If you have been involved in an M&A transaction and seen how different the M&A model is from the buildup method with public data, have you ever wondered why the M&A model isn’t a key valuation approach or wondered how M&A data differ in character from public market data? In this seminar, Jim Lisi explains why the M&A model with private data is the more reliable approach. The difference between deal data for whole companies and the public markets is explained with Shannon Pratt’s concepts. In the valuation models, just as deals are constructed, the valuation problem is broken into two parts: a value for the operating assets and a value for the nonoperating assets. Similarly, operating cash flows are differentiated from invested capital cash flows, and a central tendency of value will be found using both the market approach and capitalization rates. Then, the two most important financial factors for specific company risk are evaluated, along with discussion of what to do with the nonfinancial factors.

• Introduction/concepts
  
  
  • Value-in-exchange v. value-to-the-owner standards
  • Independent v. dependent variables
  • Impact of ownership on value
  • Market value of invested capital and market value of operating assets
    
    
• M&A model v. CAPM model
  
  
• Finding MVOA from M&A transaction data
  
  
  • Market approach
    • Selecting transactions
    • Adjusting nonoperating assets
    • Adjusting owner compensation
    • Weighting v. statistical analysis
    • Live demo of DealStats

• Income approach
  • Selecting transactions
• Adjusting nonoperating assets
• Finding risk rates
• Live demo of DealStats

• Company-specific risk
• Owner-specific risk
• Goodwill calculation
• Conclusions
  • Asset value (for banks, business brokers)
  • Net asset value (exchange value of entity)
  • Equity value (owner or investor value of entity)

• Identify the variables that apply to value-in-exchange (sale) engagements that are different from value-to-the-owner (investor) engagements

• Demonstrate how to link cash-flow metrics, balance sheet elements, and data sources to a desired conclusion type

• Apply M&A transaction data in both the market approach and income approach

• Participants will be able to determine Goodwill in compliance with USPAP standard 9-3