This post is the first of four installments from our Corporate Finance in 30 Minutes whitepaper. We begin with a brief overview of return and risk, the two basic building blocks of corporate finance.
This post is the first of four installments from our Corporate Finance in 30 Minutes whitepaper. We begin with a brief overview of return and risk, the two basic building blocks of corporate finance.
If there is one consistent story in these RIA rollups, it’s that building them takes longer than anybody expects. Duran worked on building United Capital for nearly 15 years. Some things require scale that cannot be acquired in one lifetime, however, and that’s where the CEO of Goldman Sachs, David Solomon, saw an opportunity.
Burgers’ Smokehouse, a specialty meat and food producer based in California, Missouri, has acquired Clifty Farm Country Meats of Paris, Tennessee in a transaction that closed on March 1, 2019. Mercer Capital served as Clifty Farm’s financial advisor.
The issue of a premium for an S corporation at the enterprise level has been tried in a tax case, and the conclusion is none. This case marks a virtually complete valuation victory for the taxpayer. It also marks a threshold in the exhausting controversy over tax-affecting tax pass-through entities and applying artificial S corporation premiums when appraising S corporations (or other pass-through entities). This article provides an extensive review of the case.
In a world where non-stop financial commentary is as commonplace as it is tedious, one man’s market insights get an unusual amount of attention: Warren Buffett’s annual shareholder letter. Buffett is an ironic icon of the investment management industry. He’s made his fortune from active investment management, but regularly articulates his skepticism of the same. He’s doubtlessly inspired more people to found RIAs than any other individual, yet his firm, Berkshire Hathaway, is not an RIA. And his annual treatise on the performance of his company is full of common-sense wisdom that, based on Berkshire’s track record, is anything but common.
The good news – or maybe it’s the bad news, depending on your perspective – is that overly optimistic projections are not necessarily the result of intentional errors on the part of your family business managers. Rather, behavioral economists tell us that humans are prone to overconfidence as a result of what they refer to as cognitive biases. In this post, we address five cognitive biases contributing to overly optimistic forecasts.
As year-end approaches, we hope to spread some cheer with the greatest only asset management themed holiday quiz. Merry Christmas! We will be back in January.
Golden parachute payments have long been a controversial topic. These payments, typically occurring when a public company undergoes a change-in-control, can 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.
The change in the tax law brings additional attention to player contract values as they are now potentially taxable events for teams. It may or may not impact how a team approaches its business of winning championships, but it will impact how leagues and front offices approach valuations of player contracts.
Matthew R. Crow, ASA, CFA, president of Mercer Capital, was quoted in the Financial Planning article, “Focus Financial’s revenue gains keep spotlight on RIA proxy.”
It may be a tiresome cliché, but your family business really does make money buying low and selling high. It’s important to think about gross margin, because it tells you how much of a “mark-up” your customers are willing to pay for your good or service. The higher the “mark-up” the more revenue will be available to cover operating expenses and generate an operating profit.
The income statement is a natural place to begin analyzing a company’s financial results, and revenue is the natural starting point for that analysis. We recently heard someone remark that everything good in business starts with revenue, and our experience working with family businesses of all stripes confirms that sentiment. While the absolute amount of revenue can be instructive (i.e., are we looking at a $10 million business or a $100 million business?), it is the trend in revenue that is most revealing. Is the business growing, treading water, or shrinking?
Reading financial statements well is all about asking the right questions. In this series of posts, our goal is to help family business directors ask the right questions of their financial statements. Asking better questions leads to better financial and business decisions.
If family business directors are going to make good capital allocation decisions, they need to know what the right hurdle rate is. If the hurdle rate is set too low, the family may experience weak future returns. Setting the hurdle rate too high, however, introduces the risk that the family business will pass on attractive investment opportunities. In this post, we consider how the hurdle rate relates to the weighted average cost of capital.
Stewarding a multi-generation family business is a privilege that comes with certain responsibilities, and each family business faces a unique set of challenges at any given time. For some, shareholder engagement is not currently an issue, but establishing a workable management accountability program is. For others, dividend policy is easy, while next gen development weighs heavily. Through our family business advisory services practice, we work with successful families facing issues like these every day.
This is the inaugural post for our Family Business Director blog. By way of introduction, we thought we would anticipate a few questions that you might have.
With last week’s release of the 2018 InvestmentNews Compensation & Staffing Study, trends in pay and performance expectations are making the rounds in the RIA community. Even though we are a valuation firm, we are often asked to weigh in on compensation matters, as officer pay and firm value are typically intertwined.
The investment management industry is characterized by scores of independent firms who have found success in idiosyncrasy, providing clients a limitless variety of paths and approaches to common investment dilemmas. Some would suggest that this is the source of the industry’s strength, but not everyone agrees, as evidenced by the Focus Financial IPO two weeks ago.
As we do every quarter, we take a look at some of the earnings commentary of pacesetters in asset management to gain further insight into the challenges and opportunities developing in the industry. This quarter the conversations center around market volatility, regulatory developments, and the potential cash flow into fixed income products.
This whitepaper is a compilation of thoughts we have gathered in the early days of this new tax regime. We present what we think are the major issues that RIA partners should consider.
There is an argument to be made that the 2017 Tax Cut and Jobs Act is bullish for RIA M&A, but there is also a counter-argument. In this week’s post, we address both.
Most of the sector’s recent press has focused on the tax bill’s impact on RIAs, so in addition to our own writings on the matter, we’ve highlighted some of the more salient pieces we’ve come across regarding the tax bill as it relates to the asset management sector.
The Tax Cuts and Jobs Act has really shaken up the underlying economics of investment management firms and, with that, the value of those firms. As a consequence, many owners of RIAs have inaccurate ideas of what their firms are worth, and, worse than that, they have outmoded shareholder agreements suggesting the willingness to transact at inaccurate valuations.
The Tax Cuts and Jobs Act has been especially beneficial to the RIA sector, as lower corporate tax rates has had a positive impact on equity markets, boosting AUM and earnings, which are now taxed at lower rates. Many firms are still assessing the full impact of tax reform, but what is clear is that lower corporate tax rates in 2018 will give asset mangers increased flexibility in capital management, M&A activity, and technology investment. As we do every quarter, we take a look at some of the earnings commentary of pacesetters in asset management to gain further insight into the challenges and opportunities developing in the industry.