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Definitions | Calculations for Valuation Multiples & Financial Ratios | Data Principles and Collection | Stock Sales vs. Asset Sales | Liabilities Assumed | Technical Help

Definitions

Term	Definition
Purchaser Name	The name of the public acquiring company.
CIK	The Central Index Key (CIK) is a unique SEC identifier for the public acquiring company.
Filing Type	Type of SEC filing that reports information regarding the acquisition.
Filing Date	The date of the filing type.
SIC	The four-digit Standard Industrial Classification (SIC) code associated with the description of the sold business. Go to http://www.osha.gov/oshstats/sicser.html to search for an SIC code.
NAICS	The North American Industry Classification System (NAICS) code associated with the description of the sold business. Go to http://www.naics.com/search.htm to search for a NAICS code.
Business Description	The description of the sold business.
Target Name	The name of the sold business.
Sale Location	The geographic location of the sold business.

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Data Principles and Collection

Some of our subscribers impose a separate resource/technology charge for every valuation assignment. They know approximately how many appraisals they do per year and divide that number into the [annual] costs of the databases and basic data resources they use, thereby passing along the resource (or technology) charges.

1. N/A indicates that the data in question was not available.
2. A dollar value of zero, has been expressly specified as zero.
3. Interest on the noncompete agreement value is not included unless expressly stated.

The inclusion criteria for Public Stats™ transactions is as follows:

• Acquired company must be publicly traded at time of acquisition
• Date of sale must be disclosed
• The selling price has to be clear (i.e. if restricted stock is part of the consideration the value of the restricted stock issued in the transaction must be given, etc.)
• Earn outs (or contingency payments) cannot be included in the selling price; if the earn outs cannot be removed from the given selling price than the transaction will not be included
• Product/Service description of the seller must be disclosed
• Latest full year Income Statement must be given in US dollars
• Company type must be disclosed (C or S Corp, etc.)
• The type of transaction must be disclosed; either a stock or asset sale
• The transaction must not be a reverse acquisition, reorganization, recapitalization etc.
• Must be 100% acquisition (no partial transactions)
  
• Avoid transactions where the consideration is mostly real estate (i.e. hotels, mining property). If any transaction includes the value of real estate and buildings as part of the selling price, we deduct their value from the selling price

Public Stats™ obtains transactions for the database by performing research at the Security and Exchange Commission's Web site.

Yes, sale details on publicly traded companies (valuation multiples for publicly traded companies can be found in Public Stats™ and the Mergerstat®/Shannon Pratt’s Control Premium Study™) can be used to value a private company. The indicated value utilizing the sale of an entire public company will result in a control value. It normally would not be appropriate to add a control premium. One or more discounts may be appropriate, depending on the valuation assignment. For more details, see The Market Approach to Valuing Businesses by Shannon Pratt (New York: John Wiley & Sons, 2001. p. 39).

1. Market multiples and capitalization rates are the inverse of each other. For example, if the P/E ratio is 20 times last year's earnings, then last year's earnings are capitalized at 5%: 1/20 = .05 = 5%
2. Conversely, if the capitalization rate is 5%, then the market multiple for that variable is 20: 1/5% = 1/.05 = 20X
3. Any market multiple can be converted to a capitalization rate, and vice versa. The capitalization rate form of presentation is commonly used in the income approach to valuation. It is more common to use the market multiple form of presentation in the market approach.

Below, we show the term used for the “selling price” in each BVMarketData.com database and its respective definition:

Pratt’s Stats® uses the term MVIC (Market Value of Invested Capital) for the “selling price.” The MVIC is the overall consideration in the business sale and includes any cash, notes and/or securities that were used as a form of payment plus any interest-bearing liabilities assumed by the buyer.

The Mergerstat®/BVR Control Premium Study™ also uses two terms for the “selling price”; the Target Invested Capital (TIC) and Price. The TIC is the target company's implied total invested capital based on the sum of the implied market value of equity plus the face value of total interest bearing debt and the book value of preferred stock outstanding prior to the announcement date. The Price is the implied market value of equity.

BIZCOMPS^® uses one term for the “selling price”; Sale Price. Sale Price is the actual sale price ($000's) where inventory has been deducted, if it was included in the sale price.

Public Stats™ uses the term MVIC (Market Value of Invested Capital) for the “selling price.” The MVIC is the overall consideration in the business sale and includes any cash, notes and/or securities that were used as a form of payment plus any interest-bearing liabilities assumed by the buyer.

The FMV Restricted Stock Study™ does not report details on the sale of either a portion of a company or an entire company and therefore does not contain a selling price field. Instead, this database reports the details related to transactions in restricted stock. This database does report a Market Value (in $000s) which is the market value of the firm determined on a pre-deal basis. The market value is calculated by multiplying the shares outstanding before the private placement with the high-low average market price for the stock for the month prior to the transaction. The market value is not the selling price, per se, but a calculation of the value of the total equity on the date of the restricted stock transaction.

