Conducting Financial Due Diligence and Quality of Earnings Analysis Financial due diligence and quality of earnings reports provide a third-party analysis of a target company’s current financial position and historical financial performance. When evaluating a potential business acquisition, it is crucial to understand the nature and magnitude of the business’ cash flows. Whether from the perspective of the buyer or seller, the earnings of the business are essential to determine an appropriate purchase price or multiple to be used in pricing the deal. Furthermore, it is in the best interest of both sides of a transaction to accurately represent and…
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Quantifying the Lost Opportunity of Being First (Generic Entrant) to Market The authors in this article explore the scale of first mover advantage in generic pharmaceuticals and the methods behind quantifying the value of being first generic to market, or the loss when being prevented from doing so. They discuss, how much is it worth to be the first generic entrant to the market? Introduction The recent European Court of Justice (ECJ) ruling that the GSK-Generics UK-Alpharma pay-for-delay arrangement was potentially “by object”-restrictive, confirms the continued regulatory spotlight on treatment of intellectual property and entry in generic pharmaceutical markets.[1] Of…
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For When a Client Wants to Buy a Business The authors in this article share a checklist developed and provided to firm clients contemplating buying a business. The following are key steps involved when a client wants to buy a business. Buyers and their advisors can use this list as a timeline and road map of the steps that are expected to occur, and what they should plan on doing. A companion posting for clients that want to sell a business can be found at: https://quickreadbuzz.com/2020/06/17/business-valuation-ed-mendlowitz-task-list/ The buyer needs to make sure the seller wants to sell. The seller saying…
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the Cost of Your Reference Library? Now, there is an abundance of print and online resources that have greatly improved both our report preparation efficiency and effectiveness. Simply put, we have access to better information and are more productive in our engagements. Certainly, clients benefit from that increased access and productivity, but it comes at our ever-growing out-of-pocket library expense. So how do we recover that library cost? In this article, the author describes four practices used by his colleagues. Many of us are looking at the costs of running our practices and wondering how to run a leaner, cleaner…
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The Future is Here This article describes the background, concepts behind, and implications of blockchain technology deployment for commercial, governmental, and personal use. QuickRead readers are aware of proposals to move entirely away from cash (bills and coins) for daily transactions. Such a move is expected to create a major inconvenience for those without access to credit cards and basic banking services. Readers are also acutely aware of the huge number of significant cybersecurity events which continue to adversely affect millions of people all over the world, shaking user and consumer confidence in the dependability of the custodians of our sensitive…
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Five Ways Professional Services Websites Fall Short (Part I of II) Business leaders today know that how a firm’s website is planned and organized matters more than ever. What worked well enough five years ago to separate your firm from your competition may simply not work today. At Hinge, we audit hundreds of professional services websites a year—and we see many of the same mistakes repeated. In this article, I will explore five of the most fundamental mistakes professional services firms make long before a single page has been designed and published. Whether it was due to a broken planning…
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to Business Valuation for Attorneys Investors who hold publicly traded securities have the luxury of knowing the value of their investment at virtually any time. An internet connection and a few clicks of a mouse are all it takes to get an up-to-date stock quote. Of all U.S. companies, however, less than 1 percent are publicly traded, meaning that most companies are privately held. Investors in privately held companies do not have such a readily available value for their ownership interests. How are the values of privately held businesses determined when a couple’s assets are being divided in a divorce,…
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Expert Assignments and the Impact of COVID-19 COVID-19 has had a dramatic impact on the global economy. As the economic crisis deepened, the Wall Street Journal reported, “The nation’s bankruptcy industry is bracing for a wave of business collapses triggered by the coronavirus pandemic as its ranks have been thinned by a decade of economic growth.” Working on business bankruptcy assignments in 2020 will present a special set of challenges for experts based upon the COVID-19 pandemic. For many industries, and for many individual debtors, there may be a dearth of post-COVID operating information and widely varying views as to…
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Popular Plans to Incentivize and Retain Talent Employees and executives can get added compensation in addition to their salaries. In some cases, these benefits could exceed the salary. Most of these benefits are contractual and, where there is a discretionary element, it is usually awarded by the board of directors. This article provides a round up listing of the more popular benefits. Not included are standard benefits covering most employees. Employees and executives can get added compensation in addition to their salaries. In some cases, these benefits could exceed the salary. Most of these benefits are contractual and, where there…
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Highlights of the New Bankruptcy Chapter: Chapter 5 Many small businesses could not afford the processes in place under Chapter 11. The SRBA, signed into law in August 2019, created Chapter 5 and was intended to provide a “fresh start” to small business owners. This article highlights some of the key issues under the new law. On August 23, 2019, a relatively small, 22-page bill known as the Small Business Reorganization Act of 2018 (SBRA), was signed into law by the President of the United States. The law would become effective six months later on February 19, 2020, only weeks…
