BVR. Free Download. Does Black Scholes Overvalue Early Stage Company Allocations? What It s Worth
|
|
- Austen Dixon
- 5 years ago
- Views:
Transcription
1 BVR What It s Worth Free Download Does Black Scholes Overvalue Early Stage Company Allocations? Thank you for visiting Business Valuation Resources, the leading provider of quality acquisition data and analysis. For more information about any of our premier valuation products or services, please call (503) ext. 2 or info@bvresources.com. You may also download our complete product brochure at: For permission requests, please permissions@bvresources.com. Business Valuation Resources, LLC 1000 SW Broadway, Suite 1200 Portland, OR (503) info@bvresources.com
2 Business Valuation Update From the developers of Pratt s Stats Timely news, analysis, and resources for defensible valuations Vol. 16, No. 1, January 2010 Does Black Scholes Overvalue Early Stage Company Allocations? By James Walling and Cindy Moore Valuation practitioners have adopted the Black Scholes Merton option pricing model ( BSOPM ) as a method for allocating the value of a firm amongst the various securities within a firm s capital structure. This adoption has been promoted both by its acceptance even as a preferred method by the auditing community, and by its inclusion in the AICPA practice guide as an example of an acceptable method for allocating value. However, a growing group of practitioners and auditors are acknowledging the model s weaknesses and indentifying a number of cases when its use is not appropriate. A key underlying assumption of the BSOPM is that the distribution of future equity values is log-normally distributed. Understanding this assumption, and the limitations it creates for applying the model, is critical in deciding if the model is appropriate for the facts and circumstances of an allocation calculation. Our recent research into the distribution of exit values in the software, medical device/equipment, and biopharmaceuticals industries suggests that the exit prices are highly skewed toward failure. This data raises questions regarding the frequency of the industry s use of this model. Why the BSOPM works better for public vs. private companies. The BSOPM has several underlying assumptions that are typical of academic finance, including risk free positive drift, no taxes, and, perhaps most importantly, a lognormal distribution for evolving future prices. The model was developed for pricing options on publicly traded firms. At the time the model was developed, the vast majority of options on publicly traded firms had terms of nine months or less. Given that a firm is sufficiently large such that they are public, that they have sufficient trading volume to have options trading, and have a focus on a term of nine months or less, the likelihood of failure is low. Thus, a lognormal expectation of price outcomes, with its probability of failure approaching zero, is a reasonable representation. Contrast this to an early stage, venture-backed software company where failure is the most likely outcome. Further, finance professionals have long known that the BSOPM overvalues options with extended terms and that the model tends to break down for options that are deep in or out of the money. This is a function of both a constant volatility assumption and risk free positive drift. Valuation professionals allocating the equity of early stage companies often use terms of three years or more and, depending on the preferred investor liquidation preferences, these options are often deep out-of-the-money or in-the-money. Early stage company prices. Much early stage pricing (defined for our purposes as the exit value divided by the capital invested, i.e., Gross Value Multiples ( GVM )) has focused in the aggregate to try to contrast the distribution of these prices to that implied by the lognormal distribution assumption underlying the BSOPM. These aggregate studies have shown that a lognormal distribution understates the likelihood of failure as well as the likelihood of a massive success. Some practitioners have resolved this with the justification: well, they should offset each other, so it s still a reasonable representation. BVResources.com
3 Business Valuation Update Executive Editor: Contributing Editors: Vanessa Pancic, Doug Twitchell Managing Editor: Customer Service: Publisher: Sales and Site Licenses: President: Sherrye Henry Jr. Adam Manson, David Foster Stephanie Crader Doug Twitchell Linda Mendenhall Lucretia Lyons Editorial Advisory Board NEIL J. BEATON CPA/ABV, CFA, ASA GRANT THORNTON SEATTLE, WASH. JOHN A. BOGDANSKI, ESQ. LEWIS & CLARK LAW SCHOOL PORTLAND, ORE. NANCY J. FANNON ASA, CPA/ABV, MCBA FANNON VALUATION GROUP PORTLAND, ME. JAY E. FISHMAN FASA, CBA FINANCIAL RESEARCH ASSOCIATES BALA CYNWYD, PA. LYNNE Z. GOLD-BIKIN, ESQ. WOLF, BLOCK, SCHORR & SOLIS-COHEN NORRISTOWN, PA. LANCE S. HALL, ASA FMV OPINIONS IRVINE, CALIF. JAMES R. HITCHNER CPA/ABV, ASA THE FINANCIAL VALUATION GROUP ATLANTA, GA. JARED KAPLAN, ESQ. MCDERMOTT, WILL & EMERY CHICAGO, ILL. JAMES S. RIGBY, ASA, CPA/ABV IN MEMORIAM ( ) GILBERT E. MATTHEWS CFA SUTTER SECURITIES INCORPORATED SAN FRANCISCO, CALIF. Z. CHRISTOPHER MERCER ASA, CFA MERCER CAPITAL MEMPHIS, TENN. JOHN W. PORTER BAKER & BOTTS HOUSTON, TX. RONALD L. SEIGNEUR MBA CPA/ABV CVA SEIGNEUR GUSTAFSON LAKEWOOD, COLO. BRUCE SILVERSTEIN, ESQ. YOUNG, CONAWAY, STARGATT & TAYLOR WILMINGTON, DEL. JEFFREY S. TARBELL ASA, CFA HOULIHAN LOKEY SAN FRANCISCO, CALIF. GARY R. TRUGMAN ASA, CPA/ABV, MCBA, MVS TRUGMAN VALUATION ASSOCIATES PLANTATION, FLA. KEVIN R. YEANOPLOS CPA/ABV/CFF, ASA BRUEGGEMAN & JOHNSON YEANOPLOS, P.C. TUCSON, ARIZ. Business Valuation Update (ISSN ) is published monthly by Business Valuation Resources, LLC, 1000 SW Broadway, Suite 1200, Portland, OR, Periodicals Postage Paid at Portland, OR, and at additional mailing offices. Postmaster: Send address changes to Business Valuation Update, Business Valuation Resources, LLC, 1000 SW Broadway, Suite 1200, Portland, OR, The annual subscription price for the Business Valuation Update is $339. Low cost site licenses are available for those wishing to distribute the BVU to their colleagues at the same address. Contact our sales department for details. Please feel free to contact us via at via phone at , via fax at or visit our website at BVResources.com. Editorial and subscription requests may be made via , mail, fax or phone. Please note that by submitting material to BVU, you are granting permission for the newsletter to republish your material in electronic form. Although the information in this newsletter has been obtained from sources that BVR believes to be reliable, we do not guarantee its accuracy, and such information may be condensed or incomplete. This newsletter is intended for information purposes only, and it is not intended as financial, investment, legal, or consulting advice. Copyright 2009, Business Valuation Resources, LLC, (BVR). All rights reserved. No part of this newsletter may be reproduced without express written consent from BVR. No one has done the work to figure out just what this impact is, but anecdotal evidence implies that the impact is to overstate common stock values. Further, differing industries may have differing exit value distributions. Consider the medical device industry. A successful exit in this space provides a 4-5x return to investors and a 10x return is considered a homerun. Compare that to the software industry, where a 10x return is a success, but homeruns are measured against the likes of Google or Microsoft. Research and results. To try to measure the degree to which a lognormal distribution is not a representative distribution, we have performed an empirical examination of the returns to equity holders in venture-financed technology and life sciences firms, limiting our analysis to subsectors for software, medical devices/equipment, and biopharmaceuticals. As with most research in this area, getting sufficiently complete data is the greatest challenge. We selected the Dow Jones/VentureSource data set. Our research focused on all exits from January 2001 through January 2008 and defined an exit as an Initial Public Offering (IPO), a merger/acquisition (M&A), or an out-of-business exit. It is important to note that for a significant portion of M&A exits each year, the deal value is not reported. We have excluded these exits from our analysis. Specifically, for software, approximately 35% of the exits were excluded; for biopharmaceuticals, approximately 16% of the exits were excluded; and for medical equipment and device, approximately 18% of the exits were excluded. While we have excluded these due to lack of an exit value, common sense would infer that these are mostly fire sales of assets or companies that most investors are not particularly excited to disclose. Our view is that these would likely materially increase the 0-1x return segment of the exit data. It is also likely that a small percentage of companies in the dataset have missing (unreported) equity financings, or that the amount of the equity Reprinted with permissions from Business Valuation Resources, LLC 2 Business Valuation Update January 2010
4 Figure 1 Exit Volume (# of co.'s) Exit Multiples: Software for Exit Years Exit Years Exit Years Exit Years < < Exit Multiple Figure 2 Figure 3 January 2010 Business Valuation Update 3
5 Figure 4 Figure 5 Figure 6 4 Business Valuation Update January 2010
6 financing is misreported. We have not accounted for this, as we surmise the portion is small enough that it will not materially affect our findings. Figures 1-3 show the distribution of exits based on the actual number of companies. We define an exit as an Initial Public Offering (IPO), a merger/acquisition (M&A), or an out-of-business exit. Exit values are defined as follows: IPO: the Company-Value-at-Exit is the premoney value at IPO. M&A: the Company-Value-at-Exit is the amount the company was acquired for. Out-of-business exit: the Company-Value-at- Exit is zero. Consistent with aggregate industry research, our analysis suggests that the underlying distribution of equity values is highly skewed toward failure for early stage technology and life sciences companies, and, as can be seen, it varies significantly by industry. Figures 4-6 show the distribution of exits as a percent of the sample set, which is more appropriate for comparison against the typical lognormal probability density function. The difference in these distributions, as compared to that implied by a lognormal distribution, is sufficiently pronounced to bring into question the efficacy of using the BSOPM for equity allocation for early stage companies. Equity allocation using the BSOPM for these types of companies may materially over-estimate the optionality in the common shares, and, hence, overstate their value. However, a careful look at the impact at various points on the GVM exits provides some additional insights. Distributions and the Preferred-to-Common Ratio. Standard operating procedure in Silicon Valley startups until the late 1990s maintained a preferred to common ratio of 1:10, (i.e., the common shares were worth ten percent of the preferred share value). What few people know is that this ratio was not established by valuation professionals or even by investors; it was established in the late 1970s by a group of high-powered Silicon Valley lawyers as way of limiting their risk in advising clients it had no economic basis. More recently, anecdotal evidence puts the relationship in the 1:4 to 1:7 range, with instances outside this range not unheard of. But what drives this range and relationship? The distribution of exits is enlightening. Consider the research results. A large volume of exits result in zero return to investors. In such cases the returns to the preferred and common shares are the same, so within this segment the common equals the preferred. Next, consider the segment where returns vary from.1x to 1x, a small segment at seven to fifteen percent of exits. In this segment, the preferred has value but the common does not, as a result of the liquidation preferences. Recall that we have a large number of M&A deals without pricing (35 percent in software!). We would expect most of those deals to reside in this space, where preferred investors are getting some level of return and common receive little, if any. Recent trends in liquidation preferences are expanding this segment to as high as 3x, which increases this segment materially, ranging from 18 to 42 percent. Further, with the majority of preferred shares now including participation rights, once the liquidation preferences are satisfied the preferred shares participate in value accretion with the common stealing value and further disadvantaging the common relative to the preferred. In the 3x and above segment, ranging from eight to twenty seven percent, there is usually sufficient value that the common and preferred will be equal, as the preferred will convert to common and receive more value than by simply taking their liquidation preference. However, the type of exit becomes relevant and participating preferred often double dip in an M&A exit, receiving both their liquidation preference and their participation, while in an IPO, it s an either/or situation. Now consider a lognormal distribution. There are virtually no zero exits. Exit values depend heavily on the current value of the company and the volatility. The high volatilities of these companies, applied over an extended term, push the exit values to the 3x and above range, easily making the common appear of similar value to January 2010 Business Valuation Update 5
7 the preferred, unless the common is materially out-of-the-money at the current valuation. Thus a lognormal distribution minimizes the zero value, common equals preferred segment, but may maximize the 3x+ common equals preferred segment. The relevance of the segment where preferred is superior to common depends on the starting point of the valuation relative to the preference stack. Conclusion Our research shows that the actual distribution of exit prices for early stage companies is materially different than the lognormal distribution underlying the BSOPM model that the industry relies upon. It further shows that exit distributions can vary materially based on industry. Careful consideration of these distributions provides insight into expected preferred to common ratios, and the factors impacting this relationship. These differences may skew the results when BSOPM models are inappropriately applied. Understanding how the future distribution equity values assumption performs when applied to companies at different growth stages and in different industries will help the valuation practitioner to make better informed decisions on allocation model selection and implementation. Cindy Moore joined SVB Analytics as a research director in She brings more than 10 years experience in mathematical modeling and statistical analysis. Moore has worked for Andersen Consulting (Accenture) and the Federal Reserve Bank, as well as for software start-ups in the affinity recommendation, price optimization, and supply chain collaboration sectors. This material, including without limitation to the statistical information herein, is provided for informational purposes only. The material is based in part on information from third-party sources that we believe to be reliable, but which have not been independently verified by us and for this reason we do not represent that the information is accurate or complete. The information should not be viewed as tax, investment, legal, or other advice nor is it to be relied on in making an investment or other decision. You should obtain relevant and specific professional advice before making any investment decision. About the Authors James Walling is the chief operating officer for SVB Analytics, which provides solutions to analytical problems that are specific to emerging growth technology, life science, and venture capital companies. In that regard, SVB Analytics is rendering valuation opinions for clients to help them comply with tax and financial reporting requirements. Walling oversees SVB Analytics valuations services team, which counts more than 1,100 clients to date. 6 Business Valuation Update January 2010
Business Valuation Update
Business Valuation Update From the developers of Pratt s Stats Timely news, analysis, and resources for defensible valuations Vol. 15, No. 9, September 2009 Discount Rate, Risk & Economic Damages: Practical
More informationBUSINESS VALUATION UPDATE What It s Worth
BVR BUSINESS VALUATION UPDATE What It s Worth From the developers of Pratt s Stats Timely news, analysis, and resources for defensible valuations Excerpt from Vol. 13, No. 12, December 2007 SPECIAL REPORT
More informationBVR. Free Download. A Timely New Study of Bankruptcy Prediction Models from Morningstar. What It s Worth. By Warren Miller and James P.
BVR What It s Worth Free Download A Timely New Study of Bankruptcy Prediction Models from Morningstar By Warren Miller and James P. Harrington Thank you for visiting Business Valuation Resources, the leading
More informationBusiness Valuation Update
Business Valuation Update From the developers of Pratt s Stats Timely news, analysis, and resources for defensible valuations Vol. 15, No. 10, October 2009 A Timely New Study of Bankruptcy Prediction Models
More informationBUSINESS VALUATION UPDATE TIMELY NEWS, ANALYSIS, AND RESOURCES FOR DEFENSIBLE VALUATIONS
Vol. 19, No. 1, October 213 BUSINESS VALUATION UPDATE TIMELY NEWS, ANALYSIS, AND RESOURCES FOR DEFENSIBLE VALUATIONS Why Do Private Firms Linger on the Selling Block? By Marc Vianello, CPA, ABV, CFF, and
More informationBUSINESS VALUATION UPDATE What It s Worth
BVR BUSINESS VALUATION UPDATE What It s Worth From the developers of Pratt s Stats Timely news, analysis, and resources for defensible valuations Excerpt from Vol. 14, No. 4, April 2008 Total Cost of Equity
More informationBUSINESS VALUATION UPDATE
Vol. 25, No. 3, March 2019 BUSINESS VALUATION UPDATE TIMELY NEWS, ANALYSIS, AND RESOURCES FOR DEFENSIBLE VALUATIONS Calibration With OPM in Early-Stage Enterprises: A Fair Value Update By Neil Beaton,
More informationBUSINESS VALUATION UPDATE What It s Worth
BVR BUSINESS VALUATION UPDATE What It s Worth From the developers of Pratt s Stats Timely news, analysis, and resources for defensible valuations Excerpt from Vol. 14, No. 1, January 2008 Welcome to the
More informationBusiness Valuation Update
Business Valuation Update From the developers of Pratt s Stats Timely news, analysis, and resources for defensible valuations Vol. 17, No. 12, December 2011 Using Company-Specific Risk in the Delaware
More informationBUSINESS VALUATION UPDATE
Vol. 24, No. 4, April 2018 BUSINESS VALUATION UPDATE TIMELY NEWS, ANALYSIS, AND RESOURCES FOR DEFENSIBLE VALUATIONS Q&As on the Impact of the 2017 Tax Act on Business Valuation By Chris Mellen, ASA, MCBA,
More informationBUSINESS VALUATION UPDATE TIMELY NEWS, ANALYSIS, AND RESOURCES FOR DEFENSIBLE VALUATIONS
Vol. 18, No. 10, October 2012 BUSINESS VALUATION UPDATE TIMELY NEWS, ANALYSIS, AND RESOURCES FOR DEFENSIBLE VALUATIONS Proving Damages in Trademark Cases By Stanley P. Stephenson, Ph.D., and Gauri Prakash-Canjels,
More informationBVR. Free Download. Intrinsic Value Review Precludes Inclusion of Fractional Discounts. What It s Worth
BVR What It s Worth Free Download Intrinsic Value Review Precludes Inclusion of Fractional Discounts Patel v. Patel, 2013 Va. App. LEXIS 110 (April 9, 2013) Thank you for visiting Business Valuation Resources,
More informationBUSINESS VALUATION UPDATE
Vol. 24, No. 2, February 2018 BUSINESS VALUATION UPDATE TIMELY NEWS, ANALYSIS, AND RESOURCES FOR DEFENSIBLE VALUATIONS Market Multiple Adjustments: Get a Grip on GRP By James T. Budyak CPA/ABV, CFA, ASA,
More informationBUSINESS VALUATION UPDATE TIMELY NEWS, ANALYSIS, AND RESOURCES FOR DEFENSIBLE VALUATIONS
Vol. 19, No. 7, July 2013 BUSINESS VALUATION UPDATE TIMELY NEWS, ANALYSIS, AND RESOURCES FOR DEFENSIBLE VALUATIONS Pension Plans: The $20 Trillion Elephant in the (Valuation) Room By Dr. Susan Mangiero,
More informationBUSINESS VALUATION UPDATE
Vol. 25, No. 1, January 2019 BUSINESS VALUATION UPDATE TIMELY NEWS, ANALYSIS, AND RESOURCES FOR DEFENSIBLE VALUATIONS Business Valuation Year in Review 2018 The new tax law, lively debates, new guidance,
More informationBusiness Valuation Update
...continued from front page risk, plus any or all of the following subcomponents: (erp) Small stock premia (ssp) Industry premia (separated from company-specific risk by SI) Company-specific risk adjustment
More informationBVR. Business Valuation Update. Business Valuation Update September 2013 Vol. 19 No. 9. What It s Worth
BVR What It s Worth Business Valuation Update Business Valuation Update September 2013 Vol. 19 No. 9 Thank you for visiting Business Valuation Resources, the leading provider of quality acquisition data
More informationBenchmarking Seller s Discretionary Earnings in a Small Business
A BVR Special Report Excerpt from Benchmarking Seller s Discretionary Earnings in a Small Business Based on data from Pratt s Stats What It s Worth Benchmarking Seller s Discretionary Earnings in a Small
More informationValuing Options While Running the Compliance Guantlet, Part I of II
*** Article reprinted by Two Step Software, Inc. with permission of Softletter.*** Saturday, March 15, 2008 Vol. 24, No. 05 Softletter s SaaS University: Selling, Marketing, Infrastructure and Finance
More informationBVR. Free Download. Bank Valuation: A Focus on Earnings Quality. What It s Worth
BVR What It s Worth Free Download Bank Valuation: A Focus on Earnings Quality Thank you for visiting Business Valuation Resources, the leading provider of quality acquisition data and analysis. For more
More informationBVR. Free Download. Valuation Handbook Guide to Cost of Capital and the Risk Premium Calculator. What It s Worth. Questions From the BVR Webinar
BVR What It s Worth Free Download Questions From the BVR Webinar Valuation Handbook Guide to Cost of Capital and the Risk Premium Calculator Thank you for visiting Business Valuation Resources, the leading
More informationThe Different Roles of Fairness Opinions in Different Types of Deals
Fairness Opinions in Organismo Italiano di Valutazione 4th Annual International Conference CORPORATE FINANCE FINANCIAL ADVISORY SERVICES FINANCIAL RESTRUCTURING STRATEGIC CONSULTING 30 November 2015 HL.com
More informationComplex capital structures, complex valuations: the AICPA s new valuation Practice Aid
Complex capital structures, complex valuations: the AICPA s new valuation Practice Aid By its nature, valuation is highly complex and subjective; particularly when it comes to the valuation of companies
More informationUniversity of Denver Small Practice Management
University of Denver Small Practice Management Law Office Accounting Basics Bookkeeping, Record Keeping and Billing Brenda M. Clarke, CPA ABV CVA Seigneur Gustafson LLP April 11, 2013 2012 Brenda M. Clarke.
More informationEx PERT. By Ronald D. DiMattia, CPA, ABV, CMA
CPA AICPA Summer 2008 Contents 1 Studies of merger arbitrage may provide data for assessing the discount for lack of marketability associated with controlling interests. 7 The Tax Court rules on a family
More informationUNDERSTANDING THE VALUE OF A START-UP COMPANY.
UNDERSTANDING THE VALUE OF A START-UP COMPANY July 2013 UNDERSTAND THE VALUE OF A START-UP COMPANY Valuation for start-up enterprises can be a tricky proposition. Regardless of industry, start-ups generally
More informationJay B. Abrams, ASA, CPA, MBA Valuation & Litigation Economist CURRICULUM VITAE. Books Authored. Newsletter Author/Columnist
Jay B. Abrams, ASA, CPA, MBA Valuation & Litigation Economist CURRICULUM VITAE Author of 2 McGraw-Hill Books and 20+ Quantitative Journal Articles Business Valuations Economic Damages/Expert Witness Fairness
More informationB R A N D O F I N O C O M M U N I C A T I O N S I N C.
ABOUT THE AUTHOR onald Jay Korn is a New York-based financial writer with par- expertise in investments, real estate, financial planning, Dticular taxes and insurance. He has authored seven books on financial
More informationF50 s 2018 VC Blockchain Report
F50 s 2018 VC Blockchain Report Proposed Table of Contents 1. 2. 3. 4. 5. Introduction to Blockchain a. current state of Blockchain industry Statistics/Facts Sheets Blockchain trend bullet points below)
More informationDeal Stats Transaction Survey
January 2016 - June 2016 Summary Report Prepared by Brady Cary and Robert Regis, ASA of Columbia Financial Advisors, Inc. 12/31/16 A Publication of the AM&AA Market Research Committee Market Research Committee
More informationLack of Marketability As the Scrutiny of Valuation Reports Increases, Discounts Must be Better Supported with New and Improved Methods
Lack of Marketability As the Scrutiny of Valuation Reports Increases, Discounts Must be Better Supported with New and Improved Methods By Annika M. Reinemann, CFA, ASA Published in Trust & Estates, February
More informationFinancial Valuation. Litigation Expert
Financial Valuation and Litigation Expert VIEWS AND TOOLS FROM LEADING EXPERTS ON VALUATION, FORENSIC/FRAUD AND LITIGATION SERVICES Editor s Outlook Jim Hitchner jhitchner@ valuationproducts.com In this
More informationA/E Business Valuation and M&A Transaction Study. third edition $399
A/E Business Valuation and M&A Transaction Study third edition $399 Copyright 2016 by Rusk O Brien Gido + Partners, LLC. All rights reserved. No part of this publication may be reproduced or transmitted
More informationNow available! A Consensus View Q&A Guide to Business Valuation. Available in both PRINT (Hardcover) and ELECTRONIC (searchable PDF) format.
Now available! A Consensus View Q&A Guide to Business Valuation In this new guide, HItCHner, PrAtt, and FIsHmAn answer the most important business valuation questions they ve been asked over the years.
More informationDeal Stats Transaction Survey
July 2012 December 2012 Summary Report Prepared by Jason M. Bolt, CFA, ASA Columbia Financial Advisors, Inc. K. Perry Campbell, Ph.D., CM&AA ACT Capital Advisors, LLC April 2013 A Publication of the AM&AA
More informationASU Recognition and Measurement of Financial Assets and Liabilities. It s Not CECL, But It Could Affect You.
ASU 2016-01 Recognition and Measurement of Financial Assets and Liabilities It s Not CECL, But It Could Affect You www.mercercapital.com You likely are aware of ASU 2016-01, which requires that public
More informationABOUT THE AUTHOR ADVISORY BOARD
ABOUT THE AUTHOR onald Jay Korn is a New York-based financial writer with par- expertise in taxes, investments, real estate, financial plan- Dticular ning, retirement planning, estate planning, life and
More informationPreferred Stock Valuation Issues Ronald J. Adams, CPA, CVA, ABV, CBA, CFF, FVS, CGMA
Preferred Stock Valuation Issues Ronald J. Adams, CPA, CVA, ABV, CBA, CFF, FVS, CGMA In general the most important factors to be considered in determining the value of preferred stock are: The stock s
More informationDiscounts for Lack of Marketability: Are Traditional DLOM Studies Still Relevant?
Discounts for Lack of Marketability: Are Traditional DLOM Studies Still Relevant? 7 th Annual MNCPA Business Valuation Conference October 17, 2007 Golden Valley, MN James R. Hitchner, CPA/ABV, ASA Managing
More informationThe Comprehensive Guide to. Lost Profits Damages. For Experts and Attorneys
The Comprehensive Guide to Lost Profits Damages For Experts and Attorneys Edited by: Nancy J. Fannon A Business Valuation Resources/ BVR Legal Special Guide BVR What It s Worth The Comprehensive Guide
More informationJournal Of Financial And Strategic Decisions Volume 10 Number 2 Summer 1997 AN ANALYSIS OF VALUE LINE S ABILITY TO FORECAST LONG-RUN RETURNS
Journal Of Financial And Strategic Decisions Volume 10 Number 2 Summer 1997 AN ANALYSIS OF VALUE LINE S ABILITY TO FORECAST LONG-RUN RETURNS Gary A. Benesh * and Steven B. Perfect * Abstract Value Line
More informationData Resources. Appendix B CONTROL PREMIUMS/MINORITY DISCOUNTS DISCOUNTS FOR LACK OF MARKETABILITY
Business Valuation Discounts and Premiums, Second Edition By Shannon P. Pratt Copyright 2009 by John Wiley & Sons, Inc. Data Resources Appendix B Control Premiums/Minority Discounts Discounts for Lack
More informationRESOURCE COMPLEMENTARITIES, TRADE-OFFS, AND UNDERCAPITALIZATION IN TECHNOLOGY-BASED VENTURES: AN EMPIRICAL ANALYSIS
Net Income (In Millions USD) RESOURCE COMPLEMENTARITIES, TRADE-OFFS, AND UNDERCAPITALIZATION IN TECHNOLOGY-BASED VENTURES: AN EMPIRICAL ANALYSIS David M. Townsend, North Carolina State University, USA
More informationQuarterly Journal of the Business Valuation Committee of the American Society of Appraisers
Complimentary Preview Quarterly Journal of the Business Valuation Committee of the American Society of Appraisers Volume 35 Issue 3 Fall 2016 77 Editor s Column Dan McConaughy, PhD, ASA 78 AMERICAN SOCIETY
More informationExecutive Compensation Checklist for Pre-IPO Companies
TRENDS & ISSUES Executive Compensation Checklist for Pre-IPO Companies AUTHOR Peter Lupo Managing Director Venture-backed private companies maintain executive compensation programs that are significantly
More informationThe Practical Application of Behavioral Finance
The Practical Application of Behavioral Finance July 2, 2013 by Mitchell D. Eichen and John M. Longo Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent
More informationProposed Revisions to IVSC Exposure Draft: The Valuation of Equity Derivatives
