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The Financial Reporting Blog

A weekly update on financial reporting topics curated by Mercer Capital’s Financial Reporting Valuation professionals

Five Variations on a Theme: Analyzing Transaction Premium Data (Part 1)

The consistent theme of the Appraisal Foundation’s exposure draft The Measurement and Application of Market Participant Acquisition Premiums is that acquirers do not value control for its own sake, but rather for the tangible economic benefits that can be achieved by the exercise of control. In other words, control of a business enterprise is valuable only to the extent that at least one of two conditions prevail: (1) the control buyer anticipates that the business will generate incremental cash flows under their stewardship, and (2) the control buyer has access to less expensive capital than the current owners.

Market Value of Total Capital and Enterprise Value: Cash Creates Potential Differences in Total Capital Multiples

What is the difference between a company’s total capital value and enterprise value? The difference between these two concepts is the treatment of cash. In the current market environment, many public companies have accumulated significant, even massive, amounts of cash. The treatment of cash, then, will impact multiples. In the following post, we examine the effect of cash on the relative valuation multiples of Apple, Microsoft, and IBM.

Income Post-Mortem and Coupon Clipping

“So why be constructive on private credit when one of the tenets of the central banks’ zero and negative interest rate policies is to push investors to take more risk? Maybe it is misplaced, but I think there is more value (all else equal) in high current income than waiting on a terminal value when asset values are inflated.”

2016 Mid-Year Market Review of Public and Private Equity

The first six months of 2016 were eventful for U.S. markets. Worldwide, markets dealt with the continued blight within the oil industry and the shockwave of United Kingdom’s decision to leave the European Union. In the U.S., investors worried over potential Fed interest rate hikes and the inflated unicorn valuations.

Appraisal Foundation Releases Final Guidance on Fair Value Measurement of Customer-Related Assets

On June 15, 2016, the Appraisal Practice Board (“APB”) of the Appraisal Foundation released the final version of the Valuation for Financial Reporting Advisory #2, The Valuation of Customer-Related Assets. The non-authoritative best practices guidance elaborates on valuation approaches and methodologies that can be used to measure fair value of customer-related intangible assets such as customer lists, order or production backlogs, and contractual and/or non-contractual customer relationships. This post briefly discusses this document.

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Travis W. Harms, CFA, CPA/ABV

(901) 322-9760

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Matthew R. Crow, CFA, ASA

(901) 685-2120

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Lucas Parris, CFA, ASA-BV/IA

(901) 322-9784

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Sujan Rajbhandary, CFA, ABV

(901) 322-9749

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