As oil and gas prices remained low, deal volume picked up in the beginning of 2016 as companies were forced to sell assets in order to quickly generate cash to pay off debt and avoid bankruptcy. As the year continued, M&A activity increased and total deal value at the end of 2016 doubled that of 2015.
Sears is in trouble. Or rather, it’s been in trouble for some time. Same-store sales fell 13% in November and December 2016 and Sears has booked losses of over $9 billion during the past eight years. The company has had to resort to shedding assets – tangible and intangible – in a bid to right-size operations and manage liquidity. In the past, Sears financed some of these losses through the sale of real estate.
SNL Financial, which is an offering of S&P Global Market Intelligence, has ranked Mercer Capital 15th among national bank & thrift financial firms for announced transaction activity during 2016, both by aggregate deal values and the number of transactions. Mercer Capital advised on six deals valued at $733 million.
Gravity is supposed to matter for private equity or financial buyers. Strategic buyers can pay up for an acquisition with publicly traded shares that may trade at lofty valuations. Plus, share exchanges are about relative valuations, and strategic buyers usually expect to achieve some amount of cost savings. Not so for private equity buyers, who acquire for cash with their capital and borrowed money and often cannot extract expense savings unless the acquisition is a bolt-on to an existing platform company.
Mercer Capital is pleased to announce that Atticus L. Frank has been promoted to the position of Senior Financial Analyst.
2016 proved to be an interesting year, both in terms of developments in financial reporting and the range of topics covered on this blog. We’ve enjoyed sharing our thoughts in this forum over the last three years and look forward to new challenges and opportunities in 2017.
Each quarter, Mercer Capital’s Exploration & Production Industry newsletter provides an overview of the E&P sector, including world demand and supply, public market performance, valuation multiples for public companies, and a region focus. Mercer Capital closely follows oil and gas trends in the Permian Basin, Eagle Ford Shale, Bakken Shale, and Marcellus and Utica Shale. Last quarter our E&P newsletter, focused on the Bakken Shale. Today, we take a step back and review the broad characteristics of the Bakken Shale.
Trump’s nominations suggest that the upcoming presidential term will provide a friendly oil and gas environment. While it is unclear what the President-elect’s plan is for the RFS program, it is likely that he will face challenges balancing farm and oil interests.
Vincent Papa, PhD, CPA, CFA is Interim Head, Financial Reporting Policy at CFA Institute. He recently co-authored a two-part report on a comprehensive CFA Institute-member survey on non-GAAP financial measures. The views and opinions expressed in this post are those of the author and do not necessarily represent the views of Mercer Capital.
The purpose of Travis W. Harms’ newest whitepaper, Capital Budgeting in 30 Minutes, is to assist directors and shareholders in evaluating proposed capital projects and contributing to capital budgeting decisions that enhance value.
Chapter 11 reorganization affords a financially distressed or insolvent company an opportunity to restructure its liabilities and emerge as a sustainable going concern. Once a petition for Chapter 11 is filed with the bankruptcy court, the company usually undertakes a strategic review of its operations, including opportunities to shed assets or even lines of businesses.
Over the past decade, we have been retained by several investment funds to assist them in responding to formal and informal SEC investigations regarding fair value measurement of portfolio investments. Reflecting back on those engagements yields a couple observations and reminders for funds and fund managers as they go through the quarterly valuation process.
One of the most commonly taught Bible stories is the miracle of Jesus feeding five thousand people with only five loaves of bread and two fish. Last week we learned of a new miracle story of never ending sustenance. The Permian Basin, which has been drilled since the 1920s and produced billions of barrels of oil, was discovered to hold the largest unconventional crude accumulation in the US.
We have published a collection of these posts in a book entitled “Market Participant Perspectives: Selections from Mercer Capital’s Financial Reporting Blog.” For our existing clients and blog subscribers, we hope that the book uncovers a post or two of interest that you might have missed the first time around. For clients that we haven’t met yet, there’s probably no better introduction to our team than the collection of posts in this book.
On October 13, 2016 RSP Permian (RSPP) announced the acquisition of Silver Hill Energy (SHE) for approximately $2.4 billion dollars. SHE will receive approximately $1.182 billion in RSPP common stock and $1.25 billion in cash. Based on RSPP disclosures, the assets received include (1) wells currently producing 15,000 barrels of oil equivalent per day (BOEPD); and (2) 41,000 in net acreage throughout Loving and Winkler County Texas.
The source of new capital has changed in the venture capital industry, as there has been an increase in nontraditional investors – including pension plans, hedge funds and mutual funds. From growing regulation and transparency to growing capital and propped-up valuations, this rise of the nontraditional investor has had a profound effect on VC. It’s an odd situation, where new players are welcomed and then threaten to change the rules of the game.
Timothy R. Lee, ASA, Managing Director of Mercer Capital, will present the webinar “Appraisal Review: It’s A Lot Harder Than You Think” for Valuation Products and Services on November 2, 2016.
Earnings adjustments are an important part of a valuation professional’s bag of tricks, but they are susceptible to misuse. The purpose of earnings adjustments is to convert the income statement from one that is backward-looking to one that is forward-looking. In this post, we review some characteristics of legitimate (and questionable) earnings adjustments.
On October 14, 2016, Batesville, Arkansas-based First Community Bancshares, Inc. (“FCB”) announced that it had entered into a stock purchase agreement (“Agreement”) with Lepanto, Arkansas-based Little River Bancshares, Inc. (“LRBI”) and Little River Bank (“LRB”) in which FCB will acquire LRBI. Terms of the Agreement were not disclosed. Mercer Capital served as a financial advisor to LRBI.
Mergers and acquisition activity relays much information to the general public: trading multiples, future expectations, the premium paid for a company above and beyond the company’s tangible and intangible assets, to name a few. In our bi-annual Lab Services Newsletter, we observe M&A transactions within the industry, and further analyze the largest acquisition(s) to gain insight behind the deal.
One question that the FASB has wrestled with over the last few years is if goodwill should be amortized or not. It’s been over a decade since amortization was replaced in favor of a periodic two-step goodwill impairment assessment. Adoption of these provisions has varied greatly. Now, more changes to this system are in the works, as the FASB Board met last week and made a few tentative decisions regarding the accounting for goodwill impairment for public and private entities.
Golden parachute payments have long been a controversial topic. These payments, typically occurring when a public company undergoes a change-in-control, can result in huge windfalls for senior executives and in some cases draw the ire of political activists and shareholder advisory groups. Golden parachute payments can also lead to significant tax consequences for both the company and the individual. Strategies to mitigate these tax risks include careful design of compensation agreements and consideration of noncompete agreements to reduce the likelihood of additional excise taxes.
M&A activity reinforces that E&P companies are moving to the Permian. In this post, we focus on two transactions: Resolute Energy’s acquisition of Delaware Basin Acreage and Apollo and Post Oak Energy’s merger to form Double Eagle Energy Permian.
How is a veterinary practice or animal hospital valued? Knowing which methods to apply in the valuation of a veterinary practice and which assets to recognize in a business combination can have a material impact on the value of a company and its purchase price allocation.