So, how does a business owner evaluate their business? And how can advisers or formal business valuations assist owners examining their businesses? There are at least six ways and they are important, regardless of the size of the business. All six of these should be contemplated within a formal business valuation.
This issue of Value Added® explores the elements of a quality valuation that increase the prospects of a favorable resolution of an examined matter, or the desired accepted-as-filed outcome at an initial reporting stage.
M&A activity in the banking sector showed modest improvement in 2024, with transactions rising to 126 from a multi-decade low of 101 in 2023, though pricing remained subdued by historical standards. Institutional investors demonstrated renewed support, enabling equity raises and strengthening buyer capital, setting the stage for potentially stronger activity in 2025. Mercer Capital leverages its 40 years of expertise to guide boards through strategic transactions, offering insights into M&A pricing, equity considerations, and the investment merits of acquirer shares.
In this article we report on the price volatility of Evolent Health, Inc. (EVH) in recent quarters.
The last several years have been interesting in the venture capital space. Venture capital financing increased rapidly in 2020 and 2021 and has fallen sharply since the 2021 peak. Less free-flowing capital for start-ups and early-stage companies has led to … Continued
The 2024 elections delivered a Republican sweep of the Presidency and Congress, setting the stage for potential tax policy changes. The likely extension of tax provisions from the 2017 Tax Cuts and Jobs Act, which are currently set to expire on January 1, 2026 is central to the uncertainty. The potential ten-year maximum extension would include maintaining the elevated estate and gift tax lifetime exclusion amount of $10 million, indexed for inflation ($13.99 million in 2025). However, legislative realities may lead to a shorter extension than ten years or even modifications to the exemption altogether. In this article written shortly after the 2024 presidential election, we outline possible changes to tax policy and the need for continued estate planning.
The U.S. presidential election triggered a strong rally in bank stocks, with investors expecting banks to benefit from deregulation, greater economic growth, and M&A. While professional pollsters may have missed the mark, the election result was accurately predicted by Moo Deng, a baby pygmy hippo that has achieved celebrity status. Given her clairvoyance, who better to offer her outlook for the banking industry over the next four years?
Spirit Airlines filed for bankruptcy on November 18, 2024. We will see creditors take control of the company after a nearly two-year saga involving Frontier Airlines, JetBlue and the Department of Justice successfully suing to block the proposed merger with JetBlue. Hindsight is easy, but the Spirit board made a disastrous decision like Richard Fuld in attempting to strike a better deal when the market signaled otherwise.
As the holiday season is upon us, and with Thanksgiving around the corner, I would be remiss not to reflect and share highlights from a bustling fall season at Mercer Capital. We are very grateful and thankful for the experiences, opportunities, and interactions with many of you!
Purchase price allocation is a critical step in the transaction reporting process under ASC 805. Future amortization expense, changes in the fair value of earnout liabilities, and even goodwill impairment testing all depend on the outcome of the initial allocation. This article will provide an overview of the PPA process, discuss common intangible assets, and review some best practices and potential pitfalls.
As we enter a new downrate cycle post-pandemic, bank metrics like cost of funds (COF) and net interest margins (NIM) are in focus. In this month’s Bank Watch, we analyze changes in key metrics from the recent uprate cycle and provide historical insight into how these metrics moved in prior downrate cycles. Historical trends suggest that while margins may stabilize initially, downrate periods often compress NIM. Early 3Q24 data shows signs of stabilization, but the impact of further rate cuts remains uncertain.
In this article, we discuss the importance of fairness opinions when the primary form of consideration consists of the buyer’s shares.
The acquisition of U.S. Concrete by Vulcan Materials highlights key valuation nuances in the construction industry. Evercore and BNP Paribas provided fairness opinions, using various methods like Guideline Public Company and Transaction analyses, which led to differing equity value estimates. Despite these differences, both banks agreed the $74 per share offer was fair, making this deal a notable case in M&A valuation.
