Separability and transferability are key This overview examines intangible assets within business combinations through the lens of FAS 141. Fair value is covered as well as identification and classification protocols.
-
-
While real estate investment trusts (REITS) have strengthened their credit profiles in the last few years, Fitch Ratings is anticipating a decline in their positive rating for 2014. According to Fitch, the upgrade/downgrade ratio for U.S. REITS has remained at 10:1 since 2011 and that most have now completed their deleveraging techniques. As a result, representatives for Fitch expressed that “credit metrics may soon reach an inflection point.” For full details on the projected analysis, please visit the Appraisal Institute. [button color=”blue” link=”http://www.appraisalinstitute.org/ano/DisplayArticle/Default.aspx?volume=15&numbr=1/2&id=21205″ target=”_blank” font=”arial” align=”left”]Read Full Article[/button]
-
In an optimistic prediction from Reuters, middle market M&A activity should carry lots of opportunities throughout 2014. The positive outlook comes after a combination of more certainty with respect to Fed tapering and fewer concerns about government stalemates. The prediction also relies heavily on the observation that companies previously focused on cost savings have begun to shift their attention to strategic growth opportunities. This transition is taking place at a time when there is a large amount of capital in the pockets of both debt and equity investors. At the same time, demand for floating-rate credit assets is at record…
-
Accuracy is everything This article provides an overview of the significance of regression analysis in business valuations, with a particular emphasis when applying the Market Approach. The theory is presented as to why regression analysis is superior to ratio analysis.
-
Has the Securities and Exchange Commission given M&A business brokers the “green light” to engage in securities transactions? The Securities and Exchange Commission (SEC) issued a January 31, 2014, No-Action Letter indicating it would not take enforcement action against an M&A broker contemplating a securities transaction.
-
In an enlightening article by McKinsey & Company, a compelling case is put forward for something you always felt was true, but couldn’t quite prove. When it comes to marketing professional services or products, good old-fashioned email is much more effective than social media. How much more effective is it? The report states that email is so significant in generating new business that it’s 40 times more effective than Facebook and Twitter combined. That isn’t a license to bombard potential clients or customers with spam. McKinsey lays out an explanation of how to maximize the benefits of email without alienating…
-
Fannie Mae has officially launched a new website focused solely on appraiser quality monitoring. The site is based on Fannie’s new appraisal review process, which was created to support data accuracy and consistency. Through the site, lenders now have access to a list of appraisers whose reports are subject to a complete and thorough review by the agency, as well as those whose work is no longer accepted. Access to the list, which is updated monthly, is gained through the Technology Manager portion of Fannie’s website and is available to sellers and service providers alike. The monitoring site arises, in…
-
The next generation Pursuing an acquisition for the sake of improving the top line is risky. A company can focus on creating value by reducing their cost of capital and thereby improving their risk profile. Business valuation analysts are uniquely positioned to offer advice on risk and devise strategies for corporate clients to reduce risk exposure. These measures usually lead to improved sales, profitability and value creation. A solid foundation enables the firm to pursue strategic acquisitions with more confidence.
