20 Valuation Databases & Resources in 60 Minutes

Transcription

1 20 Valuation Databases & Resources in 60 Minutes

2 DISCLAIMER All rights reserved. No part of this work covered by the copyrights herein may be reproduced or copied in any form or by any means graphically, electronically, or mechanically, including photocopying, audio/video recording, or information storage and retrieval of any kind without the express written permission of the Consultants Training Institute (CTI ), the National Association of Certified Valuators and Analysts (NACVA ), and the presenter. The information contained in this presentation is only intended for general purposes. It is designed to provide authoritative and accurate information about the subject covered. It is sold with the understanding that the copyright holder is not engaged in rendering legal, accounting, or other professional service or advice. If legal or other expert advice is required, the services of an appropriate professional person should be sought. The material may not be applicable or suitable for the reader s specific needs or circumstances. Readers/viewers may not use this information as a substitute for consultation with qualified professionals in the subject matter presented here. Although information contained in this publication has been carefully compiled from sources believed to be reliable, the accuracy of the information is not guaranteed. It is neither intended nor should it be construed as either legal, accounting, and/or tax advice, nor as an opinion provided by the CTI, the NACVA, the presenter, or the presenter s firm. The authors specifically disclaim any personal liability, loss, or risk incurred as a consequence of the use, either directly or indirectly, of any information or advice given in these materials. The instructor s opinion may not reflect those of the CTI, NACVA, their policies, other instructors, or materials. Each occurrence and the facts of each occurrence are different. Changes in facts and/or policy terms may result in conclusions different than those stated herein. It is not intended to reflect the opinions or positions of the authors and instructors in relation to any specific case, but, rather, to be illustrative for educational purposes. The user is cautioned that this course is not all inclusive National Association of Certified Valuators and Analysts (NACVA). All rights reserved South State Street, Suite 400, SLC, UT, The Consultants' Training Institute (CTI) is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted through its web site: learningmarket.org.

3 How to Obtain CPE Credit for this Webinar: The webinar will include periodic online Polling Questions to assess continuous participation and to determine the program s effectiveness. You MUST respond to all polling questions (live) or complete a quiz (recorded) in order to receive CPE credit. If you view the webinar with a Smartphone or Tablet you may need to download the App in order to answer polling questions. If you are viewing this presentation as a recorded webinar it will not qualify for NASBA QAS CPE credit. You can however, obtain CPE credit per the instructions included with your recorded webinar purchase. 3

4 Learning Objectives 4 After completing the session, attendees will be able to: Describe the criteria for selecting the appropriate data for each engagement Identify the traps to avoid in using the data Explain the strengths and weaknesses of the data List the differences between using the data in Excel and BVM Pro

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6 What are the 20 Valuation Databases & Resources we are covering today? NER Bizcomps IBA Market Data Duff & Phelps (both books) RMA VE Done Deals (Mid-Market Comps) Guideline Pluris DLOM Mergerstat (P/E, Prem & Discounts) IRS Around the Valuation World Business Appraisal Practice (BAP) Industry & Metro Report Valuation Articles Federal & State Case Law Conference Presentations Compensation Data S-1 filings 6

7 When thinking about data, think 7 about these issues*: Data s strengths and weaknesses Replicability The ability to recreate results Standards Sufficiency of the Information Explain everything Completeness Consistency with the fact pattern Relevance-is the data relevant to the fact pattern *From Top Mistakes to Avoid in Valuations According to the Tax Court Decisions webinar by Howard Lewis, based on articles by T. Lee & L.P. Hood

8 NER (National Economic Report) 8 Sources of NER Data KeyValueData/ValuSource s BVDataWorld Mercer Capital BVR Many others Issues Covered Include Growth, employment, national budget/debt, stocks, productivity, and more A look at what s driving the numbers What lies ahead / forecasts

9 KVD/BVDataWorld NER Specifics 9 Created by Kevin Hopkins, Economist Delivered Monthly (archived back to 2010) Aggregate all important national data from Government, CNBC, Investors Business Daily, Blumberg Add Features to provide color to the numbers 48 Economic data sources covering 12 subsets (Growth, Employment, Inflation, etc.) An example

10 Connecting the dots 10 You must relate all of this data to your valuation How is the business tied to the economy? Directly or inversely? Is it not affected by the economy, like healthcare? So, how does national, industry, metro and company outlook impact in terms of: On going cash flows Risk

11 Industry & Metro Research 11 Government Sources State BLS numbers State commerce departments State/city office of economic development Commercial Sources First Research $139/report or IBIS World $925 Single Report / $1,595 Annual Sub. Bizminer ($99 individual to $1,255 annual) KeyValueData/BVDataWorld Database and Custom Research $795 full report, $295 for data only

