Auto dealers are “poster children” for the impact of the downturn on business values
“Don’t trust historical earnings when doing the income approach for auto dealerships,” warns Jim Alerding, speaking at BVR’s webinar on Valuing Auto Dealerships. ”The next year earnings and DCF issues, which depend on future earnings, are going to be the most pertinent.” This presents a problem for appraisers with auto dealer engagements–market data, even from [...]
AICPA and NACVA BV standards help persuade court re: importance of normalization adjustments in income approach
First the trial court found that two shareholders in a South Carolina medical supply company had been diverting funds to pay themselves excessive salaries. Next, it ordered the shareholders to buy-out the dissenting owners and appointed a business appraiser to determine statutory fair value. In his engagement letter, the appraiser agreed to comply by the [...]
Mercer responds to NACVA/IBA debate on holding periods for minority interests
By Chris Mercer Let me first say that there is nothing magic about the concept of an expected holding period. Assume that the marketable minority value of a business is, indisputably, $1.00 per share. Assume that a restricted stock transaction occurred at $0.80 per share, or at a 20% discount. What was the expected [...]
Are you neglecting your cash flow forecasts?
Inputs for the cost of capital are increasingly evolving, and much debate takes place over which sources reign supreme—just look at the loyal camps that support ERP data from Duff & Phelps and those that support Ibbotson’s. With all this debate and focus on the cost of capital, are we neglecting our earnings forecasts? Linda [...]
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