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 [...]
Should a Private Cost of Capital Method replace CAPM and BUM?
Most appraisers recognize the judgments and assumptions built into the process of converting measurable public market data into proxies for private company valuation. Capital asset pricing needs to be “modified” with a series of adjustments to the cost of capital figures derived from the public markets. This standard valuation process that has some financial theory [...]
Experts address the challenges of valuing software companies
This Thursday June 24th, BVR’s Webinar Industry Spotlight Series presents “Software Company Valuation,” hosted by Mike Pellegrino (Pellegrino & Associates) and Robert Schlegel (Houlihan Valuation Advisors). Schlegel and Pellegrino, a former software engineer and author of BVR’s Guide to Intellectual Property Valuation, will tackle the valuation challenges appraisers face when valuing software companies. For more [...]
NACVA attendees debate whether there’s such a thing as a “key person discount?”
It makes sense that a closely held business would be worth less when the key person is no longer going to be part of teh business. In fact, this is often the case when the valuation is being performed for an estate when the decedent was the key person in the business. But, there’s [...]
Is probability-weighted forecasting in our future?
A discussion in the halls in Miami today centered around the increasing tendency of some appraisers to submit multiple projections of future incomes–perhaps low, medium, and high. There are some arguments for this practice; particularly in a market environment where volatility dominates. But, there are several arguments against this practice. First, you’ve now [...]
Live from NACVA: Pricing for tax valuations: “a race to the bottom” unless you compete on value.
“There’s a theory that business owners will pay for value, but not for compliance,” said Warren Miller, describing his SPARC system. “That’s one reason why there’s so much price competition for tax valuations.” But, Miller argues, $25,000 engagements are more common when business analysis or additional risk reduction is offered. “If you’re stuck competing against [...]
A mathematical view of the Butler Pinkerton Calculator
Gary Schurman (Applied Business Economics) discusses the derivation of the theory behind the Butler Pinkerton Calculator in his article, “Derivation of The Butler-Pinkerton Model.” Schurman presents the financial theory behind a private company beta (also known as total beta or adjusted total beta) to account for sub-optimal diversification (no diversification or partial diversification). Click here [...]
Free resource accounts for portfolio diversification factor in total cost of equity (TCOE) analyses
Earlier today BVR updated FAQ 46i on the Butler-Pinkerton Calculator’s FAQ page which addresses concerns that the BPC metrics stem from an undiversified portfolio perspective. This FAQ includes a link to a spreadsheet that helps to account for the average diversification of a hypothetical buyer pool. The spreadsheet has been updated, simplified and posted online.
What equity risk and size premia are you now using?
Here’s some current benchmark data from John Paglia and Robert Slee. As part of their current Pepperdine Private Capital Markets Project survey, they also asked appraisers what equity risk premia, size premia, company specific risk factors, and risk-free rates they are now using. Again, after all the commentary on how to handle recent volatility (much of it [...]
RJ Dragon compares Butler Pinkerton Calculator debate to “thrilla in Manila”
We’ll all have to wear boxing equipment to the next ASA meeting! Click here to read RJ’s blog.
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