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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The Opportunity for Value Growth Services How can one differentiate oneself? Scale production or services? Whether you’re an M&A advisor, a business valuator, a CPA, a transition planner, or a turnaround consultant, you would probably be very successful if you could consistently execute this simple growth strategy. For most people, the challenges of differentiating and scaling often seem to prevent success. However, once you know the secret to differentiating, landing the highly profitable new client becomes exponentially easier. In this article, Kenneth Sanginario shares his views on how to unlock client value and unleash firm growth.
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M&A is an infrequent occurrence among business development companies (BDCs). “Under the external management model, the opportunity for material cost savings is limited, and prices at or near NAV indicate that investors assign little ‘franchise’ value to the lending and origination platforms.” Travis W. Harms, of Mercer Capital’s Financial Reporting Valuation Group, discusses the recent acquisition of MCG Capital (MCGC) by PennantPark Floating Rate Capital Ltd. (PFLT) and how it is “likely the exception that proves the rule.” Find out more in the Mercer Capital’s Financial Reporting article, A Capital Raise in Acquisition Clothing? This article is republished from Mercer…
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Fairness opinions are offered by financial advisors, primarily, investment bankers on behalf of the Board of Directors who rely on them when considering a significant corporate event. The fairness opinion says that the impending transaction is fair from a financial point of view of the subject company’s stakeholders. As Jeff K. Davis, Managing Director of Mercer Capital’s Financial Institutions Group, explains, because most of the investment banker’s fee is contingent upon the successful closing of a transaction, the lead banker’s opinion has always had some taint. In 2007, the Financial Industry Regulatory Authority (“FINRA”) issued Rule 2290, which requires the…
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M&A activity has accelerated substantially in 2014 following the financial crisis. When an acquisition proposal is being weighed, there needs to be a thorough vetting of the buyer’s shares. A fairness opinion evaluates the investment merits of the shares before and after a transaction is consummated says Jeff K. Davis, CFA with Mercer Capital. This article discusses the key questions you need to ask about the buyer’s shares. [button color=”blue” link=”http://mercercapital.com/financialreportingblog/fairness-opinions-evaluating-buyers-shares/” target=”_blank” font=”arial” align=”left”]To learn more about fairness opinions, click here.[/button] This article is republished from Mercer Capital’s Financial Reporting Blog. It is reprinted with permission. To subscribe to the…
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As if the general public hadn’t lost enough faith in the stock market with recent revelations of rigged deal-making that benefits only a few, a new study shows that 25 percent of all M&A deals between public companies involve some kind of insider trading. The study, conducted by McGill University and New York University, looked at informed trading activity in equity options prior to the announcement of corporate deals. The study’s abstract states: For the target companies, we document pervasive directional options activity, consistent with strategies that would yield abnormal returns to investors with private information. This is demonstrated…
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New changes to the law could mean new client service opportunities The Securities and Exchange Commission (SEC) has issued a No Action Letter that allows unlicensed professionals to receive commissions for the sale of privately held securities in a sales transaction.
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In 2013, 30 percent of brokered deals and 31 percent of investment bank deals fell through after a Letter of Intent was signed. According to Pepperdine University’s Graziadio School of Business and Management, valuation gaps in pricing were the number one reason that M&A ventures failed. This was followed closely by non-fiscal demands from either party that were deemed “unreasonable”. Interestingly, economic uncertainty and a lack of capital were far less influential than they had been in years past. If there is plenty of cash available, then why are so many deals failing to close? Ilan Mochari shares the answers…
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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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It’s Responsible and Efficient to Begin Appraisals by Granting Certain Assumptions and Respecting Precedent. Here’s Why. All kinds of news, findings, and rulings come out that might affect the work of financial consultants and appraisers every day. When can you know when a precedent is important or something you can ignore? Or, put another way: what information is most important to pay attention to? Rand Curtiss explains.
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Buyers and Sellers Have Different Relative Negotiation Advantages, and the Letter of Intent in an Engagement Helps Define Terms. Here’s How. While perhaps not the longest or most expensive document among those found in the in the M&A process, the letter of intent (LOI) may well be the most important, particularly to the seller. The LOI sets the tone for the transaction and serves as the road map for the due diligence and the definitive agreements. Ron Stacey explains.
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Both Buyers and Sellers Should Follow a Careful Process to Realize a Successful Transaction. Here are Some Tips A successful business sale will ideally leave both the buyer and seller feeling the transaction was a success. Charles Andrews recaps questions that he asks sellers before accepting an engagement as a transaction advisor and lists ten steps defining a business sale process most likely to satisfy both buyer and seller.
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Choosing an Appropriate Weighted Average Cost of Capital Definition Sometimes Depends On Context Valuation principles generally hold that the value of a business is largely a function of return on invested capital and growth, writes J. Richard Claywell, since these are the primary drivers of free cash flow. But how does this cash flow relate to the asset and liability values on the balance sheet?
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Buyers and Sellers Need to Negotiate Delivery Targets for Working Capital and Agree on a Fair Market Value for Fixed Assets. Valuation principles generally hold that the value of a business is largely a function of return on invested capital and growth, writes Ron Stacey, since these are the primary drivers of free cash flow. But how does this cash flow relate to the asset and liability values on the balance sheet?
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Few Business Owners Seem to Even Know How to Make a Good Guess at What Their Business is Worth. NY Times Introduces Technology to Help—and Certified Advisers Provide Extra Value. Mark Cohen, at The New York Times Small Business Guide, reports: “At 53, Joe Ritz is old enough to remember a time when many of the classic cars that now pull into his specialized repair shop were new. “It’s one field where it pays to be a senior citizen,” he said. It’s Critical for a Business Owner to Know the Value of His Business; Here are Tips on Technology, Advisors,…
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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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Deal Activity Will Likely See a Surge in 2013 if a Meaningful Deficit-Reduction Compromise Can Be Reached Wallace Witkowski at Marketwatch reported in mid-December that deal activity will likely see a surge in 2013 if a meaningful deficit-reduction compromise can be reached. Otherwise the market will remain stunted as it was in the past year. Democrats and Republicans didn’t come to a full agreement by year end, or even early January, but the fact that it’s still possible within weeks and months allows his prediction to stand:
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The “Market” is Not Always Right When it Comes to Value, Especially in M&A Transactions The mergers and acquisitions market began a slow recovery this last year after a sharp downturn in 2009. Was the slowdown caused by banks reducing lending activity, cash hoarding by businesses, economic uncertainty, or the simple failure of buyers and seller to agree upon price? Michael Blake takes a look at how value is variously defined—“fair market value,” “fair value,” “investment value,” and “market value”—and offers an assessment of what may prove to be the primary market M&A activity drivers going forward.
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Ahead of the new health-care law, small firms worry about crossing the crucial 50-person threshold — and about rising premium rates Emily Maltby at the WSJ Law blog reports on increasing concerns about the forthcoming healthcare laws among small business owners. This seems to be a prominent issue and concern among small business owners, and has been noted in most every major media outlet in recent weeks, from the New York Times to Forbes, CNN, US News & World Report, FoxNews, The Economist, The Hill, the Washington Post, and more:
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U.S. Middle Market Leaders Express Preferences re: Spending, Debt, and Fiscal Cliff The National Center for the Middle Market (NCMM) recently (early December 2012) conducted a survey of 1,000 U.S. middle market business leaders across all industry sectors and geographic regions to gauge their preferences for the outcome of the negotiations. Here’s what they found: