Blog 2 of 4:  This is the second in a series of blogs that attempts to explain and distinguish between various valuation concepts, such as price, fair market value, fair value, liquidation value, intrinsic value, financial value versus strategic value, monetary versus economic value, emotional and psychic value, among others. Environmental, social, and governance (ESG)…

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Blog 1 of 4:  This is the first in a series of blogs that attempts to explain and distinguish between various valuation concepts, such as price, fair market value, fair value, liquidation value, intrinsic value, financial value versus strategic value, monetary versus economic value, emotional and psychic value, among others. Environmental, social, and governance (ESG)…

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Transcending Fair Market Value “Beauty is in the eyes of the beholder.” Margaret Wolfe Hungerford (née Hamilton), who authored many books, often under the pseudonym of ‘The Duchess’. When I think about value, I (like most in my profession) think first about fair market value (“FMV”).  The classic definition of fair market value is: The…

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Executive Summary Issue:  When oil and gas prices are lower than expected, royalties go down.  This is often when litigation picks up.  But the real issue has to do with a lack of clarity in the text of royalty and lease documents.  And this issue boils down to the valuation point, the physical location where…

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Executive Summary Issue:  As the end of 2020 draws near, the benefits to energy companies of The Coronavirus Aid, Relief, and Economic Security (CARES) Act should be kept in mind for 2020 tax filings.  The CARES Act was signed into law on March 27, 2020, and includes broad measures to provide assistance, economic stimulus, and relief…

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Overview It started sometime last year, during the fourth quarter.  The morning business show Squawk Box began to mention “ESG” on a daily basis.  Sometimes it was one of the hosts, sometimes it was a guest. Then. there were two inflection points that marked a higher level of discourse.  First, on December 17, 2019, SEC…

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Executive Summary Transaction Volume Shrinks Only 31 transactions were reported in Q2 2020, bringing the total reported transactions in 2020 to 113. Size Premium Size became an even greater pricing consideration for the middle market as transaction multiple variances widened for acquisition targets above and below $50 million. Debt Usage Decline In Q2 2020, total…

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Executive Summary Issue It takes time and money to go through a Chapter 11 restructuring, so going through it twice in a couple of years is unwise and inefficient.  Recently, it has been an issue with companies operating in the energy complex.  The challenges and complexities of energy markets make reorganization plans hard to properly…

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Executive Summary Issue There are three primary drivers that must be considered when looking at oil and gas prices.  First, they are commodities, and move with the complex economics of global supply and demand.  Second, they are very volatile.  And third, they can be significantly influenced by global, geopolitical factors. Challenge The challenge for anyone…

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Executive Summary Issue The term Environmental, Social & Governance, commonly called “ESG,” is not a new concept.  It was a hot topic before the COVID pandemic, in discussions to measure and value how companies engaged in sustainable and societally beneficial activities.  It will return as a topic across the business, regulatory, and investment communities again…

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Executive Summary Valuations Heightened The simple average Enterprise Value (EV) to EBITDA multiple of 7.4x for Q1 2020 was marginally higher than the previous four quarters. This was the net result of a shift in sentiment considering size and industry factors. Size Premium Size became an even greater pricing consideration for the middle market as…

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Executive Summary The Issue: Companies are facing cash shortfalls as they struggle to reopen from the COVID-19 lockdown.  Companies facing short-term liquidity challenges can seek new cash sources, such as the government’s Payroll Protection Program “PPP” or a bank line-of-credit.  However, certain companies may never achieve the revenue and profitability necessary to remain viable as…

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ValueScope, Inc. is excited to announce that Tom McNulty joined the firm on April 27, 2020 as a Principal and Managing Director who will launch our Houston Office.  Tom’s responsibilities include financial consulting, valuation analysis, transaction and dispute advisory, and expert testimony.  In addition to serving as the Managing Director of the Houston office, Tom…

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It has certainly been a rough couple of weeks with the recent fall off in the stock market and the shutdown of many businesses, but there may be a silver lining for people who intend to gift in the near future.  The recent decline in market valuations provides an opportunity to gift at lower values,…

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In financial markets, infrequent or rare events are referred to as “Black Swan” events.  The term “Black Swan” was popularized by Nassim Nicholas Taleb in his 2007 book, The Black Swan:  The Impact of the Highly Improbable.  Taleb describes Black Swan events as possessing three key attributes: Extremely rare Severe impact Obvious in hindsight Such…

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