30 September 2013 Our ref: ICAEW Rep 134/13 IVSC 1 King Street London EC2V 8AU United Kingdom CommentLetters@ivsc.org Dear Ms Castaneda Proposed Revisions to IVSC Exposure Draft: The Valuation of Equity
More informationGovernmental Accounting Standards Series
NO. 346 MARCH 2014 Governmental Accounting Standards Series Concepts Statement No. 6 of the Governmental Accounting Standards Board on concepts related to Measurement of Elements of Financial Statements
More informationSurvey 2017 ESG Survey
CALLAN INSTITUTE Survey 2017 ESG Survey Table of Contents Executive Summary 2 Key Findings 3 Respondent Overview 4 Defining ESG 5 ESG Factor Adoption Rates 6 ESG Implementation 12 Reasons For and Against
More informationBVR. Excerpt from the 2016 Stocks, Bonds, Bills and Inflation (SBBI) Yearbook. bvresources.com. What It s Worth
bvresources.com Excerpt from the 2016 Stocks, Bonds, Bills and Inflation (SBBI) Yearbook BVR What It s Worth Business Valuation Resources, LLC Thank you for visiting Business Valuation Resources, the leading
More informationValue This! Hot Topics in Valuation for Investment Advisers. Fall 2017
Value This! Hot Topics in Valuation for Investment Advisers Fall 2017 Presenters Nicole M. Kuchera Counsel Chicago, IL 312.964.3507 nkuchera@stradley.com Nicole Kuchera represents securities and commodities
More informationVelocityShares Equal Risk Weight ETF (ERW) Please refer to Important Disclosures and the Glossary of Terms section at the end of this material.
VelocityShares Equal Risk Weight ETF (ERW) Please refer to Important Disclosures and the Glossary of Terms section at the end of this material. Glossary of Terms Beta: A measure of a stocks risk relative
More informationUnderstanding Financial Data
May 22-25, 2016 Los Angeles Convention Center Los Angeles, California Understanding Presented by Brenda M. Clarke, CPA/ABV/CFF, CVA FM25 5/24/2016 2:30 PM - 3:30 PM The handouts and presentations attached
More informationU.K. Pensions Asset-Liability Modeling and Integrated Risk Management
WHITEPAPER Author Alan Taylor Director Wealth Management and Pensions U.K. Pensions Asset-Liability Modeling and Integrated Risk Management Background Are some pension schemes looking at the wrong risk
More informationCurrent Developments in Valuation of S Corporation Ownership
Current Developments in Valuation of S Corporation Ownership Robert J. Grossman Melissa Bizyak Two Key Developments Taxes and Value, Nancy J. Fannon and Keith F. Sellers, BVR- 2015 IRS Job Aid, Valuation
More informationTax Code HIGHLIGHTS: REGISTER TODAY!
Co-sponsored by the CBA Taxation Law Section Tax Code AndPractice A Special CLE for Colorado Attorneys on the NEW 2017 Tax Code HIGHLIGHTS: Essential components of the New Tax Cuts and Jobs Act of 2017
More informationThe Three Approaches to Business Valuation
The Three Approaches to Business Valuation By Anja Bernier, President Efficient Evolutions LLC, Certified Business Appraiser (CBA) and Certified Valuation Analyst (CVA) There are three basic approaches
More informationMERCER CAPITAL OIL & GAS QUALIFICATIONS
MERCER CAPITAL OIL & GAS QUALIFICATIONS MERCER CAPITAL Mercer Capital is a national valuation and financial advisory firm. Clients include private and public companies, financial institutions, high-net
More informationAn Allocator's View on Effective Hedge Fund Marketing: Part II
1 > An Allocator s View on Effective Hedge Fund Marketing: Part II > www.novus.com An Allocator's View on Effective Hedge Fund Marketing: Part II > By Joe Peta & Stan Altshuller What is effective hedge
More informationThe Discount for Lack of Marketability: Quantifying the Risk of Illiquidity
III rd OIV International Business Valuation Conference January 19, 2015 The Discount for Lack of Marketability: Quantifying the Risk of Illiquidity Mark L. Zyla CPA/ABV, CFA, ASA Managing Director Acuitas,
More informationMERCER CAPITAL. Oil & Gas Qualifications
MERCER CAPITAL Oil & Gas Qualifications MERCER CAPITAL Mercer Capital is a national valuation and financial advisory firm. Clients include private and public companies, financial institutions, high-net
More informationHear it Here First! Monthly webcast brought to you by the Institute of Business Appraisers (IBA ) and the Consultants Training Institute (CTI )
Monthly webcast brought to you by the Institute of Business Appraisers (IBA ) and the Consultants Training Institute (CTI ) Hear it Here First! DISCLAIMER All rights reserved. No part of this work covered
More informationExcerpt from the MERGERSTAT REVIEW
Excerpt from the MERGERSTAT REVIEW 2017 MERGERSTAT REVIEW 2017 Available exclusively from Business Valuation Resources www.bvresources.com/mergerstat 503-291-7963 ext. 2 sales@bvresources.com MERGERSTAT
More informationSeptember 22, Writing a Buy-Sell Agreement that Keeps You Away from Court. By Michael Blake, Arpeggio Advisors
September 22, 2015 Writing a Buy-Sell Agreement that Keeps You Away from Court By Michael Blake, Arpeggio Advisors Buy-sell agreements are agreements that shareholders conclude in order to enable the orderly
More informationEP GLOBAL COMMUNICATIONS, INC Martin Street, Irvine CA
EP GLOBAL COMMUNICATIONS, INC. 2192 Martin Street, Irvine CA 92612 877-287-6175 NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON FEBRUARY 8, 2018 Notice is hereby given that the Special Meeting
More informationThe following article was published in the BV Update Newsletter in
Valuing Early Stage and Venture-Backed Companies By Neil J. Beaton Copyright 2010 by John Wiley & Sons, Inc. Appendix A The following article was published in the BV Update Newsletter in October 2007.
