Mais conteúdo relacionado Mais de Financial Poise (20) When, Who & Why to Value Your Assets (Series: Valuation in Corporate Transactions)1. Copyright © 2019 by DailyDAC, LLC d/b/a Financial Poise Webinars™
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Practical and entertaining education for
attorneys, accountants, business owners
and executives, and investors.
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Thank You To Our Sponsor
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DISCLAIMER
The material in this webinar is for informational purposes only. It should not be
considered legal, financial or other professional advice. You should consult with an
attorney or other appropriate professional to determine what may be best for your
individual needs. While Financial Poise™ takes reasonable steps to ensure the information
it publishes is accurate, Financial Poise™ makes no guaranty in this regard.
About this PowerPoint: if you are looking at this PowerPoint without the benefit of
listening to the conversation that surrounded it then you are doing yourself a disservice.
This PowerPoint was prepared in contemplation of being viewed in conjunction with
listening to a one hour webinar on the topic
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MEET THE FACULTY
Moderator:
John Levitske – Ankura
Panelists:
Garth Tebay – Value Defined
Richard Claywell – J. Richard Claywell CPA
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ABOUT THIS WEBINAR:
Who, When & Why to Value Your Assets
Deal lawyers and business people alike often have to look to a valuation expert to assist in
understanding value in various non-litigation settings. This may happen in connection
with corporate spin-offs, shareholder buyouts, bulk assets sales, and a host of other
contexts in which assets must be sold or valued without the benefit of being tested by the
market. This webinar explains how to best go about identifying and then retaining the
right expert for any given situation.
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ABOUT THIS SERIES:
Valuation in Corporate Transactions
What is it worth? Valuation experts are commonly used by market participants to determine the
price they are willing to pay or receive to transact a sale of a security, a business or a discrete
asset. Valuations can be performed on assets such as equities, options, or business enterprises.
They can also be performed on intangible assets such as patents and trademarks, or liabilities such
as debt and contingent consideration. The concept of valuation permeates the business and legal
world on a daily basis. Given the importance of valuation, it seems incongruous that two perfectly
competent valuation professionals can conclude on significantly different values for the same
subject interest. This webinar series addresses this and, more broadly, discusses how valuation
experts go about their work.
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EPISODES IN THIS SERIES
10/4/19 Episode #1:
When, Who & Why to Value Your Assets
10/11/19 Episode #2:
How to Value Your Assets
11/8/19 Episode #3:
Focus on Valuing a Brand and Other "Soft" Assets
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Dates shown are premiere dates.
All webinars will be available
On Demand approximately 4 weeks
after they premiere.
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Episode #1:
When, Who & Why to Value Your
Assets
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WHY PERFORM A VALUATION?
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Merger or
acquisition
Financial
Reporting
Tax
Compliance
Disputes &
Litigation
Consulting
& Advisory
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WHO ASKS FOR A VALUATION?
• Who will be the user(s) of the valuation?
• Third parties (sometimes reliance, sometimes not)
Investors (maybe employees, maybe not)
Banks (collateral, other financing, solvency)
Trustees (ESOPs, bankruptcy)
Government (tax or other regulatory)
Auditors, tax accountants, tax attorneys
Court, attorneys
• Is perception of independence/disinterestedness required?
Conflicts of Interest
Prior experience with subject asset
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WHO PERFORMS VALUATIONS?
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4
Business and Intangible Assets
Governing Body American Society of
Appraisers
American Society of
Appraisers
American Institute of
Certified Public
Accountants
National Association
of CertifiedValuation
Analysts
CFA Institute
Professional
Designation
ASA - Accredited
Senior Appraiser
AM - Accredited
Member
ABV - Accredited in
BusinessValuation
CVA – Certified
Valuation Analyst
CFA – Chartered
Financial Analyst
Prior Education College Degree or
equivalent
College Degree or
equivalent
College Degree or
equivalent & CPA
designation
College Degree or
equivalent
College Degree or
Equivalent
Coursework Four, 24-hr society
training courses
Four 24-hr society
training courses
None 40 hour society
training course, exam
and case study.
