spoke with a business owner who had almost sold about half of his company to a private equity investor a few years ago. The facts will be changed in this story so that neither he nor I should be able to recognize his company. However, the conversation highlights a potential opportunity for owners […]
The issue of whether private companies should pay dividends is an important one. Many private company business owners (and boards) resist paying dividends because they desire to retain flexibility at their companies and do not desire to incur risk from leverage (or slower ability to repay debt). The interesting thing about this position is that it creates polar opposite effects on private companies and their shareholders. What follows are ten good reasons to consider paying private company dividends and five things that some folks say represent the downside.
A decade ago, Richard Jackim and Peter Christman wrote a book entitled The $10 Trillion Opportunity. The second edition had the subtitle of “Designing Exit Strategies for Middle Market Business Owners.” While the book did provide a guide for financial advisers working with middle market business owners, I don’t recall that it provided a basis for […]