More informationMERCER CAPITAL. Oilfield & Related Services
MERCER CAPITAL Oilfield & Related Services MERCER CAPITAL Mercer Capital is a national valuation and financial advisory firm. Clients include private and public companies, financial institutions, high-net
More informationModerator: David Larsen, Managing Director, Duff & Phelps and Vice Chairman of the IPEV Board
Valuation Workshop Moderator: David Larsen, Managing Director, Duff & Phelps and Vice Chairman of the IPEV Board Panelists: Chris Franzek, Managing Director and Alternative Asset Advisory Leader, Duff
More informationHedge Funds and Alternative Investments Conference
FAE 2012 Conferences foundation for accounting FAE education Hedge Funds and Alternative Investments Conference Best practices in an evolving investment environment. Thursday, July 19, 2012 Marriott Marquis
More informationOverall Perspective on Tax Planning Not a one-time thing
The Impact of Tax Reform on Deal Structure, Tax Leveraged Opportunities in the Life Sciences, and Other Financial Considerations for Life Sciences Deals Drew Adams, Vice President, Tax, PerkinElmer Tom
More informationAvison Young U.S. National Industrial Capital Markets
Avison Young U.S. National Industrial Capital Markets Mid-Year 017 Spotlight - Foreign Investment in U.S. Capital Markets June 017 Erik Foster Principal, Practice Leader U.S. Industrial Capital Markets
More informationEQUITY INCOME FUND¹. Money Manager and Russell Investments Overview September Russell Investments approach
EQUITY INCOME FUND¹ Money Manager and Russell Investments Overview September 2018 Russell Investments approach Russell Investments uses a multi-asset approach to investing, combining asset allocation,
More informationAnalytic Investors, LLC Mandate: Buy Write Strategy Hired: 2011
Analytic Investors, LLC Mandate: Buy Write Strategy Hired: 2011 Firm Information Investment Approach Total ARMB Mandate Wells Fargo Asset Management acquired Analytic Investors on October 1, 2016. As of
More informationQ Nine-Months 2017 A Mixed Bag. Quarterly CatIQ CatReview. Rise of the Behemoths: Intact, Aviva and Desjardins. DBRS Rating Roundup
Q3-2017 Nine-Months 2017 A Mixed Bag Rise of the Behemoths: Intact, Aviva and Desjardins Key Decisions on the Path to Insurance Innovation Quarterly CatIQ CatReview DBRS Rating Roundup Third Quarter Company
More informationChapter 25 Checklist for Reviewing A Business Valuation Report
Business Valuation Review Volume 28 Number 2 Chapter 25 Checklist for Reviewing A Business Valuation Report Shannon P. Pratt, PhD, FASA CREDENTIALS OF REPORT PREPARER(S) Academic Degrees Professional Designations
More informationMERCER CAPITAL Financial Institutions Group
MERCER CAPITAL Financial Institutions Group MERCER CAPITAL Mercer Capital is a national valuation and financial advisory firm. Clients include private and public companies, financial institutions, high-net
More informationMERCER CAPITAL OILFIELD & RELATED SERVICES
MERCER CAPITAL OILFIELD & RELATED SERVICES MERCER CAPITAL Mercer Capital is a national valuation and financial advisory firm. Clients include private and public companies, financial institutions, high-net
More informationIP ISSUES IN MERGERS & ACQUISITIONS
IP ISSUES IN MERGERS & ACQUISITIONS Louis Beardell, James Carrigan, and Rachelle Dubow June 6, 2017 2016 Morgan, Lewis & Bockius LLP Key IP Issues in Mergers & Acquisitions I. IP due diligence: scope,
More informationEnLink Midstream Partners
Strong Anadarko and Permian Growth Should Offset Barnett Decline EnLink s strategic plan is to focus on growth in the STACK play in Oklahoma and the Permian Basin to offset the impact of declines in its
More informationDiscount for Lack of Marketability in Preferred Financings
Discount for Lack of Marketability in Preferred Financings By Annika M. Reinemann, ASA, CFA and Joe Orlando Published at www.fairvalueforum.org The Fair Value Forum Conceived by a small and committed group
More informationQT Fund Ltd March 2018
QT Fund Ltd March 2018 Credit Suisse Asset Management LLC This document is neither an offer to sell nor the solicitation of an offer to buy any security. Such an offer can be made only by a definitive
More informationAssessing Regime Switching Equity Return Models
Assessing Regime Switching Equity Return Models R. Keith Freeland, ASA, Ph.D. Mary R. Hardy, FSA, FIA, CERA, Ph.D. Matthew Till Copyright 2009 by the Society of Actuaries. All rights reserved by the Society
More informationLocal Consumer Commerce
RELEASE DATE SEPT 2016 Local Consumer Commerce JUNE 2016 LOCAL CONSUMER COMMERCE JUNE 2016 Click here to download the data DATA THROUGH JUNE 2016 0.1 % Growth across all 15 cities Local consumer commerce
