Current sources of bond data for valuing promissory notes
G. Matt Barberich (Marks Nelson Vohland Campbell Radetic) is valuing a promissory note/receivable, and has asked analysts on LinkedIn’s BV Professionals group for the “best resource available to obtain current yields of notes of varying degrees of default risk (e.g., S&P ratings of Aaa, Baa, C, D, etc.), other than Moody’s Aaa and Baa corporate [...]
The size premium is alive and well
“There has been some talk in recent years suggesting that the size premium no longer exists,” James Harrington (Duff & Phelps) told the audience at the CalCPA Business Valuation Conference last Friday in San Francisco. “But research that Duff & Phelps has performed (based on data from the Center for Research in Security Prices (CRSP) [...]
Valuation analysts may overestimate the company-specific risk premium when valuing small businesses
Ted Israel (Eckhoff Accountancy Corporation) is one of several valuation practitioners that believe there is strong evidence that the small publicly traded companies that inhabit Ibbotson’s deciles 10y and 10z and Duff & Phelps’s portfolio 25 are plagued with many of the same conditions generally associated with small private companies. In his article “Risky Business: [...]
Free download on DE Chancery rejection of weak GPCM and company-specific risk
Two brothers inherited a large, closely held company from their father. One took active control and 70% of the shares; the other enjoyed his 30% interest over his lifetime, but when he died, distributed his shares to over 165 outsiders. Not surprisingly, the controlling brother authorized a reverse stock split to effectively “squeeze” out the [...]
Damodaran: Agree to disagree about the usefulness of CAPM betas
Aswath Damodaran (NYU Stern School of Business) just completed his series on “Alternatives to the CAPM: Wrapping Up.” “Find your own way of adjusting for risk in valuation but refine it and question it constantly,” the professor advises.
Beware of relying on industry trend figures when valuing a community bank
Dwight Larsen and Matthew Becker (BankValue Advisory Services) told the audience at last week’s 21st Annual Minnesota BV Conference that bank earnings are on the mend. The banking industry reported an aggregate net income of $53.6B thru 9/30/10 ($1.3B in 2009,, $4.5B in 2008; $100B in 2007) Industry ROA in 2010 3Q equaled 0.44%, up [...]
Butler Pinkerton Calculator passes a Daubert challenge
The BPC passed its first Daubert challenge in mid-December 2010 in Alamar Ranch, LLC v. County of Boise, a decision by the United States District Court (Idaho)(Civil Case No. 1:09-cv-00004 BLW). In response to the challenge, Peter Butler (Valtrend) submitted an affidavit listing the numerous instances of independent peer comments, articles, speaking engagements as evidence [...]
Damodaran’s website recommended for industry asset volatilities…but you may have to calculate debt volatility yourself…
The recent BVR webinar “The Use and Application of Option Pricing Modeling” elicited several questions from listeners, one of which was: “What is the best resource of obtaining volatility for debt? CapIQ? Bloomberg? What do you do if public comps don’t have publicly traded debt? Presenters Jim Walling (Grant Thornton) and Scott Beauchene (Strategic Value [...]
Deferred IT spending–another reason to increase company-specific risk?
Writing for Pitchbook, Stan Mork of RSM McGladrey acknowledges research by Gartner and others confirming that midsize companies have halted spending on IT upgrades and enhancements. Mork offers this very reasonable description of what this means to the value of private companies: Outdated, undersized, non-standard or custom-developed platforms point to cost, data integrity, regulatory and [...]
12 warning signs of unreliable forecasts from Tarbell and Trugman
“It’s good to be talking about business forecasts with a lot of CICBV members in the room,” began Gary Trugman at his keynote session on working with financial projections in Miami at the ASA/CICBV Annual Business Valuation Conference. “You’re all already familiar with hockey sticks.” Trugman and his co-presenter Jeff Tarbell note that USPAP doesn’t [...]
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