The Financial Reporting Blog

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


Leveraged Dividend Recapitalizations and Leveraged Share Repurchases

Leveraged dividend recapitalizations and leveraged share repurchases are two corporate finance tools that are available to owners of private companies. These tools can be used to create liquidity outside the ownership of private businesses. In this post, we will illustrate the impact of a leveraged share repurchase and a leveraged dividend on the same company. This analysis will enable us to see the impact leverage has on the company and also, the different impacts the transactions have on owners.

Turning on the Fasten Seat Belt Sign: Fair Value Measurement in Turbulence

We have previously noted that the degree of difficulty for fair value measurements has been low for some time. Switching metaphors, choppy equity markets and widening credit spreads during the third quarter of 2015 indicate that it may no longer be safe to move about the valuation cabin.

To (Appraisal) Arbitrage or Not?

Appraisal arbitrage cases have been around for years but they have become more common lately, led by hedge funds looking to profit from mergers and acquisitions. In an “appraisal arbitrage”, investors in a company vote against a proposed deal and then appeal to a judge to determine and award them the statutory fair value of the stock after the deal has closed. In recent years, a number of hedge funds have seen the opportunity to accumulate shares of a company on the eve of a buyout and attempt to profit from this strategy. When the court takes up the matter, the judge’s final decision becomes the price paid to those involved in the lawsuit – and this price (statutory fair value) could be higher or lower than the agreed upon merger price.

Valuation concerns mark Southern Capital Forum: Are VC trends the canary in the RIA coal mine?

Mercer Capital had a great time sponsoring the Southern Capital Forum on Lake Oconee last week. The annual gathering of the venture community is a favorite to check in with many of our clients and get a read on capital markets from some intentional listening. Beautiful weather and the bucolic surroundings of Reynolds Plantation helped, and on the second day of the conference, Janet Yellen kept her foot on the cost of capital. So what’s not to like? Despite the generally upbeat attitude of the sponsor community, and plenty of planned fund raisings, we heard one theme repeated over and over again that threatens the broader asset management world: stretched valuations.

In the Eye of the Beholder: Increasing SEC Scrutiny of Public Company Fair Value Marks

In an article published in August 2015, NERA Economic Consulting examined some of the effects of the SEC’s increasing use of quantitative analysis to identify potential problematic valuations in public company filings. Although the SEC previously used its tools in the private fund advisor sphere, the agency is beginning to turn its gaze to publicly traded companies. Thus far, the SEC’s focus has been on two main points, valuation policies that differ from actual valuation practices (including valuation methods and approaches, as well as the inputs used) and the incorporation of market conditions (or lack thereof).

1 21 22 23 24 25 44