More informationfor Closely Held and Family Business Owners Z. Christopher Mercer, ASA, CFA, ABAR
for Closely Held and Family Business Owners Do You Know that Your Buy-Sell Agreement Will Work As Expected? Buy-sell agreements are not merely legal documents to be signed and forgotten. How they operate
More informationTrends in Terms of Venture Financings In Silicon Valley (Fourth Quarter 2010)
Trends in Terms of Venture Financings In Silicon Valley (Fourth Quarter 2010) Background We analyzed the terms of venture financings for 95 companies headquartered in Silicon Valley that reported raising
More informationPrivate Equity Trends
Third Quarter 2018 INSTITUTE Private Equity Trends Analyzing private equity activity through all the stages of the investment cycle, from fundraising to exits. Fundraising: Mild Slowdown Driven by Fewer
More informationSMG: QT Fund Ltd February 2017
SMG: QT Fund Ltd February 2017 Credit Suisse Asset Management LLC This document is neither an offer to sell nor the solicitation of an offer to buy any security. Such an offer can be made only by a definitive
More informationIP ISSUES IN MERGERS & ACQUISITIONS
M&A ACADEMY IP ISSUES IN MERGERS & ACQUISITIONS Louis Beardell, James Carrigan, and Rachelle Dubow March 29, 2016 Key IP Issues in Mergers & Acquisitions I. IP due diligence: scope, validity, ownership,
More informationBy Kenneth Muller and Seth Chertok. Vol. 18, No. 8 August 2011
Vol. 18, No. 8 August 2011 The Impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act on Real Estate Investment Advisers and Real Estate Funds Exemptions: Part 2 of 2 By Kenneth Muller
More informationPulse of the Practice July 2009 by Eric Koester
Pulse of the Practice July 2009 by Eric Koester In July 2009, the PE/VC Committee of the Section of Business Law of the ABA completed its first survey of the lawyers in the committee, called "Pulse of
More informationHEARING STATEMENT. United States Senate Committee on Banking, Housing, and Urban Affairs
HEARING STATEMENT United States Senate Committee on Banking, Housing, and Urban Affairs Spurring Job Growth Through Capital Formation While Protecting Investors December 1, 2011 Executive Summary The Biotechnology
More informationSummary Results from the Softletter 2009 Telesales Compensation and Efficiency Survey, Part II of IV
Wednesday, Sept.30th 2009 Vol. 25, No. 18 BUSINESS INSIGHTS FOR SOFTWARE DEVELOPERS & PUBLISHERS Summary Results from the Softletter 2009 Telesales Compensation and Efficiency Survey, Part II of IV Softletter
More informationPricing of a European Call Option Under a Local Volatility Interbank Offered Rate Model
American Journal of Theoretical and Applied Statistics 2018; 7(2): 80-84 http://www.sciencepublishinggroup.com/j/ajtas doi: 10.11648/j.ajtas.20180702.14 ISSN: 2326-8999 (Print); ISSN: 2326-9006 (Online)
More informationGovernmental Accounting Standards Series
NO. 344-A NOVEMBER 2013 Governmental Accounting Standards Series Statement No. 71 of the Governmental Accounting Standards Board Pension Transition for Contributions Made Subsequent to the Measurement
More informationMichael (Xiaochen) Sun, PHD. November msci.com
Build Risk Parity Portfolios with Correlation Risk Attribution (x-σ-ρ) Michael (Xiaochen) Sun, PHD The concept of portfolio efficiency, where a rational institutional investor is expected to optimize his
More informationCapital Fiduciary Advisors, LLC Part 2A of Form ADV The Brochure
Capital Fiduciary Advisors, LLC Part 2A of Form ADV The Brochure 1800 Robert Fulton Drive, Suite 110, Reston, VA 20191 www.capitalfiduciaryadvisors.com Updated: March 2018 This brochure provides information
More informationMoody s/real Commercial Property Price Indices, May 2010
MAY 19, 20 STRUCTURED FINANCE SPECIAL REPORT Moody s/real Commercial Property Price Indices, May 20 Table of Contents: OVERVIEW 1 NATIONAL ALL PROPERTY TYPE AGGREGATE INDEX 4 OUT-OF-BOUNDS PHENOMENON 6
More informationM&A ACADEMY CHOOSING AN ACQUISITION STRUCTURE AND STRUCTURING A DEAL
M&A ACADEMY CHOOSING AN ACQUISITION STRUCTURE AND STRUCTURING A DEAL October 24, 2017 John Utzschneider and Gitte Blanchet 2017 Morgan, Lewis & Bockius LLP Agenda Overview of the Acquisition Process Basic
More informationFor many private investors, tax efficiency
The Long and Short of Tax Efficiency DORSEY D. FARR DORSEY D. FARR is vice president and senior economist at Balentine & Company in Atlanta, GA. dfarr@balentine.com Anyone may so arrange his affairs that
More informationROADMAP FROM CONCEPT TO IPO.
The ENTREPRENEUR S ROADMAP FROM CONCEPT TO IPO www.nyse.com/entrepreneur Download the electronic version of the guide at: www.nyse.com/entrepreneur 38 409A VALUATIONS AND OTHER COMPLEX EQUITY COMPENSATION
More information