All posts in “Appraisal and Valuations News”

Trending with technology

One of the things we like to talk about is trends. Trending in revenue. Trending in an industry. Trending in technology. So reading this piece in Forbes fits right in our bailiwick. Jeffrey Greene – who’s a pretty smart guy – suggests that technology is the largest threat to the white-collar sector.

Interesting, right? And he’s probably right. Continue Reading…

On Uber, 1099 Contractors, and Valuation

Ok, I admit it. Uber is our darling here.  We tend to go on and on both about valuation issues and what a unique business model it is.  Here we have a company that is looking to raise capital at a $50bn valuation, and it’s core business model is to basically use other people’s idle assets to generate revenue.  It’s growing gangbusters.  Pretty slick.

But not everyone loves Uber.  Aside from taxi medallion owners and stuck-in-the-past politicians, Uber also has a problem with it’s drivers.  It seems that they want a piece of the pie too.  The heart of the matter: drivers are 1099 contractors, and they want to be treated like employees. Continue Reading…

Showdown: Seahawks vs. Patriots… Thoughts on Investment Value

The NFL is one of America’s most visible brands- and far and away the biggest sporting draw.  The league earns an estimated $10 billion or more per year in revenue.  In 2013, an estimated 1.7 billion viewers watched NFL games on the 4 major networks carrying the NFL.  But despite the fanfare – and despite the fact that the league itself is a non-profit with annual reporting requirements – understanding of the league’s finances and valuations are murky at best.

Since we can’t drill down like we’d like to, we’ll settle for a high level look at the two teams in this year’s Superbowl: The Seattle Seahawks and the New England Patriots.

According to Forbes – which publishes a thinly documented annual “valuation” of all NFL teams – the Patriots are worth $2.6 billion while Seattle is worth $1.33 billion.

This is curious.

What, according to Forbes, drives value for an NFL team?  We usually like to think in terms of earnings.  This data isn’t public, but Forbes places the Pat’s earnings at $147 million vs. $27.3 for the Seahawks.  This yields a PE ratio of 17.6x vs 47x for the Seahawks.  Hmmm what?  The Seahawks have a valuation that is about 2.75 times richer than the Patriots.

Revenue Sharing

Unlike other sports leagues, the NFL operates on a socialist model (bless their capitalist hearts).  All TV broadcast fees are divided up and equally distributed amongst the teams.  The League (through some anti-trust exemption magic) is able to negotiate broadcast rights as a whole.  The even sharing helps teams in smaller markets earner larger broadcast fees than they otherwise might.

In 2013, the team share of broadcast rights was $187.7 million1. So every team has a minimum, baseline level of revenues they earn regardless of location or popularity or other performance.   So maybe to get a better look at each team we should strip out revenue sharing and looking at monies earned by team ex- of national broadcast rights.

Where does that leave us?  Ex- of Broadcast revenues, New England generates $240.3 mlllion of revenues vs $100.3 million in Seattle.  So about 2.4x performance.  But they are valued at 1.95x Seattle.  So that doesn’t work either.

Let’s Get Creative

We’re not stumped yet.  If football teams aren’t to be valued based on earnings, and aren’t to be valued on revenues…. must be something else.  Well we are all aware that the NFL is a super competitive business.   And as a corollary, team owners are super competitive executives.  Maybe teams are valued in relation to their on-field performance.

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Looking at the last 10 years the Patriots won an average of 12.2 games per season (side note: I LOATHE the Patriots, but that’s pretty darn impressive), whereas Seattle won a respectable 9.1 games per season.  Over the period New England has won about 30% more games than Seattle.    So the Patriots win more, but not 95% more.

This isn’t helping.

Investment Value

Sometimes we want things just because we want them.  Sometimes we call this concept intrinsic value – that is, “value for it’s own sake.”  We also refer to this concept as “Investment Value” – or the value to a particular individual.

I tend to think this is what you see at work in pro sports teams valuations. I clearly have no idea what Forbes does to make up these numbers, but we do know that very rich people buy these businesses because they really, really want them.  Look no further than Steve Balmer’s purchase of the Clippers for what many thought a huge premium to valuation.

Thinking of it in that light – say you are a fella in Seattle that has oodles of extra money and really likes football.  And assume for a moment that a football team becomes available in town.  What’s more important – buying the team?  Or getting the valuation right?

Paul Allen owns the Seahawks.  He’s a pretty rich fella from Seattle.  And that, folks, is what Investment Value is all about.

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Footnotes:
(1) The Greenbay Packer’s are the only public team company.  As such they report their financial performance, indicating  the $187 million received from revenue sharing.

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Long Horns Lose…. The Top Valuation Spot

We’re going to be writing a bit more later this month about valuations in sports teams… but in the interim this tidbit in the WSJ caught our eye.
[blockquote background=”#f6f6f6″]The Longhorns, who still led all programs in estimated revenues, are worth $972.1 million, up from $875 million a year ago. But that was only good for No. 3. Michigan finished second at $999.1 million. Ohio State and Michigan both benefited from much-improved cash flows over the past year.[/blockquote] One of the problems we always have when looking at these notional sports teams “valuations” is that they are revenue driven.  Brewer heads the right direction here – valuing a football program is ultimately no different than valuing a business.  With few exceptions, we care more about cash flow then revenues.