Approx. 900-1200
hours of directed
self-study plus three
exams over 2-3 years
Experience 5 yr. full time 2 yr. full time Involvement in 10
business valuation
2 yrs. or 10 business
valuations
4 yr. full time
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WHO PERFORMS VALUATIONS? (CON’T)
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5
Real Estate Lost Profits
Personal
Property
Governing
Body
Appraisal Institute American Society
of Appraisers
NACVA AICPA ACFE American Society
of Appraisers
Professional
Designation
MAI – Member of the
Appraisal Institute
SRA – Senior Residential
Appraiser
AM - Accredited
Member
ASA - Accredited
Senior Appraiser
MAFF – Master
Analyst in
Financial Forensics
CFF – Certified
Financial Forensics
CFE – Certified
Fraud Examiner
AM - Accredited
Member
ASA - Accredited
Senior Appraiser
Prior
Education
MAI - College Degree or
equivalent
SRA – Associates Degree
College Degree or
equivalent
College Degree or
equivalent
College Degree or
equivalent and
CPA.
College Degree or
equivalent
College Degree or
equivalent
Coursework 12 one-week courses &
exams, must pass a
demonstration report, in-
person peer review exam,
and a 2-day comprehensive
exam
Four, 24-hr society
training courses
Training and 4-
hour exam
Exam, 75 hours of
course work.
Exam Four, 24-hr society
training courses
Experience 4,500 hours of specialized
work experience
ASA - 5 yr. full
time
AM – 2 yr. full time
2,500 hours 1,000 hours 2Years ASA - 5 yr. full
time
AM – 2 yr. full time
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ACCREDITING ORGANIZATIONS
• Business and Intangible Valuation
American Institute of CPA’s
American Society of Appraisers
CFA Institute - Chartered Financial Analyst
Institute of Business Appraisers
National Association of Certified Valuation Analysts
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ACCREDITING ORGANIZATIONS (CON’T)
• Real Estate
Appraisal Institute
American Society of Appraisers
National Association of Master Appraisers
National Association of Auctioneers
Certified Appraisers Guild of America
• Machinery and Equipment, Personal Property, Other Specialty
American Society of Appraisers
National Association of Master Appraisers
National Association of Auctioneers
Certified Appraisers Guild of America
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PROFESSIONAL STANDARDS
• Uniform Standards of Professional Appraisal Practice (USPAP)
• American Society of Appraisers – standards by discipline
• American Institute of Certified Public Accountants SSVS No. 1
• National Association of Certified Valuation Analysts
• Regulatory Rules & Regulations
• Statutory and Jurisdictional Requirements
• Income Tax Reporting – IRS Revenue Ruling 59-60
• Financial Reporting - FASB ASC 820; Fair Value Measurements
• Contractual standards
• Others?
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INDEPENDENCE V. ADVOCACY IN
LITIGATION
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Lawyers are
advocates
Appraisers
must be
independent
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STANDARDS OF VALUE
• The purpose of the valuation determines the standard of value:
Market Value – real estate financing
Fair Market Value – tax compliance, some litigation & disputes
Fair Value - financial reporting
Statutory Fair Value – some litigation & disputes
Investment Value – investment advice, decision making
Intrinsic Value
What is a “Fairness Opinion?”
What is a “Solvency Opinion?”
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DIFFERENT VALUATION EXPERTS
• Business Valuation
Invested Capital or Enterprise Value
Class of Equity or Owner’s Interest (including derivatives)
Subject Interest Value
• Real Property Appraisal
• Inventory Appraisal
• Machinery and Equipment Appraisal
• Personal Property
• Other Specialties (Gems, Jewelry, Art, etc.)
