Caveats that Careful Valuators and Consultants to Keep in Mind When Using the Market Approach to Valuation Authoritative sources such as the IRS, SEC, FASB, and professional appraisal associations consistently advocate market prices to be the best indications of value. But is that always true? Gregory R. Marsh argues that in some financial markets—at various times—there’s plenty of evidence that both buyers ...

Biotechnology Valuation: An Introductory Guide Biotechnology is producing quantum advances in medicine, but the specter of unforeseen consequences from treatments has brought with it a parallel growth in litigation.  Valuing biotechnology assets isn’t easy: generally accepted methods of discounted cash flows (DCF) and market comparison are sometimes difficult to apply in an industry rife with low probabilit ...

Most consultants, business owners, and attorneys understand that a good expert witness needs to meet core criteria of giving an independent opinion, being able to support that opinion under a vigorous cross examination, and communicate with and persuade a jury. But what else is important? Joe Epps explains. ...

Main Street Businesses: Smart Strategies for Exit Plan Main Street businesses are those with less than $3 million in annual sales and less than 20 employees. While Main Street businesses are the backbone of the U.S. economy, the U.S. Small Business Administration reports that four out of five of these businesses liquidate when the owner decides to retire rather than ending in a profitable sale to a new owne ...

Smart Consultants Use Benchmarks to Add Insight and Increase Profits Business valuation professionals constantly use benchmarking tools to evaluate businesses that we determine values for—but we aren’t always as diligent in using benchmarking tools to evaluate and to manage our own consulting businesses. Dave Cooper explains why this should be a priority. ...

Be Careful When Using EBITDA for the Terminal Valuation Calculation If you’re going to construct consistent valuations, use earnings instead of cash flows in your calculations. Why is it important to be consistent? Because you have to calculate a discount rate based on one or the other. Richard Claywell explains. ...

Jon Hilsenrath at the WSJ's Real Time Economics blog captures  some interesting tidbits from Federal Reserve Chairman Ben Bernanke‘s testimony which go beyond the big question of whether the Fed will try to ease financial conditions again: ...

Terri Eyden at AccountingWeb analyzes new research from the American Accounting Association and finds that M&A restatements are common.  Excerpt: ...

The Journal of Accountancy reports the IRS is offering more flexible terms under which it will accept offers in compromise (IR-2012-53): ...

Jennifer Smith at the WSJ Law Blog reports that A U.S. district court ruling on who can claim profits from a defunct law firm’s unfinished cases could mean trouble for firms who take on partners from the ailing New York firm Dewey & LeBoeuf LLP: ...

Who Are America’s Wealthiest People? Small- and medium-sized businesses are the engines that drive the American economy. An IRS study of everyone who died with a net worth of at least $600,000 (and thus was required to file an estate tax return) showed America’s wealthiest citizens all have one thing in common: they all held significant blocks of stock in closely held private companies.  In a nutshell, the ...

Capitalized Earnings: When are the Earnings Stabilized? When you're doing a business valuation, should you use a Capitalization of Earnings/Cash Flows? Or should you use a Discounted Earnings/Cash Flow method? Here's a rule of thumb: If the benefit stream will be constant over time, choose the Capitalized Earnings/Cash Flows. Richard Claywell explains. ...

Competitive Intelligence is Key to Smart Acquisitions Part of growth is acquisition.  To do smart acquisitions, you need insight into a business owner’s thoughts—specifically, her concerns vis-à-vis selling the businesses. These are not questions with simple yes or no answers; it’s more critical to figure out what an owner thought was missing in previous acquisition overtures. What, aside from price, will i ...

All kinds of news, findings, and rulings come out that might affect the work of financial consultants and appraisers every day. When can you know when a precedent is important or something you can ignore? Or, put another way: what information is most important to pay attention to? Rand Curtiss explains. ...

The Richest and Most Comprehensive Comparables: IBA Data, 24/7. Log On Today. Business valuation has often been called an art, not a science. Revenue multiples are one key method; another is the use of comparables. Many valuators use both. KeyValueData offers NACVA members access to the IBA comparables, which are the richest and most comprehensive set of comparable available in the valuation world. Here’s a ...

Structuring Competitive Physician Compensation Models Healthcare financial executives need to understand valuation methodology to ensure legal and regulatory compliance. Specifically, when developing and reviewing their physician compensation programs, healthcare organizations should understand the market data, test outcomes of incentive plans for fair market value, and check total compensation for fair mar ...

Ten Deadliest Mistakes of Expert Witnesses Are you an expert? Technical knowledge isn’t enough, as Michael G. Kaplan explains. An effective expert witness must understand the dynamics of trial, possess excellent communication skills, and have a full command of the litigation process. Here are 10 mistakes that 35 years of experience have taught Kaplan to avoid.  ...

Myths about Middle Market Valuation Multiples Sometimes it seems as if the only requirements to be an investment banker are the ability to multiply two, usually single-digit numbers together and write your name. Hence, upon finishing the second grade, everyone is qualified. For example, take an EBITDA (earnings before interest, taxes, depreciation, and amortization) of $10MM and the median lower middle mark ...

This is increasingly a point of concern, writes Molly Williams at the Wall Street Journal's Small Business Blog. Business owners can eliminate the possibility legal chaos on this front by ensuring Web accounts are in their business' name, rather than their own.   And it's probably not a good idea to include  account numbers and passwords in wills and trusts because those can become public documents. A few s ...

Case Law—State: American Ethanol, Inc. v. Cordillera Fund, LP In American Ethanol, Inc. v. Cordillera Fund, LP, the Supreme Court of Nevada is required to weigh in on fair market value. A lower court had judged that stockholders were fairly paid some $1.75M (about $3 per share) for American Ethanol at the time of the merger. American Ethanol appealed, claiming it was worth more. Part of its argument was tha ...