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Business Valuation Fundamentals

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A presentation made by Brent McDade at the 2011 Memphis Bar Association Bench Bar and Boardroom Conference.

A presentation made by Brent McDade at the 2011 Memphis Bar Association Bench Bar and Boardroom Conference.

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    Business Valuation Fundamentals Business Valuation Fundamentals Presentation Transcript

    • Business Valuation Fundamentals Memphis Bar Association Bench Bar and Boardroom Conference May 6, 2011
    • Dissolving, Divorcing, and Distributing
    • Who Is This Guy? • Brent McDade, ASA, CBA, BVAL • Former Memphian • Business appraiser since back when I was physically fit • All around nice guy
    • Single 4
    • Married
    • Decosimo Advisory Services• Business Valuation• Litigation Support• Transaction Advisory
    • Decosimo Corporate Finance• Broker Dealer• Member FINRA/SIPC• Formalization of investment banking services provided by Decosimo CPA firm for more than 35 years: involved in the mergers and acquisitions of five major league baseball teams, more than 100 Coca-Cola bottlers
    • What We’re Going to Cover• When and how do shareholders realize value?• How is this relevant to attorneys?
    • Why do people own businesses?
    • Why do people own businesses?• Very simply, to receive the benefits of business ownership• Financial benefits of business ownership come in two forms: – Interim cash flows, in the form of distributions to owners – Value at ultimate sale
    • Value a Function of Expected Future Cash Flows
    • Realizing Value
    • Transaction Types• Voluntary • Involuntary – Gifts – Death – Divorce – Divorce – Breakups – Breakups – Financial conditions – Financial conditions – Shareholder disputes – Shareholder disputes – Contractual – Contractual – Sales – Sales – Employee Incentives – QFDR
    • “The Value”• No such thing as “the value”• Companies change in value over time• Companies have a number of values that exist simultaneously• Need to define the correct value for the situation
    • Things that Influence Value Conclusions• Subject of the valuation• Standard of value• Premise of value• Level of value• Valuation date
    • Levels of Value
    • A New Kind of Value
    • Tennessee Valuation Cases• Blasingame v. American Materials – 1983 case that everyone quotes – Affirms use of Delaware Block Method – Questions the consideration of only one year of earnings in a capitalized earnings method
    • Divorce Valuation Cases• Wright v. Quillen• Harmon v. Harmon• Alsup v. Alsup• Bertuca v. Bertuca• Smith v. Smith• Hazard v. Hazard• Cunningham v. Cunningham• York v. York• Inzer v. Inzer
    • Questions?