When Valuators Use a Weighted Average Cost of Capital (WACC) to Determine a Discount Rate, the Rate Needs to Be “Iterated.” Here’s Why. When an expert determines a discount rate for a controlling interest in a valuation using the Weighted Average Cost of Capital (WACC), that discount rate needs to be iterated. Since market values of debt and equity in a closely held company are not publicly traded and known ...

Innovation Decreased by 40% at Technology Companies After They Went Public, Finds Stanford Graduate School of Business Study Leslie Kwoh at the Wall Street Journal reports that while many tech entrepreneurs dream of taking their companies public, they may want to think twice.  While public offerings raise cash, new research suggests that IPOs can also result in stunted innovation at technology firms.   Here ...

The Method You Choose Depends On the Data You Have Application of discounts and premiums is one area where valuators demonstrate added value. Paul R. Hyde shows how and when to choose the most appropriate analytical method. ...

The Weighted Average Method of Estimating Expected Future Earnings is Based on the Average or Arithmetic Mean. Here’s Why that’s Important. Companies that are growing in revenue need to be valued regularly, and they need to be valued with their future growth in mind. The weighted average approach is a valuable tool. But Richard Claywell suggests caution in using it to extrapolate large projections of future ...

U.S.-Based Multinationals Reporting Under IFRS Struggle With Classification of Equities, Liabilities The International Accounting Standards Board agreed with respondents from its public consultation (a study that reached out to industry professionals at all levels in more than 80 countries in 2011) that it needs to better clarify definitions of assets and liabilities for debt instruments, CFO.com reports. T ...

An Interview with Jeremy Levine, a Partner at Bessemer Venture Partners As the new year begins, the Wall Street Journal's Venture Capital Dispatch — which focuses largely on high-tech start-ups and their investors — has asked several venture capital investors to reflect on the past year and give us their outlook for 2013.  Recently, it spoke with Jeremy Levine, a partner at Bessemer Venture Partners. Levine ...

Barnes & Noble’s Missing $500 Million; A Discrepancy Between Physical and Digital Property Values Tom Gara reports at The Wall Street Journal Corporate Intelligence blog that "UK-based publisher Pearson bought into Barnes & Noble's Nook Media digital business today [12/28/12], buying a 5% stake in the e-book company for $89.5 million and valuing the whole business at just under $1.8 billion. ...

Focus is Key to Successful Valuation, Time Management, and Business Growth. Here’s How to Size Up a Project. Rand Curtiss shares insight on queries that allow appraisers to drill down quickly and determine the proper approach and charge for work. What’s the primary goal of the appraisal? Was the last historical year typical—and are there any major atypical facts or circumstances? Find out if the company is ...

New IBA Market Database Tools Empower Valuators to Provide More Concise and Accurate Results: Here’s How. The IBA Market Database includes close to 40,000 comparables, a valuation analyzer, and lots more. Paul French’s review, from the National Litigation Consultants’ Review (NLCR), explains the depth of data now available on the web, and explains how to leverage this exciting new tool. ...

Uncertain How to Assess the Legitimacy of Price Multiples? Here Are Some Tips! Rand Curtiss explains how to used reasoned judgment, statistical techniques, and comparative analysis to defensibly develop and support pricing multiples in an appraisal. ...

Valuation Experts Need to Be an Integral Part of Every Business Owners’ Initial Plan. Herbert Kalman explains why business owners need to begin thinking about an eventual exit from their very beginning plans. Here’s solid advice on the value and structure of buy-sell agreements, formal business planning, annual valuations, networking, and other planning essentials. ...

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. ...

Is Brand Value Best Calculated by Deducting and Capitalizing Franchise and Management Fees?  Or by Weighing Brand Value as a Factor of Revenue?   A debate is swirling in the appraisal community regarding the value of intangibles, most notably brand affiliation, reports Patrick Maycock at HotelNewsNow.com.  While one party holds to a more traditional viewpoint that calculates such intangibles by deducting an ...

A Premium Multiple is Hard to Come By and Harder to Keep;  Owners Should Worry More About Improving Performance  Susan Nolen Foushee, Tim Koller, and Anand Mehta make the case in McKinsey Quarterly that executives considering company value often worry too much about their company's multiple (e.g., a P/E ratio, or EV/EBIDTA, etc.) instead of focusing on company growth.   It isn't that multiples aren't legiti ...

More Than Just Valuation: How to Seize Opportunities by Getting Out of Your Comfort Zone It’s a trap to define yourself as a valuator, rather than someone in the “problem-solving” business. Rand Curtiss explains why. ...

Redefining the Value of Appraisals, and Helping Clients Understand Paul R. Hyde discusses how appraisals come in a variety of configurations based on client needs. Here are tips on how to balance these conflicting demands, and how best to set the expectation for work in valuation. ...

Implications of the SEC IFRS Work Plan for Private and Public Issuers; How Slow Adoption May Rewrite GAAP   Grant Thornton Audit Services has published a 16-page report providing background and context on IFRS in the United States.   The report explores how market forces press the issue, cover SEC final report highlights and reaction to the report, summarizes how some companies are preparing for IFRS today, ...

Although 2013 Rates Are Still Unclear, Smart Planners Are Making These Moves Today Laura Sanders at the Wall Street Journal reports that the annual scramble to make smart tax moves before December 31 is proving especially vexing this year, since Congress still hasn’t settled 2013 tax rates on income, investments, large gifts, and estates. Deductions and other breaks are in doubt.  And some questions—such as ...

The Definition of Risk is Standard Deviation of Returns; Here’s What it Means, and What it Has to Do with “Total Beta” Is the Capital Asset Pricing Model (CAPM) superior as a valuation modeling tool to Total Beta? Peter J. Butler and Gary Schurman think not. Here’s why: ...

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. ...