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Life Insurance Policy Audits

Dispute Defensible Best Practices (Part 1 of 3) TIn this first part of a three part series, the author suggests that while there are many articles about how to properly analyze a life insurance policy to determine its value, the critical analysis that is needed is not to ascertain value, but to determine viability. Professional advisors involved in buy-sell and exit and succession planning will want to foll ...

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A Capital Raise in Acquisition Clothing?

M&A is an infrequent occurrence among business development companies (BDCs). “Under the external management model, the opportunity for material cost savings is limited, and prices at or near NAV indicate that investors assign little â€franchise’ value to the lending and origination platforms.” Travis W. Harms, of Mercer Capital’s Financial Reporting Valuation Group, discusses the recent acquisition of MCG Ca ...

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Valuation of Contingent Consideration in M&A Transactions

Companies often use contingent consideration when structuring M&A transactions to bridge differing perceptions of value between a buyer and seller, to share risk related to uncertainty of future events, to create an incentive for sellers who will remain active in the business post-acquisition, and other reasons says Lucas M. Parris, a senior member of Mercer Capital’s Financial Reporting Valuation Group ...

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Fairness Opinions: Evaluating a Buyer’s Shares from the Seller’s Perspective

M&A activity has accelerated substantially in 2014 following the financial crisis.  When an acquisition proposal is being weighed, there needs to be a thorough vetting of the buyer’s shares.  A fairness opinion evaluates the investment merits of the shares before and after a transaction is consummated says Jeff K. Davis, CFA with Mercer Capital.  This article discusses the key questions you need to ask ...

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Using ESOPS in Succession Planning

A Case Study An ESOP is one of many options available to business owners considering succession-planning options. There are substantial advantages, but there are also regulatory and cost considerations. A feasibility study may suggest whether the ESOP is an appropriate option. In this article, authors Kelly Finnell and Andrew Holmes share their views on when an ESOP is feasible using a case study. ...

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A Note on ESOP Valuation

A Note on ESOP Valuation[1] One of the most critical issues regarding valuation is the concept of adequate consideration.  The ESOP trustee cannot pay more than “adequate consideration” for the stock it purchases.[2]   In the context of an ESOP, ERISA defines adequate consideration as the stock’s “fair market value…as determined in good faith by the trustee…”[3]  The proposed Department of Labor regulations ...

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Factors Affecting Succession/Exit Planning in the Veterinary Industry

Revenues in veterinary practices continue to climb, but profitability has fallen. The supply-demand currently favoring sellers is about to change, and that is expected to impact sellers. These practices have options—other than selling to a consolidator—and will remain attractive to associates; however, vet practices will need to be proactive to control costs to command a better price. ...

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Media Mergers to Increase in 2015

  While the Comcast/Time-Warner merger is pending with the FCC, another mega deal has fizzled out. Toy giant Hasbro got cold feet in its $3 billion bid for DreamWorks Entertainment after its stock slid five percent after investors deemed the price way too high. Not to worry though, a new report from Ernst & Young showed 40 percent of media executives surveyed said they expected to make a buy someti ...

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M&A as a Growth Strategy

  Merging with or acquiring another company isn’t just about consuming or becoming bigger than the competition. In an in-depth article with ABF Journal, Phil Isom and Dan Tiemann of KPMG outline the deals their organization has pursued in the last 12 months and the strategies behind them. The authors detail how M&A can and should be used as a growth strategy with an eye on bringing new talent, tool ...

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Extracting Value from M&A Disputes

  At the close of August 2014, $1.1 trillion passed through American hands in M&A deals, while the global tally was $2.4 trillion. Those totals mark the highest year-to-date volume since 2007. While that’s great for the industry, not all these deals ended happily. When anticipated value doesn’t materialize after the deal is done, disputes can arise, usually involving future payouts related to perfo ...

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Billion Dollar Battle for Dollar Store

Because the economic recovery we’ve all been told is happening never really arrived, dollar stores across the United States are doing big business these days. Because of that, there’s a huge takeover battle going on between the nation’s three largest dollar store retailers. Apparently, there’s billions to be made, one dollar at a time. Family Dollar Stores (FDS) originally rebuffed an unsolicited $9.1 billi ...

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Netflix Latest to Oppose Comcast Time Warner Merger

  Netflix is the latest company to join a petition asking the Federal Communications Commission (FCC) to deny the pending $45 billion Comcast / Time Warner merger. In a 256-page report, Netflix details how the merger will give the new entity too much control over the internet, and that this new power will enable it to stifle online video distributors that it sees as competition. Comcast continues to ar ...

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Purchase Price Allocation

Analyze early and avoid earnings surprises The purchase price allocation (PPA) process is often treated as an afterthought in mergers and acquisitions (M&A). Thinking about PPA can help guide a deal to a more predictable conclusion. In the most rewarding deals, a prompt PPA process helps acquirers analyze, from a financial reporting point of view, the primary drivers or intangible values associated with ...

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One Quarter of All Public M&A Deals Involve Insider Trading

  As if the general public hadn’t lost enough faith in the stock market with recent revelations of rigged deal-making that benefits only a few, a new study shows that 25 percent of all M&A deals between public companies involve some kind of insider trading. The study, conducted by McGill University and New York University, looked at informed trading activity in equity options prior to the announcem ...

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Five Overpriced Acquisitions That Were Smart Deals

You know how it goes. Some billionaire or corporate conglomerate throws out a huge bid for a business acquisition that everyone is certain is way over the top. It’s impossible such an outlandish offer could be profitable or even justified based on the subject entity. From the LA Clippers $2 billion sale to the next windfall for a teenage phenom who creates a gimmicky phone app; it seems as if one of these b ...

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