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Relevant Market Trends Influencing the Fair Value of Private Equity and Venture Capital Portfolio Investments

In our most recent issue of Portfolio Valuation: Private Equity and Venture Capital Marks and Trends, we provide a brief digest and commentary of some of the most relevant market trends influencing the fair value of private equity and venture capital portfolio investments.  In this blog, there are key highlights covered in our Second Quarter 2017 newsletter. To read the full article in Mercer Capital's Fina ...

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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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Analyst Considerations of a Taxable Stock Purchase M&A Structure

Transaction Structure Considerations on Target Company Value Valuation analysts do not have to be investment bankers to value an M&A candidate, but they do need to understand taxable and non-taxable stock acquisitions. This discussion summarizes some of the tax benefits—and some of the tax complexities—associated with a taxable stock purchase deal structure. Although the analyst is not expected to be th ...

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Sometimes it Sucks to be Right

IRS Wins, Business Founders and their Families Lose Is cheap debt good for closely held families? Are closely held business overleveraged? Are FLP discounts about to come to an end? Why aren’t business founders and their families doing more to counter the proposed regulations that would target family business transfers? What should valuation professionals do in this environment? Dr. Sheeler answers these qu ...

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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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Updated: Valuation Best Practices for Venture Capital and Private Equity Funds

The International Private Equity and Venture Capital Valuation (IPEV) Guidelines were developed in 2005 to set out recommendations on best practices in the valuation of private equity investments.  Karolina Calhoun, senior financial analyst with Mercer Capital, looks at the draft amendments to the existing guidelines published in October 2015. To read more about the results of this report in the Mercer Capi ...

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Considerations in the Valuation of Alternative Asset Management Firms and Carried Interest

Issues in Hedge Fund Valuations The proliferation of hedge funds presents an opportunity for valuation analysts. In this article, the author provides an overview of the hedge fund industry, compares the manner in which hedge funds operate vis-Ă -vis private equity and venture capital, and outlines the opportunities and challenges for valuation analysts interested in serving this market sector. ...

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High Valuations May Be Bad for Your Business…And Your Ulcer—PE Hub

An Overly High Valuation Can Scare Away Investors or Spark a Down Round that Dilutes an Earlier Angel Investment      Mark Boslet at PE Hub explains that with IPOs on track to have their biggest year since 2010 and some major technology disruptions sparking infectious excitement, it's important to keep in mind key fundamentals including not accepting too high a valuation for your business or investment prop ...

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Squashing Small Business

Why VCs and Private Equity Pros are Sensitive to IRC 409A Valuations Rand Curtiss weighs in on why IRC 409A option-related valuations for small businesses do not solve real business problems for them. They set minimum exercise prices, asserts Curtiss—but that’s all they do. ...

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The Role of Earnouts in Acquisitions

Earnout Variables Often Account for 15 to 25 percent of Purchase Price in many Middle Market Acquisitions. Here are Tips for Structuring Them Carefully Earnouts typically appear in a large number of middle-market deals, usually accounting for 15 to 25 percent of the total purchase price.  While an earnout can to be an elegant solution to “close the gap” between seller and buyer, the fact is earnouts are com ...

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Caveat Emptor: Business Valuation in a 21st-Century Economy—VentureCapital.org

Past Performance is No Longer a Viable Valuation Tactic: Learn to Anticipate Future Prospects with Data Mining, Proprietary Benchmark Techniques, and a Close Look at Both Cash Flow and Capital Expenditures.    Caleb Slabbert, writing at VentureCapital.org, which bills itself as a non-profit organization that has been "a premier resource for both entrepreneurs seeking funding and for investors who want to he ...

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Deloitte: Hedge Funds Meet to Assess New Pressures in the Year Ahead —CFO Journal

Stakeholders Discuss Greater Institutional Investor Makeup, Governance Structures, Greater Regulatory Scrutiny Deloitte Insights contributes a piece to the CFO Journal on the Wall Street Journal site, part of a series designed to provide financial executives a customized resource to help them address the strategic, operational and regulatory issues they face in managing their finance organizations and caree ...

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Rob Slee Draws Distinctions: Distressed Deals, Healthy Deals, Zombie Deals, and What’s Important to Value Creation —MidasNation

MidasFund Will Not Acquire Distressed Companies; However, it Will Buy Stable Divisions of Bankrupt Companies.  Here's Why.   "Last week’s announcement that MidasFund had started acquiring zombie companies caused a flurry of emails," writes Rob Slee on the MidasMoments blog of the MidasNation site.  "Many of you asked about the differences between acquiring distressed, zombie and healthy companies. Let’s dig ...

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SEC Enrolls in Private Equity 101 —PE Manager

With Limited Resources, the SEC is Using a "Risk Analytics" Strategy to Target Areas of Concern, Explains Exec at Conference Recent examinations of newly SEC-registered private equity firms is helping regulators understand the complex world of private equity, according to delegates and speakers at PEI’s CFOs and COOs Forum 2013 in New York, writes Nicholas Donato at Private Equity Manager.  More: ...

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The Impact of Value on M&A Activity

The “Market” is Not Always Right When it Comes to Value, Especially in M&A Transactions The mergers and acquisitions market began a slow recovery this last year after a sharp downturn in 2009. Was the slowdown caused by banks reducing lending activity, cash hoarding by businesses, economic uncertainty, or the simple failure of buyers and seller to agree upon price? Michael Blake takes a look at how valu ...

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Will a Robot Take Your Job? —The New Yorker

Plus: A Black Box that Performs Business Valuations for Privately Held Companies?  The Scenario Might Not Be as Far-Fetched as You Think Not too long ago I had lunch w/a senior valuation guy, someone who's made his living in the field for some 30 years, and was there almost from the first days The National Association of Certified Valuators and Analysts (NACVA) was formed and Shannon Pratt began publishing ...

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Private Capital Markets: The Major Themes

There’s Lots We Know about Private Capital. There are Things We Don’t Know, too—and Need to Be Aware of. Robert T. Slee explains in this excerpt several key macro insights—and related themes—that his recent book Private Capital Markets is based on.  The macro insights are that corporate finance theory doesn’t predict behavior in private capital markets, and valuation, capitalization, and transfer are not di ...

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Four Questions Private Equity Investors Can Use to Find a Diamond in the Rough —Axial Markets

Good Values are Sometimes Overlooked.  How Can Private Equity Investors Best Assess Company Viability?   With nearly $1 trillion in dry powder, the private equity market is becoming steadily more competitive. EBITDA multiples are rising, PE firms are holding their portfolio companies longer, and pension funds are starting to make direct investments. So how do smart investors in private equity compete?   Axi ...

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