The Valuation Advisors’ Lack of Marketability Discount Study™ does not report details on the sale of either a portion of a company or an entire company and therefore does not contain a selling price field. Instead, this database reports the details related to transactions in common stocks, stock options or convertible preferred stocks prior to an initial public offering, and the relationship of these prices to the IPO price per share (the price of the stock paid by the initial public investors to acquire their shares).

Click here for an explanation.

The Coefficient of Variation = Standard Deviation / Mean (mean is the same as the average).

The Coefficient of Variation is a measure of dispersion around the mean (average).

The theory is that the valuation multiples with the lowest Coefficient of Variation are those with the least dispersion around their respective means and may be the better indicators of value. The value derived using these valuation multiples may be weighted more heavily than those with larger Coefficient of Variations.

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Stock Sales vs. Asset Sales


In an asset sale, typically only those assets and liabilities that are identified and agreed to by the buyer and seller are transferred. If available, Public Stats™ will identify the purchase price allocation among those assets and liabilities and report that information in either the Asset Data or the Additional Notes field of the Public Stats™ Transaction Report. Public Stats™ assumes that all or substantially all operating assets are transferred in an asset sale. Operating assets can be defined as those assets necessary for the continuation of the business operation in substantially the same manner as before the acquisition and MAY include the following:

· Cash and equivalents
· Trade receivables
· Inventory
· Other current assets
· Fixed assets
· Real estate
· Intangible
· Other current assets

Generally, but not always, the following are NOT transferred in an asset sale:

· Cash and cash equivalents
· Trade receivables
· Prepaid expenses
· Real estate
· Nonoperating assets not essential to the operation of the business, such as investments in securities, country club memberships, etc.

1. Entire legal entity of the company
2. All assets and liabilities unless otherwise specified in the purchase agreement

To answer this question, we quote a couple of authors

Scott Gabehart and Richard J. Brinkley write:

"The main point is that because of the greater risk of buying a company's stock rather than assets, the purchase price reflects this risk in the form of a lower value.

Generally speaking, the sale of stock is treated primarily as a capital gain, whereas the sale of assets generates a substantial gain (typically) that is taxed in large part as ordinary income. Ordinary income tax rates can be as much as twice as high as the current capital gains tax rate.

For the sake of clarity and understanding, review the following major differences between an asset sale and a stock sale.

Asset Sale

· Seller keeps cash and receivables but delivers company free of any debt.
· Seller keeps corporate entity to later dissolve or use for new endeavor.
· Seller pays combination of capital gains tax and ordinary income.
· Buyer and seller agree to allocation of purchase price between IRS asset categories.
· Buyer may redepreciate fixed assets based on allocation.
· Buyer avoids assuming both known and unknown liabilities.
· If price is greater than identifiable, tangible assets, the excess is allocated to one or more intangible assets (written off over fifteen years for tax purposes and up to forty-two for book purposes).

Stock Sale

· Seller pays primarily capital gains tax rather than higher ordinary income tax rate.
· Seller endorses stock certificates over to new owner.
· Buyer assumes all assets and liabilities unless specifically excluded.
· Buyer takes on risk associated with unknown liabilities.
· Buyer inherits tax depreciation schedules as they are (for better or mostly worse).
· Buyer may inherit tax loss carryforwards to shield future income.
· There is no allocation of purchase prices or goodwill related to transaction."

Gabehart, Scott and Richard J. Brinkley. The Business Valuation Book: Proven Strategies for Measuring a Company's Value. New York: AMACOM a division of American Management Association, 2002. pp. 198-199.

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Liabilities Assumed


If the Debt Assumed field is labeled N/A, it is assumed that the purchaser did not assume any of the seller's interest-bearing financing liabilities, or that the amount of interest-bearing financing liabilities assumed was immaterial relative to the consideration paid.


The income data reported by Public Stats™ is the latest full fiscal year reported before the date of the closing of the sale. It would be incorrect to extrapolate that the sale included the assumption of interest-bearing liabilities from the fact that interest expense was reported for the business before the date of the sale.


In a transaction indicated as a stock sale, the purchase price is assumed to include the operating assets and operating liabilities (current liabilities) of the acquired business.