12 Where do market transaction 12 databases live?

13 BIZCOMPS 13 How is Bizcomps used? Initial pricing analysis As a reasonableness test for other methods Or as the main method or as a combination with other methods Created and compiled by Jack Sanders Data derived by International Business Brokers Association (IBBA) member submissions in exchange for free use of the database 21 data points available Data has been compiled since 1990 but only the last ten years are used As of May 2016: Over 12,000 transactions 50% were all cash sales 82% were for purchase prices of less than $500,000 Analysis tool with linear regression and histogram

14 BIZCOMPS 14 Transactions Per Year

15 BIZCOMPS 15 Mean Sale = 377 Median Sale = 180 Mean sale time = 227 days; median =180 days Majority of transactions involve 10% brokerage fee Transactions over $500,000 demonstrated a size premium Ultimate sales price = 28% to 69% of revenue and 1.35 to 2.62 times sellers discretionary earnings (25 th Ptile to 75 th Ptile)

16 BIZCOMPS 16 What is included in the transaction price? Price = consideration paid plus any interesting-bearing debt assumed Asset Value = Operating assets plus goodwill Excludes Real Estate Business values derived are control positions Pay CLOSE attention to definitions as they determine what you need to add back to get to an equity value-a very common mistake! Online annual subscription - $540 per year Through KeyValueData/BVDataWorld 7 to 10 searches starting at $345

17 IBA Market Data 17 The IBA was founded in 1978 Acquired by NACVA, ValuSource and other investors in June 2008 IBA merged into NACVA in July 2012 Data is still known as the IBA Market Database, but is now owned and managed by ADAM (Appraisal Database and Mentoring Services)

18 IBA Market Data 18 IBA Market Database has over 39,000 transactions covering 800 SIC codes Started with 4 fields then 10 fields, now 128 fields Analysis tools Sales Price Number Transactions 0-$500,000 33,937 $500,001 to $1,000,000 3,015 $1,000,001 to $5,000,000 2,429 Over $5,000,

19 IBA Market Data 19 Utilizes Either Transaction Analysis or Direct Market Data Method (DMDM) DMDM Says pick a multiple relevant to the subject Transaction analysis uses a regression line and histogram

20 IBA Market Data 20 What is included in the transaction price? Price = consideration paid plus any interesting-bearing debt assumed Asset Value Fixtures, furniture, inventory, and goodwill are typically included Excludes Real Estate Business values derived are control positions

21 IBA Market Data Demo 21

22 IBA Market Data 22 Costs: IBA data- $495 Available in KeyValueData/BVDataWorld Levels $345-$2,645

23 Done Deals 23 How is this used? Data compiled from Securities and Exchange Commission (SEC) 8K filings involving the acquisition of at least a 10% interest by a public entity Nearly all of the financial information has been subjected to Generally Accepted Accounting Principles (GAAP) 75% of the acquisitions involved privately owned companies acquired by publicly owned entities Almost 11,000 transactions as of the May 2016

24 Done Deals 24 Data includes names of deal participants, buyer contact information and seller s description Includes last full year financial statement and deal terms Both stock and cash sales Half of the transactions occur between $6MM and $66MM(25 th and 75 th Ptile) Median deal price is $20,000,000

25 Done Deals 25 What is in the transaction price? Must look to the Terms field to ascertain whether or not quoted prices are Invested Capital, Equity or Enterprise Values

26 Done Deals 26 Values are derived are considered Control positions despite the minimum 10% purchase Purchaser typically exercises some type of control via board seat, advisory role or other limited form of control Online annual subscription - $595

27 Pluris Discounts for Lack Of 27 Marketability (DLOM) Data What is Pluris DLOM Database? The hunt for empirical evidence of a defendable DLOM Information in this section is derived in part from Pluris data Handbook on how to use the data from ValuSource

28 Pluris Stat s (as of 12/2014) 28 Total records: 3,538 4-digit SIC codes: 373 Median block-size (as percentage of total shares): 11.8% Median discount: 20.7% Average discount: 22.4% Standard Deviation: 0.299

29 Pluris Discounts for Lack Of 29 Marketability (DLOM) Data The private equity discount increment (PEDI) is based on the assumption that large blocks of restricted stock sell at a disadvantage and are thus less marketable but, more comparable to private equity placements Block Size (Qtrs. To Sell) Common Stock Discount Min Max Median Min Max Mean Median Top Quintile 0.2x 5.9x 3.0x -46% 86% 19% 16% Second Quintile 5.9x 10.4x 8.0x -43% 81% 21% 18% Third Quintile 10.4x 15.6x 13.0x -79% 75% 21% 19% Fourth Quintile 15.6x 21.0x 19.0x -57% 80% 20% 18% Bottom Quintile 21.0x 911.0x 34.0x -55% 91% 28% 24%

30 Pluris DLOM Demo 30 $595/Year

31 Duff & Phelps Valuation 31 Handbook What is the data, where is it used? Information in this section is derived from review of the 2017 Duff & Phelps Valuation Handbook Also note the Valuation Handbook: Industry Cost of Capital is available as well Also note the International Valuation Handbook Guide to Cost of Capital is available as well

