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Discounts for Lack of Marketability

Consideration for Closely Held Securities, Part I of II Valuation analysts may be asked to value closely held company securities for various reasons. These reasons include transaction pricing, financial accounting, taxation planning and compliance, and litigation (related to both breach of contract and tort claims). Depending on: 1) the business valuation approaches and methods applied; and 2) the benchmark ...

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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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The Cost to Obtain Liquidity

Studies in the Closely Held Company Valuation (Part II of II) In the first part of this two-part discussion, the author identified six transaction risk factors attempting to sell a controlling (including 100 percent) interest in a closely held company. Those included: 1) an uncertain time horizon to complete the offering or sale; 2) “Make ready” accounting, legal, and other costs to prepare for and execute ...

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Measuring the DLOM for a Closely Held Company Controlling Interest

Six Transaction Risks Owners Face Selling a Company that May Explain DLOM (Part I of II) In this first of a two-part article, Robert Reilly reviews the various models analysts use to estimate the DLOM and factors analysts consider in the DLOM selection. Valuation analysts often value closely held companies for transaction, taxation, financing, accounting, litigation, and other purposes. Depending on: 1) the ...

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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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Higher Standards for Fair Value

Over the last several years, various officials at the SEC have expressed concern about the broadening application of fair value measurement and its impact on the reliability and consistency of valuations performed for U.S. public companies.  Lucas M. Parris, senior member of Mercer Capital’s Financial Reporting Valuation Group, explains. To read the full article and view the presentation in Mercer Capital's ...

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Crowdfunding: SEC Issues an Investor Bulletin

Crowdfunding: SEC Issues an Investor Bulletin The SEC published an investor bulletin recently discussing a number of rules and features related to crowdfunding.  Sujan Rajbhandary, vice president and senior member of Mercer Capital’s Financial Reporting Valuation Group, explains the developments, risks, and reasons of interest. To read the full article in Mercer Capital's Financial Reporting Blog, click: Cr ...

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Report on the Review of the Definition of “Accredited Investor”

The Securities and Exchange Commission staff published a report of its review of the definition of “accredited investor”.  Congress directed the SEC to review the definition every four years in Section 413(b)(2)(A) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the staff recently submitted their recommendations to the Commission. To download this report, click: Report on the Review of ...

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JOBS Act Rules could Spawn Headaches as well as Capital

Startups interested in taking advantage of the final crowdfunding regulations under the Jumpstart Our Business Startups Act passed by the Securities and Exchange Commission a couple weeks ago should be aware of nuances to the rules that may prove challenging.  Among other things, companies will have to decide whether to offer investors debt or equity.  David M. Katz discusses the new rules and the impact th ...

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The IRS Equity Compensation Audit Guide

Obviously, every equity compensation plan is different and the particular tax treatment of a given security depends on the facts and circumstances of the arrangement.  Samantha L. Albert, senior financial analyst with Mercer Capital, examines equity-based compensation and the tools available when examining these arrangements. To read more about the results of this report in the Mercer Capital's Financial Re ...

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The Growth of Equity Crowdfunding Continues

Title III is the Newest Crowdfinance Option for Private Companies On October 30, 2015, the SEC finalized the rules for securities crowdfunding under Title III of the Jumpstart Our Business Startups (JOBS) Act of 2012. Title III lets startups raise up to $1 million per year by selling securities exclusively through registered online intermediaries known as crowdfunding portals and broker-dealer offering plat ...

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In the Eye of the Beholder: Increasing SEC Scrutiny of Public Company Fair Value Marks

The SEC is casting an eye to examine public company filings.  Samantha Albert, Senior financial analyst with Mercer Capital, looks at how their tools have been successful thus far. To read more about the results of this report in the Mercer Capital's Financial Reporting Blog, click: In the Eye of the Beholder: Increasing SEC Scrutiny of Public Company Fair Value Marks. This article is republished from Merce ...

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New Rules Aim to Claw Back Incentive-Based Pay

The SEC has proposed new rules and requirements for certain types of incentive-based executive compensation.  Lucas M. Parris, Senior Member of Mercer Capital’s Financial Reporting Valuation Group, explains the rules and how they would apply. To read more about the results of this report in the Mercer Capital's Financial Reporting Blog, click: New Rules Aim to Claw Back Incentive-Based Pay.  This article is ...

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Rules for the Modern Investment Manager

The SEC has proposed new rules and amendments that are more stringent and would alter requirements.  Mary Grace McQuiston, Senior Financial Analyst with Mercer Capital, offers insights and explores some of the ramifications these changes could bring. Read more about the results of this report in the Mercer Capital's Financial Reporting article, Rules for the Modern Investment Manager.  This article is repub ...

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Life Insurance Policy Audits

Dispute Defensible Best Practices, Part 3 of a three-part series In this third part, the last of a three part series, the author stresses that in order for a policy “review” or annual statement to rise to the level of a true “audit”, it needs to incorporate all elements of the above criteria. It needs to do this in a format providing actionable information. Without actionable information, a “review” cannot ...

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Regulation A+: Raising the Capital Cap for Small Companies

The Securities and Exchange Commission recently issued Regulation A+ that amends the existing exemption from registration requirements for smaller issues of securities. This ruling creates a two-tiered offering structure that will solve many of the limitations of Regulation A. Madeline L. Harrigan, a financial analyst with Mercer Capital, says the updated Regulation A+ provides a greater annual dollar limit ...

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The Valuation of a Closely Held Business

Distinct Qualities and Considerations (Part 2 of 2) In the first part of this series, the author looked at some of the methodologies for considering closely held or private companies. In this second part, the last of the two-part series, the author reviews some of the IRS, judicial, investment banking practices. and other considerations in the valuation process. ...

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Valuation of Hospital System Targets

Insights from the Analysis of Mega Transactions By scrutinizing data from large transactions, valuation experts can glean important information and insights into current healthcare valuations. In this article, Collin McDermott and Bridget Triepke summarize SEC filings, review the implied valuation of large healthcare mergers—based on the purchase price—and provide a detailed review of the fairness opinions ...

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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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