Chapter 11 reorganization, which allows financially distressed companies the opportunity to restructure liabilities and emerge as a viable going concern, can be a chaotic and challenging time for the company. For management teams working through a bankruptcy, there are a number of valuation-related considerations. Here are five key concepts for management teams and their advisors to be familiar with when embarking upon a Chapter 11 reorganization.
A recent WSJ article indicates that transaction-crossing platforms like traditional brick-and-mortar stores or online markets can and do collect data that consumer-product manufacturers are willing to purchase in order to fine-tune their own products and marketing. Financial statements need to reflect current economic realities to stay relevant. Tangible physical assets may have been the primary source of value creation in an earlier era, but intangible assets increasingly drive the business models of a newer generation of firms.
Many financial managers, CFOs, analysts, and valuation specialists are familiar with the concept of a “control premium” or “premium paid” that is often observed when a public company is acquired. A control premium is most often measured with reference to the price paid to acquire the company and its trading price immediately prior to acquisition (or rumor of an acquisition). However, the observed premium may not represent a premium for conceptual control inasmuch as it conveys the quantification of actual changes that can be made by exercising that control.
At its September 16, 2014 meeting, the Private Company Council reached consensus on a proposed GAAP exception available to private companies completing a business combination. The exception must be endorsed by the FASB before becoming effective. The proposed exception would allow private companies not to recognize non-competition agreements and certain customer-related intangible assets acquired in a business combination. The PCC’s mandate is to reduce the cost and complexity of financial reporting for private companies. However, the degree to which this proposal meets that objective depends, in part, on two factors …
Recently I found myself doing a double-take upon seeing the headline “FASB Looks to Uncomplicated Accounting—A Little, At Least.” Accounting standards becoming… less complicated? In response to various stakeholders’ concerns, the FASB launched an initiative to reduce complexity in accounting standards in July 2014. The FASB’s initiative comes at an opportune time, as accounting standards have become more lengthy and complex, so has the cost and difficulty of financial reporting. The objective of the simplification project is to improve the usefulness and transparency of financial information.