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Notes from Bloomberg: Should I Get a Valuation?

We really liked this recent article on Bloomberg regarding business valuations.  Simply put, a reader asks “Does it make sense for me to get a business valuation?”

Clearly we have a horse in the game here, but their advice is spot on.
[blockquote background=”#f6f6f6″]From Bloomberg: “And really, assuming your small business is your family’s biggest asset—perhaps other than your home—isn’t it smart to have a realistic idea of what it’s worth?” [/blockquote]

Yeah, we’d say so. Of course we measure everything… so sure, why not measure the most valuable thing you own?

 

 

 

Omaha Gets it Right: This is Why You Use a Valuation

A recent tidbit from the Omaha World Herald caught our eye.  The paper responded to a query we hear all too often:  “I’m looking to buy a business but the price seems high.  Now what?”

The Herald responded:
[blockquote background=”#ffffff”]What you want to be cautious about is allowing the seller to “plug” a number in as the sales price and state that is what it is worth, no explanation and no supporting information. Usually what happens in the negotiation of a purchase is that a third party is introduced to provide an independent business valuation. If this is the case, a buyer should ensure that the valuation analyst is using standards that are set by the nationally recognized association [such as NACVA] dedicated to this service. [/blockquote]

Spot on.  Yes, a valuation analyst is going to work through the scenario and help the buyer understand what a reasonable fair market value is for the company.

But let’s take it a step further: the analyst will help understand what is (or should be) included in the price.  Is cash and AR included?   AP paid off?  Inventory included or expected to purchase separately?  Is the inventory number reasonable or does it include excess, slow moving inventory?  There’s an old yarn in the M&A / investment banking world that says “you name the price, I’ll name the terms.”

Your valuation analyst can help you with both – first understanding if the price is reasonable, and then confirming the terms correlate to the price.

 
 
 

Peak App?

Loved this tweet from Thomas Purves.  What with all the broughaha regarding Uber (don’t know what we mean?  Spin the globe, pick a country, and google how they are taking over / fighting the incumbent), this riff on “peak oil” struck a cord.

I have no idea if we are at peak app – sure hope not – but I’m nearly positive we are at Peak Uber Stories.

BTW – just get out of the way, incumbents.  If you can’t compete, trying to legislate your way to existence is just a recipe for losing slowly…

 

Jessica Timmerman Joins Quantive

July 7, 2014 – Quantive Business Valuations, a national, full service valuation firm, is happy to welcome Jessica Timmerman as Senior Manager.  Ms. Timmerman, a Certified Valuation Analyst, joins Quantive to assist in the company’s rapid growth in providing business valuation services to various industries across the country.

Ms. Timmerman has a wealth of experience, having completed engagements for over 150 middle market companies.  She has provided valuation support for a range of purposes, including gifting and estate planning, shareholder buyouts and disputes, merger and acquisition considerations, buy-sell agreement development, divorce, litigation, financial reporting, financing, and federal tax and other regulatory compliance, among many others.  Jessica has performed appraisals in a wide range of industries and markets including wholesale businesses, service companies, retail companies, and manufacturers.

Ms. Timmerman comments, “I am excited to begin this new venture with Quantive Business Valuations and look forward to working with the team to further develop their already extensive product and service offering.  I am fortunate to be joining such an innovative and respected company that prides itself on technical competence, compliance, and market innovation.  The Business Valuation arena is very widespread with few market specialists leading the arena. I look forward to working with the Quantive team to continue carving its niche as a national valuation leader.”

Upon Jessica’s hire, Quantive’s Director of Valuation Services, Dan Doran, said, “We view this new hire as a sign of Quantive’s commitment to being a leading business valuation Firm in the industry.  Our increased market presence has facilitated Company expansion and the need to bring on seasoned valuation analysts in accordance with our clients’ needs and market evolutions.  We are fortunate to find someone of Jessica’s caliber to build upon our analytical capabilities and expand our overall client service experience.”

Experience

Prior to joining Quantive, Jessica worked as a Senior Analyst for Sun Mergers & Acquisitions and Sun Business Valuations. Jessica was also formerly an Internal Wholesaler for Advisors Capital Management, a Northern New Jersey registered investment advisory firm with $1B assets under management.

Jessica is a Certified Valuation Analyst as conferred by the National Association of Certified Valuation Analysts (NACVA) for proficiency in business valuation.  NACVA’S CVA designations are valuation credentials accredited by the National Commission for Certifying Agencies (NCCA).

Education

In addition to her industry specific training and certification, Jessica graduated from the College of New Jersey with a BS in Business Management.

About Quantive Business Valuations

Quantive Business Valuations is a full service valuation firm providing independent valuation services to businesses, shareholders, attorneys, accountants, and estate planning professionals. The Company specializes in small and medium sized closely held and family owned businesses and has a wide range of industry experience supported by an in-depth understanding of valuation theory. www.goquantive.com.