Does anyone know what the future holds for markets?  Perhaps fairness options can help financial advisors seek the answers they are looking for.  Jeff K. Davis, Managing Director of Mercer Capital’s Financial Institutions Group, explores this option and some issues to consider when deciding if it should be used in a falling market.   To read more about the results of this report in the Mercer Capital's ...

When Performing a Business Valuation Earnings are not always objective and valuations apply a multiple to earnings to determine a company’s value. The elements making up a company’s valuation involve determining normalized earnings, a decision whether income taxes would be applied, and the capitalization rate to be used to get the value. There are also other factors, but this article looks at the quality of ...

In Appraising Outpatient Enterprises Healthcare related outpatient enterprises provide services that do not require hospital admission and may be performed outside the premises of a hospital. Similar to valuation of any business, valuations of outpatient enterprises should include consideration of the three general approaches to valuation (i.e., the income approach, the market approach, and the asset/cost a ...

Are you aware of the warning signals when analyzing acquisition targets?  Alex Cook, president of Voyant Advisors LLC, discusses five issues to look out for when analyzing a company’s financial reporting. To find out more on the CFO article, click: Accounting Issues Mask a Seller’s True Value. ...

Calculating a prospective return takes into account many factors.  Travis W. Harms, Mercer Capital’s Financial Reporting Valuation Group, discusses what impact a “hefty” purchase price could mean for returns. To read more about the results of this report in the Mercer Capital's Financial Reporting Blog, click: Yes, Virginia, the Cost of Capital Really is Low. This article is republished from Mercer Capital' ...

Some very interesting implications can be noted comparing two different companies using EBITDA.  Z. Christopher Mercer, Founder and CEO of Mercer Capital, looks at how relying on EBITDA as a measure of cash flow can impact the valuation analysis conclusion if other measures are not considered. Read more about the results of this report in the Mercer Capital's Financial Reporting article, Public Market Views ...

If It’s Ready Scott Bulloch, an exit planning professional and advisor, shares his views on why now companies with EBITDA of $1,000,000 or more are attractive to private equity. While there are companies that will meet the minimal thresholds, not all are ready. Is your company or that of your client’s ready for private equity? ...

Beware of the Limitations of Hospital Transaction Databases The market approach is one of three established valuation approaches. In this approach the valuation analyst will look for comparable companies. In this article the authors caution against the outright use of databases as a means of developing a Conclusion of Value for a hospital. Independent verification is time-consuming and essential. The author ...

Can private companies really increase their value 80-100 percent by limiting unsystematic (controllable) risks? The November/December 2013 issue of The Value Examiner featured Ken Sanginario’s article entitled, “The Valuation Business: A Strategic Road Map for Success.” In this article, Sanginario answers questions raised by skeptics to make the case that value doubling for private companies is possible. ...

How long will it last? Dividend recapitalizations provide a mechanism for owners, including private equity firms, to return capital to them (the investors) in lieu of an outright sale. The article discusses trends, the reasons for recapitalizing, and suggests what characteristics to look for when considering this technique. ...

Understanding EBITDA applications is crucial to accurate buyout values. This analysis examines EBIDTA as an overused metric that does not represent real economic profit.  According to the author, eight subtractions are required to consistently and accurately determine true profit values.   ...

MidasFund Will Not Acquire Distressed Companies; However, it Will Buy Stable Divisions of Bankrupt Companies.  Here's Why.   "Last week’s announcement that MidasFund had started acquiring zombie companies caused a flurry of emails," writes Rob Slee on the MidasMoments blog of the MidasNation site.  "Many of you asked about the differences between acquiring distressed, zombie and healthy companies. Let’s dig ...

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 ...

Tips for Family Businesses to Survive and Thrive When Tough Times Hit Can You Revive Your Distressed Family Business?  The first step to figuring that out, Steven F. Agran explains, is an objective assessment of cost structure.  What determines whether a business can be cash flow positive at current sales levels or even at lower levels, if sales continue to decline?  Find out here. ...

Ron Stacey considers Return on Invested Capital (ROIC) and growth using EBITDA as a proxy for cash flow. ROIC, Stacey writes, is a critical value driver that’s probably the single most important factor for a given cost of capital.  But calculation is never simple: “People always want a formula, but it doesn’t work that way,” Warren Buffet once noted. “You have to estimate total cash generated from now to et ...

Be Careful When Using EBITDA for the Terminal Valuation Calculation If you’re going to construct consistent valuations, use earnings instead of cash flows in your calculations. Why is it important to be consistent? Because you have to calculate a discount rate based on one or the other. Richard Claywell explains. ...

Myths about Middle Market Valuation Multiples Sometimes it seems as if the only requirements to be an investment banker are the ability to multiply two, usually single-digit numbers together and write your name. Hence, upon finishing the second grade, everyone is qualified. For example, take an EBITDA (earnings before interest, taxes, depreciation, and amortization) of $10MM and the median lower middle mark ...