32 Duff & Phelps Valuation Handbook 32 Contains critical valuation information Two sets of data: Decile Information (including 10 breakout to quartiles) Duff & Phelps Risk Premium Report Uses the same sources for information: Center for Research in Security Prices (CRSP) Standard & Poor s Research Insight database SBBI Series from Morningstar s EnCorr database Uses Ibbottson methodologies to produce the Duff & Phelps book

33 Duff & Phelps 2017 Valuation 33 Handbook Contains critical valuation information: Size Premium & Industry Risk Premium Center for Research in Security Prices (CRSP) deciles 1 through 10 Decile 10 broken into 10a and 10b and its quartiles 10w and 10x, and 10y and 10z Risk Premium Studies Eight characteristics of Size Buildup, CAPM and Risk Style Exhibits Text describing how to use the exhibits Cost: 2017 Book only: $295, Bundle: $669 Comes with a Titanium Subscription $2,645 (single user)

34 Valuation Handbook Cost of 34 Capital Analyzer Demo

35 RMA Valuation Edition 35 Where does RMA fit in the valuation process? Sources of Financial Benchmarking Data: RMA Annual Statement Studies IRS Corporate Ratios Integra First Research Industry Profiles Public Company Group Bizminer

36 RMA Valuation Edition 36 The Risk Management Association (RMA) Created in 1915 by a group of bankers to mitigate credit risk through exchange of info. Named Robert Morris Association Changed name in 2000 to Risk Management Association Create the Annual Statement Studies every year You need a license to reproduce in your reports

37 RMA Standard Edition vs. 37 RMA Valuation Edition RMA Standard Edition National geography Median and mean data RMA Valuation Edition (VS Exclusive) 6 geographic regions available 10 X more data (Contains deciles: percentile) Ability to rank

38 RMA Valuation Edition 38 Why do we need RMA data? In a valuation we need to benchmark the subject company financial performance against peers Provides empirical evidence for strengths and weaknesses Use benchmark to make and justify decisions regarding risk

39 RMA Valuation Edition 39 Financial statement industry comparison data Data comes from RMA member banks from loan applications Primary data: Common size balance sheets Common size income statements 19 Common ratios

40 RMA Valuation Edition 40 Data slices available: 1 year or multi-year data (see industry trends) North American Industrial Classification System (NAICS) Criteria M=000 so MM is millions Assets: 0 500M, 500M 2MM, 2MM 10MM, 10MM 50MM, 50MM to 100MM, 100MM 250MM Sales: 0-1MM, 1MM-3MM, 3MM-5MM, 5MM-10MM, 10MM-25MM, 25MM and up Historical: 5 years of data presented but not broken down by size Regions: Northeast, Southeast, Central, North Central, South Central and West in VE edition

41 Benchmarking vs Ranking 41 What is standard mean? What is ranking, why is it better?

42 RMA Demo $725 single year, $925 All years 42 Titanium Subscription $2,645 (Single)

43 RMA Ranking in ValuSource 43 Software

44 Guideline 44 Data available from $hundreds to $tens of thousands (Bloomberg or CapIQ) Three challenges Subject companies are too small Finding good data Analyzing the data $495/year

45 Guideline Application 45

46 IRS Corporate Ratios 46 Covers 250 industries in 13 asset categories Based on 5 million corporate tax returns Data is three years old We format IRS ratios and common size statements exactly the same as RMA Contains 10 years of data, great for industry trends Understand some benchmarking sources use IRS data as their base and then forecast it to get current data. $275/Year (included 10 years of data) Subscriptions starting at $645

47 Search on Title 47

48 Mergerstat 48 Based on Mergerstat Review By Industry, with 5 years history P/E ratios Premium and Discount Data Control premium for 100% acquired company 50 Industries Plus Total Blended Rate Used to imply minority discount $125 each

49 Around the Valuation 49 World What is Around the Valuation World? A monthly 90 minute webzine Provides material handout Provides CPE exam Why is it useful? What is your strategy to stay up with the avalanche of information in the BV world?

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51 ATVW Agenda for July 2016 Webcast Details: Janae Castell: Valuation Updates Gregory R. Caruso interviewing Ron Rudich: The Incredible, Useful Balance Sheet Melissa Gragg: How to Defend 90%+ of Your Valuation Assumptions with Excellent Research In and Out of Court Roberto Castro interviewing Toby Tatum: Monte Carlo Methodology in Business and Litigation Engagements

52 Final Eight 52 Business Appraisal Practice (BAP) Industry & Metro Report (1000+ reports) Valuation Articles (2,000+ articles) Federal & State Case Law (1,800+ cases) Conference Presentations (500+ presentations) Compensation Data (from BLS) S-1 filings (55,000+ filings)

53 All this Data is Available from ValuSource s BVDataWorld 53

54 Thank you!! Questions? What I can send you: Pluris DLOM Guide, ATVW Sample, NER Sample, RMA VE Sample, COCA Report, BAP Sample, Industry/Metro Sample Dave Miles dmiles@valusource.com 54