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Archive for Michael Gilburd

Business Valuation, Growing Value And Liquidity Realization (Part XX Of Book Series)

Michael Gilburd - Business Valuation Series

Comprehensive Business Review – A Trusted Business Advisor can help you author, design and develop a very clear Business Plan that meets the requirements of a sophisticated audience.

Generally, less is more – the shorter the better. The challenge is to determine how much to emphasize each section, how they interrelate, and how to show your plan as a compelling story.

What to expect:

By using this proven Capital Markets Sourcing Document, you should properly address:

Company Profile
● Business description – summary
● Unique attributes – trends and opportunities
● Deal potential
● Exit / liquidity event
● Investment highlights – loan or investment request
● Collateral
● Use of proceeds
● Financial data – historical and prospective
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Business Valuation, Growing Value And Liquidity Realization (Part XIX Of Book Series)


Transfer Pricing – the practice of charging prices for the supply of goods or services to a related entity (usually wholly owned) in such a way as to repatriate profits or affect tax or duty bills in your favor.

Generally, international transfer pricing and tax planning experience has been obtained from working for major financial institutions while assigned to large multinational corporations.

You can rely on a credible transfer pricing study for the following:

• The U.S. transfer pricing regulations, under IRS §482 of the Internal Revenue Code, require that inter-company transactions be priced under the same terms that would have existed had the transactions taken place between unrelated entities. Similar regulations now exist in virtually every developed nation around the world.

• Any business entity operating in more than one country likely has inter-company transactions involving the exchange of tangible property, intangible property or services.

The Importance of Transfer Pricing
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Business Valuation, Growing Value And Liquidity Realization (Part XVIII Of Book Series)

Gifting Life Insurance

Gifting Life Insurance to Charity Generates Cash

Life insurance is an excellent tool for making charitable gifts for a number of reasons.
• Life insurance provides an “amplified” gift that enables you to purchase immortality on an installment plan.
• Through a relatively small annual cost (the premium), a benefit far in excess of what would otherwise be possible can be provided for charity.
• This sizeable gift can be made without impairing or diluting the control of a family business or other investments.
• Assets earmarked for family members can be kept intact.

For example, a 50-year old committed to giving $5,000 annually for 10 years could leverage the $50,000 gift into a $360,000 gift. A second-to-die, or survivor life policy, adds even more leverage. A 50-year old couple could make a gift of $800,000 with the same $5,000 annual commitment. (Assumes 50-year old(s), preferred non-smoker(s) using variable life policy earning 10% gross return.)

Using a traditional permanent life insurance contract will generally yield a 6% to 7% internal rate of return to life expectancy on premiums paid.
Life insurance can be a self-completing gift. For a donor committed to making annual gifts, a portion of the annual gift can be directed to an insurance policy guaranteeing the continuation of that gift in perpetuity. If the donor becomes disabled, the policy can remain in force through the “waiver of premium” feature (if elected). This guarantees the ultimate death benefit to the charity and, in some cases, the same cash values and dividend build-up that would have been earned had disability not occurred. Even if the donor dies after only a few premium payments, the charity is assured a full gift. The death proceeds can be received by the designated charity, free of federal income and estate taxes, probate, and administrative costs, and without any delay, fees, or transfer costs.
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Business Valuation, Growing Value And Liquidity Realization (Part XVII Of Book Series)

Valuation: Business Owner Charitable Opportunity

Appreciated holdings for more than one year: If you own a company, whether in the form of C corporation stock or subchapter S stock, or a large block of public stock (free-trading or restricted), these stocks probably have appreciated and have been held by you for more than one year.

Short-term holdings: It is generally inadvisable to give charity securities in which your capital gain is short-term (i.e., securities that you have owned for less than 12 months). In such cases, the deduction will be for the cost basis of the securities, not the current market value.

Securities with a built-in loss: Rather than give a charity property in which you have a capital loss, you should sell them, establish a deductible capital loss, and then contribute the proceeds to the charity.

