Posts filed under 'Valuations'
Demystifying Valuations for Venture Backed Companies
There are many occasions for a valuation in the life of a start-up company: preparing for the sought-after financing from a premier VC, the highly anticipated sale to a strategic partner at a hefty premium, or even pricing the initial public offering. (more…)
Add comment July 23, 2010
M&A Agony and Ecstasy for Early Stage Technology Companies: Purchase Price Allocation
When I speak with the CFOs of our clients about the acquisitions they are making, it reminds me of the title of that old 1965 Charlton Heston flick, The Agony and the Ecstasy .
Many of our clients are venture capital backed technology companies that have been growing successfully and have commenced making acquisitions. On the one hand, they feel the ecstasy of getting their deals done. On the other hand, they must confront the agony of fair value accounting. (more…)
Add comment June 22, 2010
Palm Reading: HP Extends the Life Line
On April 28, HP announced the $1.2 billion acquisition of Palm for $5.70 per share.
The acquisition will provide discussion fodder for months if not years to come, and we will see if HP can turn Palm into a serious competitor for the iPhones, Androids and Blackberries of the world.
In this post, I will stay clear of any strategic speculation, but rather focus on the process of the transaction. (more…)
2 comments May 26, 2010
Preferred Equity Basics Part Three
There Is A Reason Why Preferred Equity Is Called Preferred:
Preferred Equity’s Big Impact on the Value of Common Stock
The terms and conditions of preferred equity issued to venture capitalists may seem arcane, but the impact on the value of common stock (and stock options) is significant! While these impacts are important for tax and accounting compliance, more significantly, they determine the amount of money stockholders will receive when the long hoped-for “exit” is finally realized.
This is the third in a series of posts meant to help explain many of the typical terms for preferred equity we see in our daily valuation work. This analysis will provide some guidance on the impact to the holders of common shares. (There can be legal issues which also come into play, especially in contested matters. However, this blog is not legal advice, and the specific facts and circumstances for any particular case will differ from the examples described herein). (more…)
Add comment March 29, 2010
Preferred Equity Basics Part 2
There Is A Reason Why Preferred Equity is Called Preferred:
Preferred Equity Has a Big Impact on the Value of Common Stock
The terms and conditions on preferred equity frequently issued to venture capitalists may seem arcane, but the impact on the value of common stock (and stock options) is significant! These impacts are important for tax and accounting compliance. But more importantly, they determine the amount of money shareholders will receive when the long hoped-for “exit” is finally realized. (more…)
Add comment February 4, 2010
Preferred Equity Basics Part 1
There Is A Reason Why Preferred Equity is Called Preferred:
Preferred Equity Has a Big Impact on the Value of Common Stock
The terms and conditions on preferred equity frequently issued to venture capitalists may seem arcane, but the impact on the value of common stock (and stock options) is significant! These impacts are important for 409A compliance. But more importantly, they determine the amount of money employees may receive when the long hoped-for “exit” is finally realized.
This is the first in a series of posts meant to help explain many of the typical forms of preferred equity we see. We will provide guidance on the impact to the holders of common shares. (more…)
Add comment February 1, 2010
IRS 409A: Another Inconvenient Tax
Here at The Brenner Group, we often get comments from our friends in the venture capital and entrepreneurial communities about the burden of 409A compliance and the closely related 123R accounting rules for stock option expensing.
The comments range from expressions of pain and dismay to colorful language that is not suitable for reading at the family dinner table. (more…)
Add comment November 12, 2009
5 Classic and Costly Start-up Mistakes
Ivan Gaviria, an attorney at Gunderson Dettmer’s Silicon Valley office, recently posted 5 classic (and costly) mistakes startups make with their people.
What made #5 on his list? Ignoring Internal Revenue Code 409A. (more…)
1 comment September 16, 2009
An Alternative Model to Value Early Stage Technology Companies
A news service for the valuation profession recently profiled a discussion of the “H Model” among valuation professionals (BV Wire Issue 83-1 published August 5, 2009 by Business Valuation Resources, LLP). Since we sometimes include the H Model in valuations of early stage technology companies performed at The Brenner Group, I thought I would add a few comments. (more…)
August 24, 2009
Has the Discount for Lack of Marketability Really Doubled?
Discounts for Lack of Marketability (“DLOM”) often play an important role in the valuation of privately held companies. This is because we often develop an indication of the value of a company as if it were publicly traded, and then adjust the value to reflect the fact that its stock cannot be rapidly sold on a public exchange.
In light of the turmoil in the equity markets over the past eighteen months, some have conjectured that the difference in values between public and private companies has gotten wider. An intriguing set of studies conducted by Ronald M. Seaman shine some light on this issue. (more…)
July 24, 2009