• Intangible Asset Valuation
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KEY TERMS
• Assets
• Liabilities
• Equity
Assets = Liabilities + Equity
Equity = Assets - Liabilities
• Invested Capital = All Classes of Equity + Interest-Bearing Debt (i.e. the capital that was
provided by owners and creditors to fund the business)
• MVIC = Market Value of Invested Capital
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KEY TERMS (CON’T)
• Enterprise Value = MVIC less cash and equivalents
• EPS: earnings (net income) per share of common equity
• EBIT = Earnings before interest expense and taxes
• EBITDA = Earnings before interest expense, taxes, depreciation and amortization
• Free Cash Flow = Net operating profit less adjusted taxes less capital expenditures and
net working capital increases plus depreciation and amortization expenses
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INVESTED CAPITAL AND EQUITY
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Net Working Capital
Plant, Property &
Equipment
Intangible &
Goodwill
Debt
Equity
Current Assets Current Liabilities
Invested
Capital
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DEFINITIONS
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Net Revenue
- Cost of Goods Sold
= Gross Margin
- Operating Expenses (SG&A)
= Operating Profit
- Estimated IncomeTaxes
= Net Operating Profit lessAdjustedTaxes
EBIT
+ Depreciation &Amortization Expenses
- Capital Expenditures
- Increases in NetWorking Capital EBITDA
= Free Cash Flow
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WHAT IS BEING VALUED?
• May refer to the value of an entire company (the “invested capital”), the aggregate
equity, or a specific class or block of equity.
• If Equity:
Common or preferred (dividend preference)
Voting or non-voting
100% or less than 100% of voting shares:
o If less, controlling or non-controlling (minority) interest
Marketable or non-marketable
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VARYING “LEVELS” OF VALUE
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Minority, Non-MarketableValue
Minority, MarketableValue
ControlValue
Acquisition/StrategicValue
Strategic Premium
Control Premium Discount for Lack of Control
Discount for Lack of Marketability
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HIGHEST AND BEST USE
• The highest and best use is the reasonably probable and legal use of an asset that is
physically possible, appropriately supported, financially feasible, and results in the
highest value:
If the expected future benefits are maximized through the continued operation of the
group of assets in the business in which they are currently engaged, the appropriate
premise is value-in-continued-use as a going-concern.
If the expected future benefits are maximized through the piecemeal sale of the
underlying assets independent of one another, the appropriate premise is value-in-
exchange or liquidation.
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PREMISE OF VALUE
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Going-Concern
• Value of a firm as an operating,
functioning business to a buyer.
It results from advantages such
as a good reputation, trained
workforce, established and
successful procedures, tested
systems, and necessary licenses
and permits.This value is
almost always more than the
sum of the market (liquidation)
value of the firm's assets.
Liquidation
• Orderly
• Forced (AuctionValue)
• The cumulative value of the
assets net of liabilities as if sold
piecemeal and independently
of one another, not as a group.
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VALUATION APPROACHES
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Approache
stoValue Income Approach Cost ApproachMarket Approach
Capitalization of
Earnings
Valuation
Methods
Discounted Cash
Flow
Liquidation
Adjusted Balance
Sheet
Forced Orderly
Guideline Public
Companies
Guideline
Transactions
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INCOME APPROACH – TWO METHODS
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Capitalization
of Earnings
Discounted
Cash Flow
Two Methods
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MARKET APPROACH – TWO
METHODS
32
Guideline Public
Companies
Guideline
Transactions
Two Methods
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COST APPROACH
• Restates accounting value of net assets to economic/market value assuming highest and
best use [adjusted book value].
• Most applicable in valuing companies with underutilized assets and/or little intangible
value:
Real estate investment companies
Investment holding companies
Contract manufacturers
Commodity processors
Companies facing potential liquidation
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COST APPROACH (CON’T)
• Given less weight when valuing:
Service businesses
Business with substantial intangible value
Asset-light businesses
• Liquidation Value – determine if sale of assets will be:
Orderly – reasonable time
Forced – “fire sale” – lower value than orderly sale due to decreased time in finding
potential buyers and increase in selling costs
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COST APPROACH (CON’T)
• Typical balance sheet adjustments include:
Marketable securities
Accounts receivables
Inventory
Land
Fixed assets (building & equipment)
Related party transactions
Intangibles
Contingent Liabilities
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ABOUT THE FACULTY
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John Levitske – John.Levitske@ankura.com
John Levitske is a Senior Managing Director at Ankura, focused on business valuation and complex financial
disputes. He has served as a senior advisor to companies, owners, executives, and legal counsel in business
disputes, shareholder disputes, and M&A transactions regarding issues of valuation, finance, damages, and
accounting. John is based in Chicago.