Contribution is made by a partnership or S corporation: If the noncash contribution is made by a partnership or S corporation, the reporting requirements are applied at the partnership or S corporation level, except that charitable deductions at the partner or shareholder level require compliance with the reporting requirements by the partnership or S Corporation.
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Business Valuation, Growing Value And Liquidity Realization (Part XVI Of Book Series)

Business Valuation, Growing Value And Liquidity Realization (Part XVI Of Book Series)-Michael Gilburd

Economic Analysis of Damages – valuation and economic expertise is used for damage analysis and expert testimony to provide an opinion as to losses. Experts opine and testify in the following areas:

Lost Business Profits Analysis

• Total Business Loss
 Forced Market Exit/Shutdown
 Exclusion from Market Entry
 Loss of Business Opportunity
 Partial or Temporary Business Loss
 Product or Service Line Loss
 Business Decline
 Business Interruption
 Delay in Market Entry
 Diminished Robustness of Market Entry/Growth

Other Economic Analyses Pertaining to Damages

• Fair Market Price or Value
• Going Concern Value
• Loss of Reasonable Royalties
• Unjust Enrichment
• Loss of Product, Goods in Process, or Raw Materials
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Business Valuation, Growing Value And Liquidity Realization (Part XV Of Book Series)

Business Valuation, Growing Value And Liquidity Realization (Part XV Of Book Series)

Fairness and Solvency Opinions

A Fairness Opinion is an independent qualified third-party financial expert’s statement as to the “fairness”, from a financial point of view of a specified financial transaction, based on professional judgment supported by collected data. The “fairness” is from the standpoint of a certain designated party or parties (the company or majority shareholders), usually vis-à-vis minority shareholders.

Fairness opinions are established on the basis of a valuation report and require an in-depth analysis of the companies involved and the terms and conditions of the transaction. Fairness opinions are used to support decision making by corporate leadership and to assist shareholders or affected parties in evaluating the terms of such a proposal.

In rendering a fairness opinion, the author evaluates:
 The value of the business or assets transferred or exchanged.
 The value and form of consideration received or paid.
 Available alternatives offering greater value than the proposed transaction, determined by different approaches, including a testing of the market.
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Business Valuation, Growing Value And Liquidity Realization (Part XIV Of Book Series)

Business Valuation, Growing Value And Liquidity Realization (Part XIV Of Book Series)

Compensation Studies – valuation expertise provides a platform to balance shareholder value and tax authority issues to form an opinion as to fair compensation for key employees.

Since the amount of compensation paid to key employees directly impacts shareholder value, a comprehensive approach that includes validation of stockholders’ investment is key to arriving at fair compensation.

The challenge is to determine how much compensation is fair without diminishing shareholder value.

Such studies include:
 Management compensation comparables
 Enterprise value (i.e., Business Valuation)
 Majority and minority shareholder value
 Royalty and commission arrangement impact

Examples of such studies:

 Nasdaq Public Company, Information Technology and Software. A Company seeks to evaluate the compensation a terminated CEO had been earning and the reasonableness of the compensation he was alleging he was due. The result was the CEO settled for a significant decrease.
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Business Valuation, Growing Value And Liquidity Realization (Part XII Of Book Series)

Business Valuation, Growing Value And Liquidity Realization (Part XII Of Book Series)

Section 2 – Financial Analysis Report

The second step is creating an understanding of the financial strengths and weaknesses, a section most valuable to a prudent business owner:

1. Financial analysis helps in assessing Your Company’s financial performance over time. Past sales and earnings, while not a guarantee of future performance, can provide an indication of
future growth potential and can put Your Company’s current performance into a historical context. For example, a company with steadily rising sales and earnings is worth more than one
with little or no growth.

2. Trends and key factors impact results, and comparing financial performance and financial statement ratios with available industry performance measures also provides an indication of the
attainability of future results.

3. Ratio analysis provides a relationship among financial statement accounts that indicates trends for Your Company. These indications of overall probability of future success or failure
often influence premiums and discounts while measuring and monitoring financial performance.

