Business Valuation: A Primer for the Legal Professional
Acknowledgments
Chapter 1
Introduction
Common Situations Requiring a Valuation Specialist
Overview of Topics Covered in the Book
Chapter 2
Keys to Working Successfully with BusinessValuation Professionals
When to Get a Valuation Expert Involved
Hiring a Qualified Valuation Professional
Defining the Assignment
Summary of Key Concepts
Chapter 3
Basic Steps to Expect During a Business Valuation Engagement
Engagement Definition
Engagement Letters
Data Gathering
Analysis
Issuance of the Report
Summary of Key Concepts
Chapter 4
Business Enterprise Value:What Does ItRepresent?
Valuation 101—Book Value Does Not Necessarily Equal Market Value
What Does the Term Business Enterprise Value Represent?
What Is the Amount of Business Enterprise Value (BEV) Based Upon?
Relationship between BEV and the Company’s Underlying Assets
Summary of Key Concepts
Chapter 5
Key Elements of a Company to Understand
Products and/or Services
Product Characteristics
Customer Base
Pricing Power—Company vs. Customer
Competitive Dynamics
Relative Strengths and Weaknesses
Supply Chain
Purchasing Power
Management
Workforce
Miscellaneous Elements
Summary of Key Concepts
Chapter 6
Analyzing a Company’s Historical andProspective Financial Performance
The Language of Accounting and Finance
The Company’s Storybooks
Reading the Story
Income Statement
Balance Sheet
Normalizing Adjustments
Summary of Key Concepts
Chapter 7
Economic and Industry Analysis—Impact on Valuation
Impact of the Macroeconomy
Gross Domestic Product
Inflation
Interest Rates
Unemployment
Housing Starts
Other Economic Factors
Sources of Economic Data
Local vs. National vs. Global Economy
Impact of the Industry
Industry Factors to Consider
Comparative Financial Data
Sources of Industry Data
Summary of Key Concepts
Chapter 8
The Income Approach to Valuation
Present Value Concept
Total Invested Capital vs. Direct Equity Applications of Income Approach
Capitalized Cash Flow Method
Discounted Cash Flow Method
Present Value of Distributable Cash Flow
Assessing the Reasonableness of Projected Distributable Cash Flow
Assessing the Reasonableness of the Rate of Return
Assessing the Reasonableness of Long-Term Growth Rate
Summary of Key Concepts
Chapter 9
Estimating a Required Rate of Return for Use in the Income Approach
Impact of the Rate of Return on Income Approach Results
What Does the Rate of Return Represent?
Cost of Equity Capital
Cost of Debt Capital
Capital Structure
Summary of Key Concepts
Chapter 10
The Market Approach to Valuation
What Are Market Multiples?
Total Invested Capital vs. Direct Equity Applications of the Market Approach
Different Types of Valuation Multiples
Choosing a Market Multiple to Consider
Adjusting Financial Results of Comparable Companies
Selecting Level of Market Multiple
Applying the Multiple to the Subject Company Results
The Guideline Company Method
The Transaction Method
Summary of Key Concepts
Chapter 11
Treatment of Non-operating Assets
Example Illustrating Reason Why Non-operating Assets Need to BeIsolated
Example Illustrating Underperforming Business Segment
Example Illustrating Add-Back of Owner’s Perquisites
Summary of Key Concepts
Chapter 12
The Asset Approach to Valuation
Applicability of the Asset Approach
Market Value and Book Value
Premises of Value
Built-In Capital Gain Tax Discount
The Procedures of the Asset Approach
The Asset Approach—An Illustrative Example
Summary of Key Concepts
Chapter 13
Reconciling Results Indicated by Applicationof Various Valuation Approaches
Strengths and Weaknesses of Valuation Approaches
Appropriateness of Methodology
Additional Points for Consideration
Final Estimate of Value
Summary of Key Concepts
Chapter 14
The Levels of Value Framework
What Are Minority Discounts and Lackof Marketability Discounts?
What Level of Value Results from the Application of Each ValuationMethod?
Determination of Discount for Lack of Controland Control Premiums
Determination of Discount for Lack of Marketability
Common Pitfalls in the Application of Valuation Discountsand Premiums
Other Valuation Discounts
Summary of Key Concepts
Chapter 15
The Basics of Individual Asset Valuation
Premises of Value for Individual Tangible and Intangible Assets
Valuation of Personal Property
Valuation of Real Property
Types of Intangible Assets
Valuation of Identifiable Intangible Assets
Valuation of Goodwill
Putting It All Together
Summary of Key Concepts
Chapter 16
Valuation Nuances in Various LitigationContexts
Family Law Litigation
Other Special Valuation Issues in Family Law
Shareholder Disputes
Diminution in Business Value
Summary of Key Concepts
Index
About the Author