This quarter’s “Valuation Tales” includes three licensed excerpts provided by Business Valuation Resources (BVR).

• The key issue addressed in the article Security Interest Exists in Economic Value of FCC License parallels an important financing issue for the typical beverage distribution acquisition. The holder of an FCC license cannot offer the license as security but the holder can offer the proceeds of the sale of the license as security. Similarly, a lender typically cannot be given an interest in the distribution rights themselves but they can take an interest in the proceeds from the sale of distribution rights.
• The second excerpt deals with courts appointing their own experts. I find it a somewhat troubling situation for the valuation profession if courts feel compelled to appoint a valuation expert for the sake independence and as a means of avoiding so called “valuation wars”. The stated role and professional standards of valuation experts dictate their independence. Additionally when opposing experts quantify the valuation impact of factual or legal matters under dispute they serve an important function.
• The last excerpt, FASB helps out with ‘market participant’ definitions, notes that fair value guidance could have some relevance for the valuation of private companies. Some of the distinguishing characteristics suggested by the SEC touch on key beverage distributor valuation issues like “financial versus strategic buyers”, “financial capacity”, “acquisition strategy”, and “marketplace synergies”.

Continue reading Valuation Tales: 2011 – Q4