In Small Business Valuations In a recent joint business valuation review engagement, the author and a fellow appraiser discussed whether one should use market value of invested capital (MVIC) or enterprise value (EV) when applying an income approach in business valuation. In this article, the author discusses these two concepts and sheds some light on why one might use one over the other. A recent joint business valuation review engagement sparked hours-long discussion between myself and a fellow appraiser about whether we should use market value of invested capital (MVIC) or enterprise value (EV) when applying an income approach in…
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Issues Using Transactional Databases and whether there is a Florida Effect that Biases the Transaction Multiplies In this article, the author discusses issues that impact the transaction multiples. He warns appraisers that it is dangerous to assume that the data offered by the transactional databases is consistent from transaction to transaction and, therefore, can be combined into a single sample and then compared to the subject of the valuation. In the article, he discusses three issues. Those are: 1) the vast differences in selling prices reported by the transactional databases; 2) the distorting effect of Florida comparables; and 3) the…
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When it comes to money, “enough” is the hardest word to define in the English language. The challenge of defining “enough” extends to corporate managers deciding what cash balance is appropriate. Travis Harms, lead of Mercer Capital’s Financial Reporting Valuation Group, takes us through the data offering helpful tips. To read the full article in Mercer Capital’s Financial Reporting Blog, click: Is Cash Always King? 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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Introduction Valuation analysts are retained to value closely held businesses, business ownership interest, and securities for a variety of transaction, financing, taxation, accounting, litigation, and planning purposes. For each engagement, analysts consider the three generally accepted business valuation approaches: the Income Approach, the Market Approach, and the Asset-based Approach. However, most analysts rarely apply the Asset-based Approach in the typical business valuation. This column is part of a series of discussions related to the application of the asset-based valuation approach.
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On October 13, 2016, RSP Permian announced the acquisition of Silver Hill Energy for approximately $2.4 billion dollars. Based on RSPP disclosures, the assets received include: 1) wells currently producing 15,000 barrels of oil equivalent per day; and 2) 41,000 in net acreage throughout Loving and Winkler County Texas. Grant Farrell, vice president, explains the details of this transaction. To read the full article in Mercer Capital’s Financial Reporting Blog, click: RSP Permian/Silver Hill Energy: A Closer Look at the Acquisition. This article is republished from Mercer Capital’s Financial Reporting Blog. It is reprinted with permission. To subscribe to the…
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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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Assessing Solvency, Fraudulent Transfers, and Liability When Distributions are Made to Minority Shareholders The recent U.S. Tax Court case of Kardash v Commissioner, T.C. Memo, 2015–51 provides guidance regarding transferee liability and underscores how valuations are used to determine when and if a subject company is insolvent. The case also summarizes a number of defenses used (and rejected) to counter a claim of transferee liability.