Business Valuation Update
- How to Review a Report’s Valuation Methodology
- Ideas for Solving Two Problems in the BV Profession
- How Do Your Firm’s Benefits Stack Up?
- Using Rule of Thumb Data to Uncover Cooked Books
Using the Distributor Method to Value Customer Relationships
A common framework when valuing intangible assets of a business—such as brands, trademarks, and technology—is to use the relief from royalty method, combined with the multiperiod excess earnings method (MPEEM), to appraise customer relationships. This framework requires significant market evidence, especially at the asset level, because of the challenge of finding royalty indications that are directly comparable to the asset being valued. Therefore, in certain industries and situations, this framework may be highly subjective and, if applied in a mechanical manner, may provide a value conclusion that is inconsistent with a qualitative assessment of the entity and its underlying assets. As an alternative, in certain situations, we replace the company-specific margin with a market-based margin, as a reasonable market proxy, in an MPEEM. This method is commonly referred to as the distributor method (DM). The name is derived from the initial use of distribution companies as the market proxy. Subsequently, extensions have been developed for other situations.
Valuation of customer/client relationships for divorce
Valuation of Customer/Client Relationships for Marital Dissolution Purposes , Robert F. Reilly, American Journal of Family Law , Winter 2002, pp. 273-288. Recurring customer/client relationsh ...
15 Tips for Valuing Intellectual Property Using the Multiperiod Excess Earnings Method
Overview. Valuing intellectual property and intangible assets is often a highly technical task. Valuation experts frequently use forms of discounted cash flow (DCF), and more specifically the multiperiod excess earnings method (MEEM), to value many intangible assets such as patents, customer relationships, commercial contracts, brands, franchise agreements, and licences.
Misunderstanding of Facts Results in Overvaluation of Fuel Supply Rights
Debtor’s fuel supply rights had value either in form of an implied contract, customer relationship, or simply an income stream, court says; court does not assign specific value but finds appraiser overstated its value due to misunderstanding of key facts.
Loss of Value Damages Do Not Require Showing of Complete Destruction
In tortious interference with business relations case, 8th Circuit says district court did not err when it allowed plaintiff’s expert to testify to total loss of value where company was not completely destroyed but harmed; damages award was not excessive.
Loss of Value Damages Do Not Require Showing of Complete Destruction
In tortious interference with business relations case, 8th Circuit says district court did not err when it allowed plaintiff’s expert to testify to total loss of value where company was not completely destroyed but harmed; damages award was not excessive.
Using the Distributor Method to Value Customer Relationships
A common framework when valuing intangible assets of a business—such as brands, trademarks, and technology—is to use the relief from royalty method, combined with the multi-period excess earnings method (MPEEM) to appraise customer relationships. This fra ...
Look at Attrition When Valuing Customer Relationships
Attrition is key when valuing customer relationships, and most appraisers use the multiperiod excess earnings method (MPEEM) to determine it, Thomas Zambito, a senior vice president in BDO Consulting’s Valuation Services Practice (Seattle), said at a rece ...
Valuer’s Q&A Corner
Business Valuation Australia is pleased to offer the new column “Valuer’s Q&A Corner.” In each issue, BVA will answer your critical business valuation questions with tips and advice from BV thought leaders. Please email your questions to editorau@bvresources.com and look for responses in each issue of BVA.
Dealing With the Changes to the Thin Capitalisation Rules
On 8 May this year, the federal government issued exposure draft legislation proposing changes to the thin capitalisation rules. When passed, these changes can result in higher taxes for multinationals if not managed appropriately.
A Perfect Valuation Report for Tax Purposes: Missing Pieces of the Puzzle
Many articles have been written and many debates had about what makes a good business valuation report, especially when determining a market value for Australian taxation purposes. Like many valuation professionals, I believe this is not just a matter of high mathematics, where each input and variable can be easily defended by the logic of readily available theorems. Compiling a good business valuation report requires extensive knowledge of businesses and industries; an understanding of economic, financial, and political environments; technical proficiency in applying both quantitative and qualitative judgment; and wisdom in writing a meaningful report.