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with “Pinkcast” Daniel H. Pink is author of six provocative works about business and human behavior. His website contains videos and newsletters. In this article, Rod Burkert describes how Pinkcast changed the way he marketed, and provides six reasons why BVFLS professionals may want to consider Pinkcast as a resource. Do you struggle putting pen to paper … figuring out what to say in a 300–900-word dispatch on a client-centric blog or newsletter … or having no time to work a regular written publication into your schedule? If you have a smartphone and 120 seconds, I have a solution. Before…
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Highlights the “Good” and “Bad” Hindsight Debate Many predictions are doomed to fail whereas hindsight is undefeated. Predicting the future is very difficult due to the countless permutations that can occur. By contrast, anyone can observe what happened after the fact. Not surprisingly, it can be tempting to focus on the reliability of hindsight over the (typically) more relevant contemporaneous projections when performing assessments as of a prior date. This article addresses the “good” vs. “bad” hindsight debate within the context of COVID-19 and its implications to other matters. Introduction/Summary Many predictions are doomed to fail whereas hindsight is undefeated.…
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to Convert Leads into New Business In this post, Dr. Frederiksen shares some thoughts on ways to use virtual marketing to increase visibility, communicate your expertise, and build engagement with prospects. In the age of COVID-19, these marketing techniques are essential to a firm’s survival. In my most recent post, I explained some key advantages of virtual marketing over more traditional approaches. In this post, I will share some thoughts on ways to use virtual marketing to increase visibility, communicate your expertise, and build engagement with prospects. In the age of COVID-19, these marketing techniques are essential to a firm’s…
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Time to Revisit this Tool If you think Monte Carlo simulations are too complex to use in business valuation, you are not alone. There are three main reasons valuators shy away from using Monte Carlo analysis: 1) they do not totally understand it, 2) it involves statistical analysis and most would prefer not to relive their college statistics class, and 3) it is difficult to explain, especially to a jury. A recent survey by Business Valuation Resources (BVR), which was ongoing as of the date this article was written, indicates 51 percent of the respondents (82 respondents to date) use…
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Avoiding Trademark Infringement Sometimes you need to use your competitors’ trademarks to sell your products or services. This is particularly true when you are selling, for example, replacement parts, and need to say that your replacements are compatible with the trademark owners’ products. It can also be important when providing services such as repair. If you repair BMW automobiles, you need to let others know. Fortunately, if you do it properly, you can use them and avoid trademark infringement. This article discusses fair use of trademarks. Sometimes you need to use your competitors’ trademarks to sell your products or services.…
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and its Impact on Lost Profits Calculations These are challenging times. Financial experts are faced with economic uncertainty and differing projections from various sources as to what the “new normal” will look like. Regardless of the economic circumstances, financial experts are hired to estimate lost profits. These calculations must be made with reasonable certainty. But to be reasonably certain, proximate cause must be considered. To properly consider causation during these current times, an expert must consider the impact of the COVID-19 pandemic and the economic shutdown. Without such consideration, an expert’s report will not reflect reality and could be construed…
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Personal Damages Calculations and Exposure to COVID-19 Financial experts who, in the past, have been reluctant to take on personal injury economic damages as part of their practice should reconsider that decision today. Not only is the field growing and on the verge of a potentially huge boom driven by the COVID-19 crisis, there are plenty of resources to help you quickly get up to speed performing these types of damages analysis. This article presents three reasons for valuation practitioners to consider adding personal injury, wrongful death, and wrongful termination damages calculations to their practice, and an introduction to resources…
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In a SPAC Merger Transaction The fair value of equity consideration issued in a merger involving a public company is generally calculated as the product of the quoted price for the individual equity instrument times the quantity issued (commonly referred to a “P times Q”). However, if the merger involves a special purpose acquisition company (SPAC), determining “P” can be subjective and may result in different interpretations of U.S. GAAP fair value between the valuation specialist and the parties involved in the deal. Introduction The fair value of equity consideration issued in a merger involving a public company is generally…
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Caused by the COVID-19 Pandemic Business leaders, tax practitioners, and attorneys are considering how to address the serious challenges that may arise from disruptions in commercial activities due to business closures, travel restrictions, and stay-at-home orders that were put in place in many countries around the world in order to reduce the spread of COVID-19. This is also impacting transfer pricing systems, which is the focus of this article. Among the multitude of questions that business professionals will have to deal with will be how to manage losses attributable to these extraordinary events within their intercompany transfer pricing systems. Business…
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and “Voodoo” Economic Forecasts? One of the issues facing the business valuation community as well as business owners is the newly created accounting metric called “EBITDAC”, which stands for Earnings Before Interests, Taxes, Depreciation, Amortization, and Coronavirus. This is a non-GAAP accounting metric used by some companies today to raise more debts from lending institutions by adjusting or recasting their financial statements to account for lost earnings incurred due to the coronavirus. The author asks what coronavirus add-backs are defensible under this new normal? One of the issues facing the business valuation community as well as business owners is the…