Disputes Defensible Best Practices (Part 2 in a 3-Part Series) In this second part of a three part series, the author looks at examples of how potential catastrophes have been avoided or reversed by employing a comprehensive policy audit. He then focuses on what is needed to make a policy audit dispute defensible.
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Practice Pointers from the Field How can a credentialed valuation analyst compete with a low-cost provider of valuation services performed by a professional lacking a business valuation credential? In this article, the author shares how he has succeeded conveying the value of using a credentialed and qualified business appraiser.
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Investors, analysts, and pundits remain highly optimistic on the Financial Technology (“FinTech”) sector driven by factors such as technology advancement and evolution, evolving consumer behavior and expectations for digital delivery of financial services, and regulatory response to the financial crisis. Mercer Capital examines valuation multiples within the FinTech industry over time to see whether public markets are reflecting these trends as well. They report that a FinTech bubble is emerging or starting to form as margins are generally down across various FinTech niches while valuation multiples have expanded. Find out more in the Mercer Capital’s Financial Reporting article, Is a…
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High account balances is an often overlooked risk related to sequence of returns especially for investors within five years of their retirement. Ron Surz, target-date fund expert and ThinkAdvisor contributor, warns that most target-date investors are in grave peril. Read more about why sequence of returns is so risky in this article at ThinkAdvisor.
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In Economic Substance Analyses Valuation analysts and other financial advisers are often called on to perform economic substance analyses in federal income tax challenges. In these cases, the Internal Revenue Service challenges a tax deduction or loss related to a taxpayer transaction by applying the so-called economic substance doctrine. This doctrine allows the Service to disallow a taxpayer transaction if the taxpayer (or the taxpayer’s expert witness) cannot prove that: 1) the taxpayer expected to earn a profit (absent any income tax considerations) on the transaction, and 2) the taxpayer had a reasonable business purpose for entering into the transaction.…
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Forecasting “But-For” Revenue for Lost Profits In this article, the author provides a brief discussion of each major approach considered in an economic damages engagement and then discusses circumstances in which multivariate analysis could provide the greatest benefit in formulating a comprehensive damage model.
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This blog discusses the four-step process for providing fair value marks for venture capital fund investments in pre-public companies: 1) examining the most recent financing round economics, 2) adjusting valuation inputs to the measurement date, 3) measuring fair value, and 4) reconciling and testing for reasonableness. Sujan Rajbhandary, vice president in Mercer Capital’s Financial Reporting Valuation Group, discusses each step in the process including the option pricing method (OPM) and the probability-weighted expected return method (PWERM). Find out more in the Mercer Capital’s Financial Reporting article, How to Value Venture Capital Portfolio Investments. This article is republished from Mercer Capital’s…
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Scenario planning, an effective decision-making tool under uncertainty, is underutilized by organizations primarily due to deep-seated cognitive biases that exist. Drew Erdmann, Bernardo Sichel, and Luk Yeung of McKinsey & Company tell managers how to address these common biases and provide guidance along with a practice cheat sheet on the dos and don’ts of scenario planning. Read more on scenario planning and how to make it a successful tool for your organization in the McKinsey article, Overcoming obstacles to effective scenario planning.
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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 follow this three part series.
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Healthcare Valuation Considerations when Valuing Outpatient Services With healthcare evolving, how can practitioners project the future benefit stream related to outpatient services? In this article, the authors discuss the use of hypothetical and extraordinary assumptions. They argue that use of these assumptions requires careful consideration as they can have a significant effect on value. In addition, the valuation analyst must adhere to the disclosure requirements set forth in USPAP which requires the valuation analyst to clearly and accurately disclose all assumptions used in the assignment
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In this post, Samantha L. Albert, senior financial analyst with Mercer Capital, talks about the FASB’s Simplification Initiative which is designed to make small changes to GAAP that will reduce costs and complexity, while maintaining or improving the usefulness of financial statements. One potential change announced on May 21, 2015 is to ASC Topic 805. The FASB has proposed modifying standards related to how companies are required to account for business combinations. Companies would only be required to recognize adjustments in the current reporting period and would not need to restate prior periods. Find out more in the Mercer Capital’s…
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Cram Down Interest Rates (Part II of II) In this two-part series the author provides as overview of the issues confronted by courts and financial experts involved in a commercial real estate (CRE) bankruptcy. Read the first part in this series here. In this second part, the author continues the discussion regarding how a financial expert may go about to determine the appropriate interest rate for the underlying claims and analyze the CRE market. In addition, the author provides an example to illustrate the issues that will arise in the court proceeding.
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Conducting Due Diligence on the Expert and Setting Expectations of the Expert Witness in a Litigation Engagement One of the risks of doing business today is getting involved in business disputes. Disputes take many forms. Disputes can be resolved through negotiation, mediation, arbitration, or litigation. Business disputes are frequently complex and the parties involved are sophisticated and motivated to succeed. It has become routine in complex commercial disputes to use expert witnesses to assist in preparing a case and in interpreting the facts of the dispute. Expert witness testimony and expert reports have become the norm in commercial disputes. This…
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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 ‘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 Capital (MCGC) by PennantPark Floating Rate Capital Ltd. (PFLT) and how it is “likely the exception that proves the rule.” Find out more in the Mercer Capital’s Financial Reporting article, A Capital Raise in Acquisition Clothing? This article is republished from Mercer…