How to Build a Valuation Practice Using Today’s Tools and Technology
When Mel Abraham and Rod Burkert started their valuation practices, one of the first things they realised was how hard it was to figure out how to build a valuation practice as solo practitioners.
What to Do About Applying Size Premia in Australia
The size premium is an important valuation issue for two reasons: (1) it is difficult to estimate; and (2) its inclusion in deriving a cost of capital can have a material effect on the outcome of a valuation assignment. This article provides an overview of the current status of the size effect and size premia in Australia, examples of cases from Australian courts and tribunals in which size premia have been considered, and the issues and challenges faced in estimating size premia within the Australian market.
Valuing Customer Relationships: Does the Distributor Method Miss the Mark?
Customer relationships are nearly always one of the identified intangible assets in purchase price allocations. While valuation of this asset has traditionally been carried out with the multiperiod excess earnings model (MPEEM), the distributor method (DM ...
Top Experts Talk ‘Best Practices’ in Valuing Intangibles For Financial Reporting
It’s one of the top growth areas for BV analysts—valuing intangible assets for financial reporting, and recently we gathered three of the leading authorities in this relatively new and nuanced area for a roundtable of “best practices” and valuation techni ...
Purchase Price Allocations: Navigating the Minefield Of Intangible Valuations
With the advent of SFAS 141, 142 and the new revisions to 141(R), the valuation profession has been thrown into the middle of a battleground on purchase price allocations (PPA).
ASA Advanced BV Conference covers host of topics
The American Society of Appraisers held its 22nd Advanced Business Valuation Conference October 16 -18, 2003, at the Hyatt Regency in Chicago, Illinois.
Short but pithy IBA 2005 business valuation conference (Part 3 of 3)
The IBA 2005 Business Valuation Conference was held at the Wyndham Palace Resort & Spa in Orlando, Florida (May 4-7, 2005).
For Your Consideration: A Model to Help Clarify BV Standards Debate
How relevant is financial reporting to business valuation professionals? Should there be one set of BV standards for all—or possibly two sets of standards, one covering “financial reporting” and a second that covers “all other” valuation work? Is there ...
Q&A with Howard Lewis
On July 16, 2008, IBA announced a plan to transfer its assets to a partnership including NACVA, ValuSource and KeyValueData. A new executive director was named—Howard Lewis, who spent 33 years with the IRS, including 8 years as the National Program Manage ...
Navigating the rising economic tide at CBC's annual meeting in Portland
n Implementing the Congruent Multi-disciplinary Team Linn Crader, CBC, CBI Crader & Associates, Inc. Linn Crader spoke about using a multi-disciplinary team to buy or sell a busines ...
AICPA BV ‘Hardball’ Panel Calls for the End of ‘It Depends’
Some of the toughest questions facing business appraisers today flew at the “Hardball with Hitchner” panel assembled at the annual AICPA National Business Valuation Conference in New Orleans Dec 2-4. Moderator Jim Hitchner (Financial Valuation Group) al ...
Quantifying Company-Specific Risk: The Authors Answer Your Questions
Note: Keith Pinkerton and Peter Butler’s recent article “Quantifying Specific-Company Risk: A New Empirical Framework” (Feb. 2007 BVU), followed by a BVR telephone conference in March, sparked a lively debate and numerous questions from our well-informed ...
Assessing the BV ‘Standards’ Issue Raised by the SEC Advisory Committee Report
Among practicing business appraisers, comparative tables like those appearing in this issue of BVU have a nuts-and-bolts kind of utility. For one thing, our standards provide templates for the preparation of valuation reports. They also provide answers t ...
"Practice" goodwill must be independent of the practitioner
The difference between personal goodwill and enterprise (practice) goodwill is easy to define conceptually, but sometimes difficult to measure. In this column, I will present the basic concepts ...