With more than two decades of Big Four public accounting and international consulting experience, John is
seasoned in business valuation, financial analysis, economic damage quantification, forensic accounting,
retrospective solvency analysis, and post-merger & acquisition accounting calculations. He handles appraisals
of healthy and distressed companies for buyouts of shareholders and creditors, transaction planning, estate
and gift taxation, financial accounting, bankruptcy proceedings, and litigation disputes.
John has provided consulting and expert witness testimony services and has served as a neutral party in
arbitration and mediation. He has testified as an expert witness in the US and Europe in depositions, hearings,
bench and jury court trials, and domestic and international arbitration (ICC, SCC, AAA, JAMS, FINRA, and ad
hoc arbitrations) and has served as a neutral arbitrator. In addition, he has rendered binding decisions on
disputed matters.
To read more, go to https://www.financialpoise.com/financialpoisewebinars/faculty/john-levitske/
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Garth Tebay – gtebay@valuedefined.com
Mr. Tebay is a practicing Certified Public Accountant, Certified Valuation Analyst, Master
Analyst in Financial Forensics, and Certified Mergers and Acquisitions Advisor with over
47 years of experience. He is the founder and Managing Partner of Value Defined, LLC, a
business valuation and litigation support firm in Sylvania, Ohio and an Affiliate Member of
the Business Growth Alliance, which provides value growth consulting to medium-size
businesses.
Mr. Tebay received his Bachelor of Science in Accounting in 1972 from Findlay College in
Ohio. He received certification as a Public Accountant in 1975, Certified Valuation Analyst
in 1996, Certified Mergers and Acquisition Advisor in 2001 and Master Analyst in
Financial Forensics in 2008.
To read more, go to https://www.financialpoise.com/financialpoisewebinars/faculty/garth-tebay/
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Richard Claywell – richard@biz-valuation.com
Richard is a practicing Certified Public Accountant, and holds the additional designations of Accredited in
Business Valuation, Accredited Senior Appraiser, Certified Business Appraiser, International Certified
Valuation Specialist, Certified Valuation Analyst, Certified in Merger & Acquisition Advisor, Master Analyst in
Financial Forensics, Certified in Fraud Deterrence, Accredited in Business Appraisal Review. Richard has been
valuing closely held companies since 1985. Richard’s practice is restricted to business valuation, economic
damages, profit enhancement and exit planning. Richard received his Bachelor of Science in Accounting in
1979 from the University of Houston – Clear Lake. He then received certification as a Public Accountant in
1983. Over the years, Richard has earned additional accreditations that relate to business valuations, economic
damages and fraud. Richard has been an instructor for the National Association of Certified Valuation Analysts
for many years, has been an instructor for the Internal Revenue Service and the International Association of
Consultants Valuators and Analysts (IACVA). Richard is currently the Director of Education for the IACVA and
is responsible for the business valuations materials being taught in 55 countries. Richard has taught business
valuation or economic damage courses in China, Korea, Taiwan. Richard has performed over 1,000 business
valuations since 1985. Richard has testified in Texas County Court, Texas State Court, Bankruptcy Court and
Texas State Courts. Richard has given testimony in economic damages (lost profits), shareholder disputes,
personal injury, wrongful termination and divorce.
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QUESTIONS OR COMMENTS?
If you have any questions about this webinar that you did not get to ask during
the live premiere, or if you are watching this webinar On Demand, please do
not hesitate to email us at info@financialpoise.com with any questions or
comments you may have. Please include the name of the webinar in your email
and we will do our best to provide a timely response.
IMPORTANT NOTE: The material in this presentation is for general educational purposes only. It has been prepared primarily
for attorneys and accountants for use in the pursuit of their continuing legal education and continuing professional education.
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