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Is Cash Always King?

When it comes to money, “enough” is the hardest word to define in the English language.  The challenge of defining “enough” extends to corporate managers deciding what cash balance is appropriate.  Travis Harms, lead of Mercer Capital’s Financial Reporting Valuation Group, takes us through the data offering helpful tips. To read the full article in Mercer Capital's Financial Reporting Blog, click: Is Cash A ...

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Book Review—What It’s Worth

Hotel Business Value QuickRead’s Technical Editor, Roberto Castro, reviews BVR’s What It’s Worth: Hotel Business Value.  There are few resources available for business valuation professionals that focus on the valuation of hotels.  The “go to” reference books have been Stephen Rushmore, MAI and Erich Baum’s Hotels & Motels: Valuations and Market Studies, a 2001 Appraisal Institute publication, and David ...

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A Market Participant Perspective on the Size Premium

The magnitude of the equity risk premium, or required return in excess of the risk-free rate, is a perennial question for valuation specialists.  Travis Harms, Mercer Capital’s Financial Reporting Valuation Group lead, explains that the aggregate equity premium is typically broken into two pieces: 1) a market risk premium, and 2) a size premium. To read the full article in Mercer Capital's Financial Reporti ...

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Gravity Matters, Especially for Financial Investors

What risk assets are not near record valuations, aside from assets in a few sectors such as energy and retail?  Investing when multiple expansion occurs over a holding period is a great thing, but multiples cannot expand forever; they also can contract.  Jeff Davis, managing director of Mercer Capital’s Financial Institutions Group, explains. To read the full article in Mercer Capital's Financial Reporting ...

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Ultimate Earnings Adjustments

Since the Federal Reserve issued guidance on leveraged lending limits, borrowers and lenders have been interested in the ratio of debt-to-EBITDA in proposed financing packages.  However, banks are supposed to steer clear of deals for which the ratio is 6.0x or greater.  Travis Harms, Mercer Capital’s Financial Reporting Valuation Group lead, explains the topic of earnings adjustments. To read the full artic ...

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Allocating Purchase Price for a Pharma Transaction—Pfizer Acquires Medivation (Part II)

In August 2016, Pfizer announced it would acquire Medivation for $14 billion.  The transaction made headlines for how the size of the deal escalated over a period of approximately six months prior to the announcement.  In Part I of this series, Sujan Rajbhandary, senior member of Mercer Capital’s Financial Reporting Valuation Group, presented a broad outline of the PFE-MDVN transaction.  Part II will delve ...

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Allocating Purchase Price for a Pharma Transaction—Pfizer Acquires Medivation (Part I)

In August 2016, Pfizer announced it would acquire Medivation for $14 billion.  The transaction made headlines for how the size of the deal escalated over a period of approximately six months prior to the announcement.  Sujan Rajbhandary, senior member of Mercer Capital’s Financial Reporting Valuation Group, presents in this blog post (and Part II) a broad outline of the transaction and explore what a potent ...

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Five Variations on a Theme: Analyzing Transaction Premium Data (Part 2)

Part 1 of this series offered an overview of observed transaction premium data (from the 2016 Mergerstat Review) for acquisitions of public companies.  That post also deliberated on one of five common avenues to incremental economic benefits that motivate market participants to transact.  Part 2 walks through the four remaining variations on the incremental economic benefits theme, and offers some concludin ...

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Five Variations on a Theme: Analyzing Transaction Premium Data (Part 1)

The consistent theme of the Appraisal Foundation’s exposure draft The Measurement and Application of Market Participant Acquisition Premiums is that acquirers do not value control for its own sake, but rather for the tangible economic benefits that can be achieved by the exercise of control.  Travis W. Harms, Mercer Capital Financial Reporting Valuation Group lead, explains the analyses and discusses his vi ...

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Non-GAAP Measures: The SEC Updates Interpretation of Disclosure Regulations

While observers appear to be increasingly worried about the proliferating use of non-GAAP measures, a useful debate on non-GAAP measures would probably focus on the nature of their presentation within various disclosures rather than whether or not they should be outlawed altogether.  Sujan Rajbhandary, vice president, senior member of Mercer Capital’s Financial Reporting Valuation Group, explains. To read t ...

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Non-GAAP Measures: Here to Stay?

The debate over the use of non-GAAP performance measures continues.  Even as the prevalence of these items grows in the financial reports of public companies, cautionary tales of the uses and abuses of such metrics garner headlines.  Lucas M. Parris, senior member of Mercer Capital’s Financial Reporting Valuation Group, explains. To read the full article in Mercer Capital's Financial Reporting Blog, click: ...

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Maximize Proceeds in Accounting Firm Sales

Get Top Value When Selling an Accounting Firm Avoiding these seven key misconceptions can help you avoid getting less than your firm is worth.  Harry L. Olson, president of Accounting Broker Acquisition Group Inc., discusses the misconceptions and what pitfalls to look out for. To find out more about this Journal of Accountancy article, click: Maximize Proceeds in Accounting Firm Sales. ...

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Fairness Opinions and Down Markets

Does anyone know what the future holds for markets?  Perhaps fairness options can help financial advisors seek the answers they are looking for.  Jeff K. Davis, Managing Director of Mercer Capital’s Financial Institutions Group, explores this option and some issues to consider when deciding if it should be used in a falling market.   To read more about the results of this report in the Mercer Capital's ...

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Quality of Earnings

When Performing a Business Valuation Earnings are not always objective and valuations apply a multiple to earnings to determine a company’s value. The elements making up a company’s valuation involve determining normalized earnings, a decision whether income taxes would be applied, and the capitalization rate to be used to get the value. There are also other factors, but this article looks at the quality of ...

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The Utilization of the Market Approach

In Appraising Outpatient Enterprises Healthcare related outpatient enterprises provide services that do not require hospital admission and may be performed outside the premises of a hospital. Similar to valuation of any business, valuations of outpatient enterprises should include consideration of the three general approaches to valuation (i.e., the income approach, the market approach, and the asset/cost a ...

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Yes, Virginia, the Cost of Capital Really is Low

Calculating a prospective return takes into account many factors.  Travis W. Harms, Mercer Capital’s Financial Reporting Valuation Group, discusses what impact a “hefty” purchase price could mean for returns. To read more about the results of this report in the Mercer Capital's Financial Reporting Blog, click: Yes, Virginia, the Cost of Capital Really is Low. This article is republished from Mercer Capital' ...

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Public Market Views of EBITDA: Exxon Mobil and Apple

Some very interesting implications can be noted comparing two different companies using EBITDA.  Z. Christopher Mercer, Founder and CEO of Mercer Capital, looks at how relying on EBITDA as a measure of cash flow can impact the valuation analysis conclusion if other measures are not considered. Read more about the results of this report in the Mercer Capital's Financial Reporting article, Public Market Views ...

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Hospital Valuations–Market Approach

Beware of the Limitations of Hospital Transaction Databases The market approach is one of three established valuation approaches. In this approach the valuation analyst will look for comparable companies. In this article the authors caution against the outright use of databases as a means of developing a Conclusion of Value for a hospital. Independent verification is time-consuming and essential. The author ...

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