This section analyzes Your Company’s financial performance relative to itself and relative to the industry in which Your Company operates.
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Business Valuation, Growing Value And Liquidity Realization (Part XI Of Book Series)

Business Valuation, Growing Value And Liquidity Realization (Part XI Of Book Series)

► The Blueprint for Building Value™ will quantify the financial value of your business, analyze your business, interpret your vision, and effectively communicate this information to key stakeholders. This tool will improve business performance and heighten your degree of confidence to make the best capital markets decision.

The decision may be to sell the business, finance the business, raise capital, grow or cultivate the business, create an ESOP, insure the business or its Key People, or develop a comprehensive estate or gift tax plan, or a combination of strategies.

This insightful tool identifies and measures Your Company’s strengths and weaknesses − which if properly acted upon will increase the business’s value.

• The Blueprint for Building Value™ is a comprehensive report of a substantive analysis of your business including its financial valuation, operational and structural aspects, and
capital markets alternatives.

• The Blueprint for Building Value’s Questionnaire Workbook is designed to accumulate and put in one place the most critical business information, in a streamlined no-nonsense fashion.

• The benefits that the Blueprint for Building Value™ brings are many (including but not limited to the following):
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Business Valuation, Growing Value And Liquidity Realization (Part X Of eBook Series)

Business Valuation, Growing Value And Liquidity Realization (Part IX Of Book Series)

ESOP Valuations and Fairness Opinions are used to initially independently determine if an ESOP is feasible for a company, and subsequently to establish the worth of a company for ESOP purposes.

 Qualified Plan governed by ERISA.
 Required to be invested primarily in the sponsoring employer securities.
 May be used as a corporate finance technique.
 Often used as an exit strategy for a retiring shareholder. The ability for the ESOP to incur debt and the ability for the selling shareholder to reinvest the proceeds on a tax deferred
basis is very attractive.
 Creates a market for the stock of a closely held company and make the purchase of that stock a pretax (deductible) expense.
 IRC §1042
• Rollover – Allows the seller of stock to reinvest the proceeds from the sale in qualified replacement securities (conditioned on a sale of at least 30% of the company’s outstanding
stock and that the reinvestment occur in the next 12 to 15 months).
• A bank or other lender funds the transaction in order to take advantage of IRC §1042.
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Business Valuation, Growing Value And Liquidity Realization (Part IX Of Book Series)

Michael Gilburd - Business Valuations

What Will the Results Show?

Companies and brands are evaluated by their customers and prospects across a range of factors. Your first job is to determine what factors are relevant to each individual situation. This is done any number of ways:

• By conducting a number of interviews with company staff to get their take on what is felt to be relevant
• Exploring previous research, the company may have conducted to determine customer attitudes or satisfaction
• Conducting a small number of telephone interviews with selected clients (both past and present) to surface their attitudes toward the company
• Conducting one or two focus groups to surface attitudes as well as brainstorm factors that would be important to customers in keeping them loyal

Once the relevant factors are agreed upon, data is collected among the appropriate target.
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Business Valuation, Growing Value And Liquidity Realization (Part VIII Of Book Series)

Michael Gilburd on Business Valuations

The Power of Customer Insight Research

For many decades, researchers have worked with companies and brands to assess their position in the marketplace. The same attitude and customer insight research employed by both B to C and B to B companies are powerful tools for generating data that can strongly affect a determination of value. Such research can take any number of forms and include:

• Market segmentation studies
• Awareness, attitude and image studies
• Psychographic and ethnographic studies
• Package and product testing studies
• Advertising and communication effectiveness studies

Whatever research approach is used, the goal is the same: to determine the strength of the company or brand as compared to competition.

Often, though, valuation experts ignore the importance of customer insight research. They fail to realize that by measuring the attitudes of customers and prospects, and producing hard data across a range of factors can greatly increase the value of a company.

Consider how you, and your competition, are perceived by your customers or prospects in regard such elements as:
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