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Technical Help

The Web site's search engines use the underlying data to create the list of SIC codes. If your SIC code is not listed in the search engine, this means there are no transactions with that SIC code in the selected database. You may want to search the other databases to see if they have any helpful data. You can search all databases at the same time, by SIC code, by either clicking here or selecting the "Search All" menu option at the top left. The results of this search engine will display the number of transactions contained in each BVMarketData database. If you click on each databases' representative number, the Web site will display a summary of the data in that database. If you are a subscriber to the selected database, the Web site will display the subscriber search results. If you are not a subscriber to the selected database, the Web site will display the visitor search results.

By pressing and holding down the LEFT mouse button, you can highlight a series of SIC codes (either by two digit SIC codes, three digit SIC codes or any series you want [all of manufacturing, for example]).

By holding down the CONTROL button on the keyboard (and clicking with the LEFT mouse button), you can highlight a noncontiguous group of SIC codes.

To print a group of transactions (the current group size is 10); on the search results page in the list of transactions, utilize the icon that looks like a red piece of paper – it is labeled “Print Detail Report Package”. When printing more than a couple of detailed transaction reports, this will save you time.

The best solution is to maximize your print margins. In Internet Explorer the default margin size is 0.75 inches. When you print transaction reports, reduce the print margins to 0.25 inches and most will fit on a single page. Also, you should remove any header/footer information that Internet Explorer includes in web page printouts. The print margins and header/footer settings can be found under File -> Page Setup in Internet Explorer.

Assuming you are using Microsoft Internet Explorer, please do the following:

• In Internet Explorer, go to the Tools/Internet Options menu
• On the General tab, in the Temporary Internet Files section, click "Delete Files"
• On the General tab, in the Temporary Internet Files section, click "Settings"
• If it is not already clicked, click the "Every visit to the page" radio button, then click "OK"

Check your browser version and update to the latest. Also, check if you have some sort of pop-up window blocker, you need to disable the pop-up window blocker.

Some of the more advanced pop-up window blockers will allow you to customize the specific pop-ups you would like to allow. Otherwise they will need to disable the program in order to view the printable format.

Some pop-up blockers can be temporarily disabled by holding the "Ctrl" and "Alt" keys on the keyboard when you are attempting to allow pop-ups.

Currently the Excel Export feature on BVMarketdata.com is only supported in Internet Explorer. The Excel Export uses VBScript which is only supported in Internet Explorer. We are in the process of updating the export function to be compatible with other web browsers. An alternative would be to use the Email to Me option which will email the data to you in a comma separated file.

This typically happens when the subscriber is using a pop-up blocker. To bypass the pop-up blocker, press down on either your “Shift,” “Control,” or "Alt" key (try both) prior AND during clicking on the Excel Format button – this should bypass the pop-up blocker. If you are able, you may also add www.BVMarketData.com as a “trusted” site in your pop-up blocker program – this would negate the need to hold down your Control button when you next use the Excel Format button.

If you are using Outlook to browse the internet, you may experience this problem. Apparently web browsing within Outlook has problems passing data from one page to another. To solve this, exit Outlook and use Internet Explorer to access our website.

Another possibility is that you may have a pop-up blocker that is preventing the new window from appearing. To solve this, disable your pop-up blocker by (1) turning the pop-up blocker off until you are done exporting the data (2) holding shift, control, or alt (dependant on your pop-up blocking software) which allows you to temporarily allow pop-ups while the button is pressed, and then reverts to blocking pop-ups once the button is depressed or (3) find the options or settings on your pop-up blocker and choose to allow pop-ups from our website.

Make sure your are using the most recent version of Internet Explorer for Mac. Here's a link to download the most recent version of IE for Mac.

http://www.microsoft.com/mac/download/default.asp#IE

If you are running Office 2001 for Mac, make sure you have the latest version. Click the link below to download it and install it.

http://www.microsoft.com/mac/downloads.aspx#office2001 and click on Microsoft Office 2001Combined Update 9.0.4

If you have any further questions please contact the Webmaster via e-mail at: nathans@bvresources.com or phone at 888-287-8258 and ask for Nathan.

If you are having trouble viewing the Excel exported data from BVMarketData.com^sm and are using Excel 2000 (other versions of Excel have not exhibited this problem), please read the following.

In the original version of Office 2000 there was a bug when passing Excel data over the web. This problem was fixed in a service pack released by Microsoft. Once you install this service pack update on your computer you should not have any trouble viewing the Excel data from BVMarketData.com^sm.

To update your Office 2000 to the latest service pack release, please locate your Office 2000 CD or Excel 2000 CD and then visit the following web site at Microsoft.com:

http://office.microsoft.com/ProductUpdates/default.aspx

At the top of the page click on the following link:

Check for Updates

You will then be taken through a process of updating your Office 2000 install on your computer. This will update your Excel application as well. During the install, it will ask for your Office 2000 CD.

If you have any questions please e-mail Nathan Struk at: nathans@bvresources.com

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Last updated: 8/27/08