In August 2016, Pfizer announced it would acquire Medivation for $14 billion. The transaction made headlines for how the size of the deal escalated over a period of approximately six months prior to the announcement. In Part I of this series, Sujan Rajbhandary, senior member of Mercer Capital’s Financial Reporting Valuation Group, presented a broad outline of the PFE-MDVN transaction. Part II will delve more into the transaction to present some high-level observations around allocation of the purchase price. To read the full article in Mercer Capital’s Financial Reporting Blog, click: Allocating Purchase Price for a Pharma Transaction—Pfizer Acquires Medivation…
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In August 2016, Pfizer announced it would acquire Medivation for $14 billion. The transaction made headlines for how the size of the deal escalated over a period of approximately six months prior to the announcement. Sujan Rajbhandary, senior member of Mercer Capital’s Financial Reporting Valuation Group, presents in this blog post (and Part II) a broad outline of the transaction and explore what a potential purchase price allocation would look like. To read the full article in Mercer Capital’s Financial Reporting Blog, click: Allocating Purchase Price for a Pharma Transaction—Pfizer Acquires Medivation (Part I). This article is republished from Mercer…
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Part 1 of this series offered an overview of observed transaction premium data (from the 2016 Mergerstat Review) for acquisitions of public companies. That post also deliberated on one of five common avenues to incremental economic benefits that motivate market participants to transact. Part 2 walks through the four remaining variations on the incremental economic benefits theme, and offers some concluding thoughts on how to incorporate this sort of analysis into fair value measurements. Travis W. Harms, Mercer Capital Financial Reporting Valuation Group lead, explains the analyses and discusses his views. To read the full article in Mercer Capital’s Financial…
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The consistent theme of the Appraisal Foundation’s exposure draft The Measurement and Application of Market Participant Acquisition Premiums is that acquirers do not value control for its own sake, but rather for the tangible economic benefits that can be achieved by the exercise of control. Travis W. Harms, Mercer Capital Financial Reporting Valuation Group lead, explains the analyses and discusses his views. To read the full article in Mercer Capital’s Financial Reporting Blog, click: Five Variations on a Theme: Analyzing Transaction Premium Data (Part 1). This article is republished from Mercer Capital’s Financial Reporting Blog. It is reprinted with permission. …
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While observers appear to be increasingly worried about the proliferating use of non-GAAP measures, a useful debate on non-GAAP measures would probably focus on the nature of their presentation within various disclosures rather than whether or not they should be outlawed altogether. Sujan Rajbhandary, vice president, senior member of Mercer Capital’s Financial Reporting Valuation Group, explains. To read the full article in Mercer Capital’s Financial Reporting Blog, click: Non-GAAP Measures: The SEC Updates Interpretation of Disclosure Regulations. This article is republished from Mercer Capital’s Financial Reporting Blog. It is reprinted with permission. To subscribe to the blog, visit: http://mercercapital.com/category/financialreportingblog/.
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The debate over the use of non-GAAP performance measures continues. Even as the prevalence of these items grows in the financial reports of public companies, cautionary tales of the uses and abuses of such metrics garner headlines. Lucas M. Parris, senior member of Mercer Capital’s Financial Reporting Valuation Group, explains. To read the full article in Mercer Capital’s Financial Reporting Blog, click: Non-GAAP Measures: Here to Stay? This article is republished from Mercer Capital’s Financial Reporting Blog. It is reprinted with permission. To subscribe to the blog, visit: http://mercercapital.com/category/financialreportingblog/.
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Get Top Value When Selling an Accounting Firm Avoiding these seven key misconceptions can help you avoid getting less than your firm is worth. Harry L. Olson, president of Accounting Broker Acquisition Group Inc., discusses the misconceptions and what pitfalls to look out for. To find out more about this Journal of Accountancy article, click: Maximize Proceeds in Accounting Firm Sales.
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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 Financial Reporting Blog, click: Fairness Opinions and Down Markets. This article is republished from Mercer Capital’s Financial Reporting Blog. It is reprinted with permission. To subscribe to the blog, visit: http://mercercapital.com/category/financialreportingblog/.
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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 earnings.
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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 approach). The specific valuation methods selected under each engagement will be guided by the facts and circumstances surrounding the hypothetical transaction of the subject property interest (e.g., availability of data, nature of the current transactional marketplace). This article focuses on utilizing a market approach…
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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.
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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’s Financial Reporting Blog. It is reprinted with permission. To subscribe to the blog, visit http://mercercapital.com/category/financialreportingblog/.
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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 of EBITDA: Exxon Mobil and Apple. This article is republished from Mercer Capital’s Financial Reporting Blog. It is reprinted with permission. To subscribe to the blog, visit http://mercercapital.com/category/financialreportingblog/.
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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?
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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 authors discuss five common mistakes seen using the market approach.
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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.
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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.
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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.
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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 into this.” Here’s an excerpt:
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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 legitimate data to consider. But multiples can vary widely if a company is comparing itself to the wrong set of competitors. Multiples legitimately vary considerably based on the leverage a company is currently using and…