-
Spinoff deemed an attempt to hinder and delay debtor’s creditors In December 2012, Tronox Inc. creditors concluded their case to recover at least $14 billion in damages from Anadarko Petroleum Corp’s Kerr-McGee unit over a spin off they claimed drove Tronox into bankruptcy. In 2006, Kerr-McGee spun off part of its business as Tronox before selling itself to Anadarko for $18.4 billion. Tronox, which was previously under bankruptcy protection, alleged that Anadarko’s Kerr-McGee unit made the company insolvent by stripping away valuable oil and natural-gas assets and saddling it with legacy costs for environmental remediation. Kerr-McGee alleged the suit was…
-
In the “good old days” before the crash of 2008, Wells Fargo generated $100 billion in mortgage revenue every quarter. Now, it makes barely half that. As the largest US bank by market cap, it’s now seeking alternative business and product lines to fill that unfathomable financial gap. Sources say that Wells Fargo is exploring the idea that the virtual currency, Bitcoin, might be the perfect revenue replacement source. Now under consideration is how Bitcoin-related services or banking arrangements might be offered to virtual currency entrepreneurs. For more information on this unique turn of events, visit zerohedge.com. [button color=”blue” link=”http://www.zerohedge.com/news/2014-01-14/wells-fargo-americas-largest-bank-market-cap-pushing-offer-bitcoin-services”…
-
In 2013, 30 percent of brokered deals and 31 percent of investment bank deals fell through after a Letter of Intent was signed. According to Pepperdine University’s Graziadio School of Business and Management, valuation gaps in pricing were the number one reason that M&A ventures failed. This was followed closely by non-fiscal demands from either party that were deemed “unreasonable”. Interestingly, economic uncertainty and a lack of capital were far less influential than they had been in years past. If there is plenty of cash available, then why are so many deals failing to close? Ilan Mochari shares the answers…
-
According to Tax Court decisions Part 2 of this article examines the remaining eight most common mistakes made in valuation, based on U.S. Tax Court decisions. Court rulings may be right or wrong, but without taking sides, this article confirms the truism that experience is the best teacher. . [button color=”blue” link=”https://quickreadbuzz.com/2014/01/22/16-mistakes-avoid-valuations-part-1/” target=”_blank” font=”arial” align=”left”]Read Part 1[/button]
-
Capturing value within the horizon using accounting-based valuation This article examines two alternative approaches to the Discounted Cash Flow (DCF) Method when seeking to capture the majority of total value within the horizon. A closer look is given to the Residual Enterprise Income (REI) Method as well as the Abnormal Enterprise Income Growth Method (AGR) in comparison to the DCF Method, and a determination is made as to which method is most effective.
-
In a well-supported article by zerohedge.com, the author suggests a “fix” to the current problems with price-to-earnings (P/E) multiples. Among the questions answered are: Can P/Es tell us anything about stock valuations during periods of earning recessions? Is a bear market closer than we think? If so, when is the best time to buy? What do today’s inflated valuations mean for long-term returns? Why are outcomes so different when earnings are adjusted to account for mean reversion? The philosophy and figures are more than interesting when examined across a nearly 100-year sample, as this review does. You can read the…
-
In a brief, but telling article from Inc.com, Jeremy Quittner cites statistics from the November 2013 Janus Monthly Equity Report that suggests the tech and social media industries may be heading for a burst of 1990’s proportions. This is due largely to the outrageously enormous public debuts of companies like Facebook and most recently, Twitter. The stratospheric valuations only become more unrealistic when considering these are companies that do not create or manufacture any tangible good or service. By and large, they don’t produce anything. The report itself warns, “…cloud computing and social media are bringing a level of disruption…
-
According to Tax Court decisions Part 1 of this article examines eight of the 16 most common mistakes made in business valuation reports according to U.S. Tax Court decisions. Business valuation textbooks, training manuals, and conference presentations may do a good job of teaching the right ways to conduct valuations. But in some respects, the most authoritative teacher of what is right and, just as importantly, what is wrong is the decision of the court in a dispute over the value of a privately held business or shares thereof.
-
The Black Scholes Model The true value of a stock option is often greater than its intrinsic value. This article takes a theoretical approach to valuation that focuses on the time value of money with the Black-Scholes Option Pricing Model.
-
Income from intellectual property continues to be an increasing contributor to economic growth. Too often, however, the creator and financial advisor find themselves in a gray area when it comes to the changing tax laws surrounding patents and copyrights. Proper planning and a clear understanding of the most recent developments are essential when it comes to affecting the creator’s tax liability. In a thorough article from the AICPA’s The Tax Advisor, some of the most important issues regarding intellectual property and income are addressed, including: royalties as business and non-business income, appropriate deductions, exemptions from uniform capitalization rules, sale or…
-
New technologies are emerging in the market to fast, that we barely acquaint ourselves with one before two more burst onto the scene. Not all of these advancements will impact our world or even still be around a decade from now. The ones that do last, however, will transform the economy and our lives in significant ways. In an extremely informative and interactive report by McKinsey & Company titled, Disruptive Technologies: Advances that will transform life, business and the global economy, twelve technologies are singled out as the most significant, with a projected $33 trillion yearly impact on global markets…
-
The Frontline of Fraud Risk Management Internal fraud occurs as the result of a series of weaknesses within internal control systems, which are at the top of the fraud risk management pyramid. This article defines the three essential types of internal controls, their five interrelated components, and how they can be instituted for maximum protection.