Mercer Capital’s own Travis Harms tag-teamed with Ron DiMattia (Corporate Value Partners) on a presentation entitled “Digging Deeper: Exploring the Nuances of Discounted Cash Flow Analysis.” In the presentation, Ron and Travis addressed the importance of conforming the projection model with the subject company’s “story,” integrating the various inputs and assumptions, and testing sensitivities. The session also addressed some of the most-common biases that afflict financial forecasts.
My theory on markets, like much of life, is that things are never as bad as they seem when events are going south and never as good as they seem when all appears to be headed higher. One standard deviation on either side of the mean is where most of the action occurs. The 2014 Shared National Credit exam, I think, falls within the two standard deviations confidence interval. I did not see any big surprises in the examiners’ comments, which for the second consecutive year focused on leveraged lending commitments ($767 billion) within the context of the overall SNC exam ($3.4 trillion of commitments). That said there were some instructive comments that may point to how the market will evolve. As a result, the 2015 exam may be more useful for investors provided the economy does not change dramatically.
If you are a top company executive, salesperson, or are employed in a highly skilled technical field, you likely have a clause in your employment contract that prohibits you from leaving to work for a competitor or starting your own firm for a specified period of time. While commonplace for more senior positions and in certain industries, you may be surprised to find a non-compete agreement (NCA) in your contract if you assemble or deliver sandwiches at one of Jimmy John’s 2,000 restaurant locations.
On August 19, 2014, the PCAOB issued a staff consultation paper on standards for auditing accounting estimates and fair value measurements. The paper is part of the PCAOB’s ongoing efforts to evaluate whether existing audit standards could be improved. The staff’s concern is partly driven the fact that many PCAOB inspections have resulted in deficiency findings, particularly in the area of fair value accounting.
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.