Chris Mercer reviewed the Supreme Court’s Connelly v. United States decision, which ruled that life insurance received by a company after a shareholder’s death increases the company’s value for tax purposes. This ruling has important implications for divorce valuations, where accurately assessing business assets, including life insurance proceeds, is crucial.
Since our last update in 2023, banking deal activity has remained sluggish but may be recovering. Core deposit intangible (CDI) values have slightly increased, averaging 2.74% through mid-September 2024, up from 2.58% in 2023. Interest rates continue to drive CDI values, and recent Federal Reserve rate changes are anticipated to influence CDI values. Although market rates are trending downward, CDI values remain resilient. Future rate cuts could further affect these values, making a detailed understanding of core deposit characteristics essential for accurate valuation.
For business owners navigating a divorce, the value of a family business and its associated real estate can significantly impact the division of marital assets. Real estate strategies vary widely—from owning operating real estate to leasing from third or related parties—and each approach offers different implications for risk, capital appreciation, and business flexibility. Understanding these strategies can help couples make informed decisions about their marital estate during a divorce.
The liquidity crisis of 2023 has given way to periodic capital raises by regional (and community) banks that are grappling with the aftermath of the Fed’s ultra-low-rate policies. KEYCORP was the latest recipient of a sizable equity investment, but KEYCORP may point to a pick-up in M&A activity.
The banking sector saw a significant rally in stock prices in July 2024 as net interest margins stabilized and improved after a period of compression. M&A activity is also showing signs of recovery, with higher deal volumes and valuation multiples, leading to a cautiously optimistic outlook for the remainder of the year despite potential concerns over asset quality.
This month we discuss the growth of commercial real estate loans despite interest rate pressure, the decrease in commercial property prices, and the increasing number of delinquent loans. The U.S. Federal Reserve conducted stress tests on large banks to assess their resilience in severe economic scenarios, emphasizing the importance of understanding the diverse nature of CRE loans and the varying degrees of risk associated with different types of commercial properties.
The estate planning world is keenly focused on the SCOTUS decision in Connelly. Does the decision render entity-purchased life insurance useless, or at least, less useful than before? At the very least, in light of this ruling, every buy-sell agreement funded by life insurance should be reviewed by competent legal and tax counsel to ensure that the agreements operate as planned when triggered. For more information about the ruling, read Chris Mercer’s informative article.
This article discusses important concepts of personal vs. enterprise goodwill in valuations for divorce. It is important to understand the business, industry, and efforts of the divorcing spouse(s) & non-divorcing parties to perform a thorough, supportable analysis. It is also important to know how each state treats personal goodwill – some states consider personal goodwill to be a separate asset, and some do not make a specific distinction for it and include it in the marital assets. Additionally, while there are several accepted methodologies for determining % allocations to personal vs. enterprise, there are not uniform standards nor guidelines that govern the how-to’s; as such these analyses are complex and require subject matter expertise.
A quality of earnings (“QoE”) report and an audit are both essential tools in the business world, but they serve distinct purposes and offer varying insights. Audits are broader and regulatory in nature, whereas QoE analyses are more focused and strategic, catering to the needs of investors and decision-makers who require a deeper understanding of a company’s true financial health and future potential.
We were proud to sponsor and attend the AAML’s inaugural National Family Law Conference in Nashville, Tennessee on May 16-18, 2024. As usual, the sessions and attendees did not disappoint. Our biggest takeaway was that successful cases include the right recipe: the right attorney and the right expert – essentially, the right team. In this article we discuss some of our takeaways from this years AAML Family Law Conference.
Rising regulatory burdens contributed to the stunning growth in private equity the last two decades and private credit in recent years. PE investors ultimately require liquidity, however. Subdued M&A and IPO markets since mid-2022 have spurred growth for private equity secondaries, which mostly consists of GP-initiated transactions for continuation funds and LP-initiated transactions for portfolio interests.