If you ask a business appraiser what your company’s value drivers are, he may respond with definitions of the variables found in a net present value formula, or a description of the empirical data used to arrive at the cost of capital, financial leverage, and the rate of earnings growth.

This is because valuation calculations are most affected by small changes in four assumptions:  Read More…

Originally published in Financier Worldwide on September 2008

U.S. lenders once again have become more selective in their choice of borrowers, if they are able to lend at all. As increasing loss loan reserves deplete banks’ already deflated capital accounts, the markets for non-investment grade debt obligations have dried up, leaving many banks without even the last resort option of selling downgraded loans at a loss.  Moreover, “covenant-lite” loans have restrained many commercial banks and asset-based lenders from pursuing  Read More…

Published in 1944 were two books that became famous for their authors’ opposing interpretations of the history and effects of economic markets. While both works have attained the status of classics in academic circles, one of them, Friedrick Hayek’s The Road to Serfdom, became well-known in the field of economics. In the 30 years following World War II, the popularity of European social democracies expanded and Keynesian economics became a template on which an enormous program of government intervention and regulation was built in the United States. During this time, The Road to Serfdom was forgotten by the public and practically ignored by economists until 1974, when Hayek won the Nobel Prize in economics for his work that demonstrated the futility and corruptibility of planned economies. Hayek’s free market principles became a driving force behind the policies instituted by the Reagan and Thatcher administrations to create a deregulated market system that resulted in 25 years of uninterrupted economic growth.  Read more…

Originally published in the National Litigation Consultant’s Review on June 2009

When retained to testify as an expert witness before the New York Stock Exchange (NYSE) arbitration panel, I expected the assignment to consist of a straightforward determination of whether a member brokerage firm had been insolvent at the time of a failed transfer of a large block of securities. Instead, I found that the facts that might support a conclusion that the defendant was clearly insolvent—the fulcrum of the plaintiff ’s case—could be interpreted in ways that would support a finding of solvency or insolvency, depending on the definition that the NYSE chose to rely on. This, in essence, was my testimony, which neither the arbitration panel expected, nor my client wanted to hear. However, it was a true representation of the facts, and in some ways encouraged the parties to settle the case. The conundrum existed at the time primarily because of the many precedent court decisions that had slightly modified the definition of insolvency to address the circumstances of a particular case.  Read more…

Statement on Financial Accounting Standard 141 – Business Combinations (FAS 141) was issued in 2001 and provided guidance regarding how an acquirer measures and recognizes identifiable assets, assumed liabilities, and any non-controlling interests of the acquiree. It also addresses the measurement and recognition of acquired goodwill, gains resulting from a bargain purchases, and specifies disclosures that enables the users of the financial statements to better evaluate the financial effects of the business combination.  Read more…

As employer and broker-sponsored retirement plans continue to fail in their sole purpose of providing a reliable retirement income, the distinctly American traits of independent thinking and self-determination have materialized in the form of an exponential increase in self-directed retirement plans. Managed by the beneficiary, self-directed IRA and 401k plans frequently hold hard-to-value assets, such as early stage companies, partnership interests, undivided real estate, restricted stock, promissory notes, options, contracts, and even intellectual property. Read more…