Can the Goodwill Rate of Return be Equal to the WACC?

By: David Turney, CFA Intrinsic has performed hundreds of purchase price allocations over the past few years and, usually, the rate of return assigned to goodwill is the highest among the assets in the weighted average return on assets (WARA) analysis. However, this idea can be challenged in certain situations. This post is not [...]

By |2018-11-04T20:44:49+00:00October 24th, 2018|Financial, Valuation|Comments Off on Can the Goodwill Rate of Return be Equal to the WACC?

Publicly Traded Blockchain Companies: Understanding Risk for a New Market

By: Daniyal Inamullah, CFA Without the advantage of being part of a reputable VC or Angel group, or actively working on early-stage company investments, public market information offers retail investors with the best knowledge to invest in micro and small cap companies. Due to the asymmetric information and profit potential associated with any new [...]

By |2018-11-06T15:09:20+00:00October 15th, 2018|Acquisitions, Blockchain, Financial, Presentations, Select Articles, Valuation|Comments Off on Publicly Traded Blockchain Companies: Understanding Risk for a New Market

Earnings Quality is More than Adjusted EBITDA

Buyers perform exhaustive pre-acquisition due diligence of target companies that spans financial, tax, legal, IT, operational, marketing, HR, and other matters.  Central to financial due diligence is the target’s earnings quality.  Discussion of earnings quality usually focuses solely on recent historical EBITDA, normalized by making various adjustments.  Of course, normalized EBITDA is critical information. [...]

By |2018-10-17T13:32:25+00:00October 5th, 2018|Acquisitions, Financial, International, Select Articles, Taxes|Comments Off on Earnings Quality is More than Adjusted EBITDA

Fair Market Value to Fair Value reconciliation in Machinery and Equipment Appraisals

Fair Market Value (“FMV”) is a proposed opinion of value of an asset, supported by sound research and generally accepted valuation methods, that could be received in the market. Whereas Fair Value (“FV”) is the realized value of a piece of equipment upon the actual sale of an asset. In Machinery and Equipment appraisals (“M&E”), [...]

By |2018-09-19T10:44:25+00:00September 19th, 2018|Acquisitions, Financial, Select Articles, Valuation|Comments Off on Fair Market Value to Fair Value reconciliation in Machinery and Equipment Appraisals

Blockchain and Its Potential Use in Accounting

Blockchain, meet accounting.  I think you two will have a great relationship. You were practically made for each other. For every debit, there must be a credit. The foundation of accounting works so well that there haven’t been significant changes since Luca Pacioli's "double-entry" system was documented in the 1400's. Getting to its basic definition, [...]

By |2018-10-15T18:01:21+00:00September 17th, 2018|Blockchain, Financial, Select Articles, Taxes|Comments Off on Blockchain and Its Potential Use in Accounting

Physician Compensation Models: Concerns on the Employment Model

Issue: Hospital owned physician practices has tripled since 2002. Health systems are not effectively managing physician practices due to the lack of focus on important drivers such as compensation models and centralized revenue cycle function and negotiation of health plan rates. Both the hospital and physicians are not happy; lack of ROI for the hospital [...]

By |2018-07-26T08:31:27+00:00July 26th, 2018|Financial, Healthcare|Comments Off on Physician Compensation Models: Concerns on the Employment Model

Fair Value Discounts to Equity Consideration in a Controlling Acquisition

Application of Discounts to the Fair Value of Rollover Equity A question Intrinsic often fields in completing valuations for financial reporting involving a controlling transaction is whether it is appropriate to apply discounts for lack of control (DLOC) or discounts for lack of marketability (DLOM) to rollover equity granted to the sellers. We find that [...]

By |2018-07-18T16:28:18+00:00July 18th, 2018|Financial, Valuation|Comments Off on Fair Value Discounts to Equity Consideration in a Controlling Acquisition

Impact of the new ASC 606 revenue recognition standard on software company deals

While adoption of the new principle-based revenue standards (ASC 606 and IFRS 15, Revenue from Contracts with Customers) is old news for public companies who were required to conform with the standard starting January 2018, many private companies have not yet considered the impact the new standard will have on their revenue recognition nor created [...]

By |2018-06-20T18:46:41+00:00June 19th, 2018|Financial, Governments, Valuation|Comments Off on Impact of the new ASC 606 revenue recognition standard on software company deals

From 35% to 21% – Yes, the tax cuts made your company more valuable.*

In May, I had the opportunity to attend the annual Fair Value Conference organized by the American Society of Appraisers (ASA) in Los Angeles. As one may expect, a hot topic at the conference was the impact of the Tax Cuts and Jobs Act (TCJA) signed into law by the Trump Administration on December 22nd [...]

By |2018-06-20T18:42:31+00:00June 7th, 2018|Financial, Governments, Taxes, Valuation|Comments Off on From 35% to 21% – Yes, the tax cuts made your company more valuable.*

Fair Market Value – Is The All Cash Presumption Always the Right Answer?

Author: Alex Hodgkin Date: April 24, 2018 In many of the valuation exercises we undertake, particularly the ones related to tax compliance, we are beholden to using a standard of value known as “fair market value”. Many of you reading this note may not know what a standard of value is, so here is the [...]

By |2018-06-20T18:47:34+00:00April 24th, 2018|Featured, Financial, Select Articles|Comments Off on Fair Market Value – Is The All Cash Presumption Always the Right Answer?