For International Arbitration Proceedings This article highlights key valuation issues that are debated during arbitrations, which we have faced on numerous occasions. Some of the most important ones that come up during the quantification of economic damages in international arbitration are biases in financial projections, questions about discount rate, and some secondary concerns. Introduction Economic damages are seen as the Holy Grail of any international arbitration. The amount of compensation for financial losses is the ultimate goal of the claimant, who seeks to be compensated for the damage suffered, but that amount is also the main concern for the respondent,…
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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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In an ESOP Formation Financial Feasibility Analysis (Part II of II) This is the second of two-part article that discusses ESOPs. In this part, the author focuses on quality of earnings, liquidity, and plan design analyses. Owners of a private company who are looking for an exit strategy may consider the sale of all (or part) of the company to an employee stock ownership plan (ESOP). Such a strategy may be particularly attractive to baby boomer private company owners who are seeking retirement and liquidity and who would prefer to see their loyal employees retain a stake in the company…
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In Financial Projections (Part II of II) This is a two-part article that considers the review and assessment of prospective financial information. Specifically, this discussion describes the behavioral bias that may influence financial projections. This discussion should inform any party involved in compiling or assessing financial projections. This discussion is particularly relevant for fiduciaries who may be involved in the transaction or other investment decision-making process. In Part I of this article, the authors discussed key questions fiduciaries should ask to understand financial projections and eliminate or reduce bias. In this second-part, the authors discuss company-specific considerations—a qualitative approach and…
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In Financial Projections (Part I of II) This is a two-part article that considers the review and assessment of prospective financial information. Specifically, this discussion describes the behavioral bias that may influence financial projections. This discussion should inform any party involved in compiling or assessing financial projections. This discussion is particularly relevant for fiduciaries who may be involved in the transaction or other investment decision-making process. Introduction This discussion considers the review and assessment of financial projections that are prepared as part of a corporate transaction. This discussion may inform any party involved in compiling or assessing financial projections. This…