To Close Deals, Find the Best Buyer, and Clearly Demonstrate Value Company owners planning to sell need to convince buyers that the premium they’re asking for is legitimate, necessary, and justified. Ron Stacey offers tips on how to validate value to potential buyers. ...

Added Ammunition Support Appraisal Assumptions Sherry Smith offers a look at data sources that can deepen and add credibility to valuations, M&A offers, and more. Pepperdine Private Capital Markets Survey, Sageworks, and a number of Secondary Markets for Private Companies (SecondMarket, Sharespost, and Triago) all offer illuminating information. ...

Federal Cases Examine Bankruptcy, Valuation Standards The Court of Appeals for the Eleventh Circuit weighs in on penalties for “gross valuation misstatement” in Gursthaw v. Commissioner, and the U.S. Bankruptcy Court for the Eastern District of Tennesee rules on the value of mortgage liens In re: Williams. ...

Calculating Discounts Accurately Depends a Lot on Company Specifics. Here’s What You Need to Know Dennis Bingham and KC Conrad provide a thorough look at options for calculating a discount for lack of marketability (DLOM), including restricted stock studies, pre-IPO studies, theoretical and option pricing models, discounted cash flow (DCF), Mandelbaum factors, and more. ...

Business Owners Need to Establish Clear Guidelines for Future Buyouts with Their Partners John Markel explains that it’s critical for partners to put together a buy-sell agreement that establishes in specific detail the standard of value, the level of value, and acceptable methods for funding a buyout. Here’s why. ...

Media Vary on Whether Election Increases or Decreases  Uncertainty;  Concur It's Good for Business A number of media outlets have begun to weigh in on the topic. At Accounting Today, the editors have put together a topical list of some of the relevant issues: ...

The FASB Lists 29 Different Intangible Asset Categories. Here’s What You Need to Know. Intangible assets have comprised an increasing proportion of the value of assets of most companies in the last decade, Gregory Marsh explains. Often a collection of intangible assets is accounted for as a single asset labeled “goodwill.” Here’s why that sometimes doesn’t make sense. ...

Disaster Area Declarations Have a Lot of Tax Implications.  Learn Specifics. Natural disasters, such as Hurricane Sandy, may provide certain tax opportunities and insurance recovery situations that business owners and individuals should be aware of.   Howard A. Lewis, MS, ABAR, AVA, and Former IRS Program Manager for Valuation Service offers insight: ...

What Can be Won by Avoiding Litigation? By using the litigation-derived adversarial process as a template to educate and a resource for better decision-making, writes Paul Leiman, owners may well find that litigation itself can be avoided. Find out how. ...

Valuators Must be More Than “Lucky Punks” How can appraisers best figure the cost of equity capital? Rand M. Curtiss argues that using standard tools including Ibbottson, Duff & Phelps, CAPM, or the Butler-Pinkerton model aren’t enough. What to use instead? Curtiss suggests starting with a look at the rate of return on mezzanine money and the rate of return on later-stage VC investments. Find out why. ...

Critically Assess Underlying Data and an Appropriate Method for Value Determination Richard Claywell regularly reviews business valuations that seem to consider the asset, market, and income approaches in forming an opinion, but that never explain or justify a weighting methodology used to arrive at a final value conclusion. Here’s why that’s a mistake.   ...

Should Losses Trigger an Immediate Charge or Later Write Down? The Financial Accounting Standards Board (FASB) is engaged in an interesting discussion with the International Accounting Standards Board (IASB) regarding how quickly bad loans need to be recognized by banks. Here’s the essence of the dispute. ...

Tax Treatment for Rebates Differs Depending on How Insurance Premiums Were First Paid The last wave of MLR rebates have either reached their recipients or are in the mail. Reed Tinsley explains how healthcare practice managers can determine the appropriate way to treat those rebates when tax time comes. ...

New Operational Risk Thinking Can Help Predict and Prevent Disasters of a Global Scale and Improve Bottom Lines as Well In an interview with Renee Boucher Ferguson of the MIT Sloan Management Review, Kathleen Long discusses some of the threats operational risk can pose to a company and how her company, Montage Analytics, is helping businesses combat these dangers. ...

ESOPs serve as a utilitarian strategy for business owners looking for unique and effective ways to improve employee benefits and business flexibility. William Stewart explains how an ESOP, depending on how you set it up, can function like a Swiss Army Knife. Depending on how you set it up, an ESOP is fully flexible. ESOPs, for instance, offer buyers and sellers a wide range of purchasing options that can va ...

The Risk-Free Rate is the Cornerstone in Finance for Estimating both the Cost of Equity and Debt Capital. In corporate finance and valuation, both academics and practitioners have long used government security (U.S. Treasury Bills and Bond) rates as proxies for risk-free rate of return. How do credit downgrades affect the risk-free rate for private company valuators? Anthony Banks explains. ...

Taxes on S-Corporations are Hotly Discussed by Legislators and May Change. Here’s the History, Standing Precedents, and Current Law. S Corporations have been much in the news lately, as we’ve noted on the QuickRead blog. In this piece, Peter Agrapides provides a comprehensive chronological account of valuation cases where the issue of tax affecting S-Corporations has taken center stage. ...

Avoid Hypotheticals. But Remember: Experienced Experts Recognize that Limited Evidence Will Often Support a More Limited Opinion Michael Kaplan explains how limited evidence can still support a limited opinion. Read about a valuator who had access to an insufficient number of documents and a hard cutoff date to complete a valuation by. Since the valuation was prepared in a manner that meets the professional ...

It’s Critical to Have an Exit Plan: But Unforeseen Disability or Untimely Death Contingencies Need to Be in Place Too. Here’s What to Consider Have you ever dreamed of selling your business and retiring to pursue a lifelong passion or hobby? Hopefully, that will happen. But, let’s face it. Life is unpredictable. ...

Here’s How To Understand the Set-Up and Then Make Pre-Valuation Adjustments Valuation gets tricky when it involves complex ownership structures. Rand Curtiss explains how to approach the appraisal of companies that own interests in other companies, companies that charge fees to affiliated companies, and groups of companies that have several owners each holding different ownership percentages. ...