Equity-Based Compensation Valuation

June 21, 2019

Shelf Life of an Equity Compensation Valuation

Clients frequently want to know, “How long is an equity compensation valuation good for?” We get it. You want to provide employees, contractors, and other service providers who are compensated through company stock with current information about their interests, but the time and cost required to get a valuation must also be considered.

Due to the natural business changes every company goes through, accounting and legal professionals often recommend updates at least annually if no significant change or financing has occurred.However, unique company or market characteristics often necessitate more frequent updates. Here are some of the factors to consider when determining the need for a valuation update:

  • Significant changes in the company’s financial situation
  • Shift in overall strategy
  • Achievement of business milestones
  • Changes in market or industry conditions
  • Gain or loss of major customer accounts
  • Additional funding
  • Issuance of new equity compensation
  • Potential for an upcoming IPO
  • Changes in expectation as to the timing of an exit event

Even for companies that have fairly steady operations, the effects of small business changes accumulate over time. Companies that deal with major changes relatively infrequently may be suited to regular summary updates to supplement full comprehensive reports as a way to maximize the cost-benefit analysis of equity compensation valuation.

Originally published in the Financial Reporting Update: Equity Compensation, June 2019.

Continue Reading

The New Frontier Of Consumer Credit: Banks vs. Fintechs
The New Frontier Of Consumer Credit: Banks vs. Fintechs
Over the past three decades, community and regional banks have scaled back consumer lending while large banks and specialty finance companies have captured significant market share through economies of scale and robust origination platforms. Firms like American Express (NYSE:AXP), Capital One (NYSE:COF), Synchrony Financial (NYSE:SYF), and Ally Financial (NYSE:ALLY) leverage FDIC-insured deposit funding to power their lending operations. Most of these players, along with acquired entities like Discover Financial, operate at the intersection of payments and credit. Visa (NYSE:V) and Mastercard (NYSE:MC) are important payment partners to traditional banks, however.
Medical Device Industry Outlook – Five Long-Term Trends to Watch
Medical Device Industry Outlook – Five Long-Term Trends to Watch
Demographic shifts underlie the long-term market opportunity for medical device manufacturers. While efforts to control costs on the part of the government insurer in the U.S. (and elsewhere) may limit future pricing growth for incumbent products, a growing global market provides domestic device manufacturers with an opportunity to broaden and diversify their geographic revenue base. Developing new products and procedures is risky and usually more resource intensive compared to some other growth sectors of the economy. However, barriers to entry in the form of existing regulations provide a measure of relief from competition, especially for newly developed products.
A Decade in Motion: How COVID Reshaped Valuations in the Transportation Industry
A Decade in Motion: How COVID Reshaped Valuations in the Transportation Industry
The last several years have been nothing short of transformative for the transportation and logistics industry. Shifts in global trade patterns, consumer behavior, capital markets, and cost structures have left an indelible mark on both the operating performance and valuation metrics of transportation companies. A review of enterprise value to EBITDA (EV/ EBITDA) multiples across key subsectors, truckload, less-than-truckload (LTL), air, marine, rail, and logistics, reveals three distinct eras: the calm before the storm (pre-COVID), the whiplash of the pandemic years, and the normalization that followed.

Cart

Your cart is empty