20 valuation databases & resources in 100 minutescw.nacva.com/perc/database and...

20 Valuation Databases &

Resources in 100 Minutes

Dave Miles

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Learning Objectives

Rewards of different data bases

Costs of different data bases

Pros on using the different data bases

Cons of using the different data bases

What are the 20 Valuation Databases & Resources we are

covering today?

Bizcomps

IBA Market Data

Duff & Phelps-Navigator

RMA VE

Done Deals

Guideline Company

Pluris DLOM

Mergerstat (Premiums ,PE)

Business Appraisal Practice (BAP)

Industry & Metro Report

Valuation Articles

Federal & State Case Law

Conference Presentations

Compensation Data

S-1 filings

Around the Valuation World

Expert Witness Profiler

When thinking about data, think about credibility:

Data’s strengths and weaknesses

Reliability

Replicability - The ability to recreate

results

Sufficiency of the Information

When thinking about data, think about credibility:

Completeness

Consistency with the fact pattern

Relevance-is the data relevant to the

fact pattern

NER (National Economic Report) Sources of NER Data

• KeyValueData/ValuSource’s BVDataWorld

• Mercer Capital

• BVR

• Many others…

Issues Covered Include

• Growth, employment, national budget/debt, stocks, productivity,

and more…

• A look at what’s driving the numbers

• What lies ahead / forecasts

KVD/BVDataWorld NER Specifics

Created by Kevin Hopkins, Economist

Delivered Monthly (archived back to 2010)

Aggregate all important national data from Government, CNBC, Investors Business Daily, Bloomberg

Add “Features” to provide color to the numbers

48 Economic data sources covering 12 subsets (Growth, Employment, Inflation, etc.)

Industry & Metro Research Government Sources

• State BLS numbers

• State commerce departments

• State/city office of economic development

Commercial Sources

• First Research $139/report or $1,100 unlimited

• IBIS World $925 Single Report / $1,595 Annual Sub

• Bizminer ($111 individual to $1,279 annual)

• KeyValueData/BVDataWorld Database and Custom

Research $795 full report, $295 for data only

Where do market transaction databases live?

BIZCOMPS

How is Bizcomps used?

• Initial pricing analysis

• As a reasonableness test for other

methods

• Not very often as the main method or

as a combination with other methods

Created and compiled by Jack Sanders

BIZCOMPS Data derived by business broker

submissions in exchange for use of the

database

21 data points available

Data has been compiled since 1990 but

only the last ten years are used

Analysis tool with linear regression and

histogram

BIZCOMPSAs of April 2018:

Over 12,000 transactions

50% were all cash sales

82% were for purchase prices of less than $500,000

Mean Sale = $393,000; Median Sale = $185,000

Mean sale time = 231 days; median =180 days

Majority of transactions involve 10% brokerage fee

Transactions over $500,000 demonstrated a size premium

Ultimate sales price = 27% to 68% of revenue and 1.34 to 2.57 times sellers discretionary earnings (25th P-tile to 75th P-tile)

BIZCOMPS

Asset Value = Operating assets plus goodwill excludes real estate and should exclude inventory

Business values derived are control positions

Pay CLOSE attention to definitions as they determine what you need to add back to get to an equity value-a very common mistake!

Online annual subscription - $569 per year

Through KeyValueData/BVDataWorld – 7 to 10 searches starting at $345

IBA Market Data

The IBA was founded in 1978

Acquired by NACVA, ValuSource and other investors in June 2008

IBA merged into NACVA in July 2012

Data is still known as the IBA Market Database,

IBA Market DataAs of April 2018:

IBA Market Database has over 39,000 transactions covering 800 SIC codes

Over 41,775 transactions

43% were all cash sales

85% were for purchase prices of less than $500,000

Mean Sale = $930,000; Median Sale = $140,000

Majority of transactions involve 10% brokerage fee

Ultimate sales price = 29% to 68% of revenue and 1.17 to 2.72 times sellers discretionary earnings (25th P-tile to 75th P-tile)

IBA Market Data

Utilizes Either Transaction Analysis or Direct Market Data Method (DMDM)

• DMDM – Says pick a multiple relevant to the subject

• Transaction analysis uses a regression line and histogram

IBA Market Data

What is included in the transaction price?

• Asset Value

• Fixtures, furniture, inventory, and goodwill are typically included

If inventory is normally transferred outside of sale then not included

• Excludes Real Estate

Business values derived are control positions

IBA Market Data

Costs:

• IBA data- $495

• Available in KeyValueData/BVDataWorld Levels $345-$2,645

Done Deals

Data compiled from Securities and Exchange Commission (SEC) 8K filings involving the acquisition of at least a 10% interest by a public entity

Nearly all of the financial information has been subjected to Generally Accepted Accounting Principles (GAAP)

75% of the acquisitions involved privately owned companies acquired by publicly owned entities

There are 11,464 transactions as of the May 2018

Done Deals

Data includes names of deal participants, buyer contact information and seller’s description

Includes last full year financial statement and deal terms

Both stock and cash sales

As of May 2018 (Based on reported price)

Half of the transactions occur between $2MM and $226MM(25th and 75th Ptile)

Median deal price is $21,000,000

Done Deals

What is in the transaction price?

• Must look to the “Terms” field to ascertain whether or not quoted prices are invested capital, equity or enterprise values

Done Deals

Values are derived are considered control positions despite the minimum 10% purchase

• Purchaser typically exercises some type of control via board seat, advisory role or other limited form of control

Online annual subscription - $595

Pluris Discounts for Lack Of Marketability (DLOM) Data

The hunt for empirical evidence of a defendable DLOM

Handbook on how to use the data from ValuSource

$595 per year subscription

Pluris Stat’s (as of 05/2018)

Total records: 4,071

4-digit SIC codes: 404

Median block-size (as percentage of total shares): 11.7%

Median discount: 20.0%

Average discount: 21.9%

Standard Deviation (Population) of discount: 0.293

Pluris Discounts for Lack Of Marketability (DLOM) Data

The private equity discount increment (PEDI) is based on the assumption that large blocks of restricted stock sell at a disadvantage and are thus less marketable but, more comparable to private equity placements

Min Max Median Min Max Mean Median

Top Quintile 0.2x 5.9x 3.0x -46% 86% 19% 16%

Second Quintile 5.9x 10.4x 8.0x -43% 81% 21% 18%

Third Quintile 10.4x 15.6x 13.0x -79% 75% 21% 19%

Fourth Quintile 15.6x 21.0x 19.0x -57% 80% 20% 18%

Bottom Quintile 21.0x 911.0x 34.0x -55% 91% 28% 24%

Block Size (Qtrs. To Sell) Common Stock Discount

Duff & Phelps Navigator

Where is the data?

Contains critical valuation information – Two sets of data:

• Decile Information (including 10b and 10z)

• Duff & Phelps Risk Premium Report

Uses the same sources for information:

• Center for Research in Security Prices (CRSP)

• Standard & Poor’s Research Insight database

• SBBI Series from Morningstar’s EnCorr database

Uses Ibbottson methodologies to produce

Duff & Phelps Navigator

Navigator will calculate the Cost of Equity without the company specific risk

Cost Basic (2 years data) $350; $199 addl user

Cost Pro (all years) $689; $389 addl user

Comes with a Titanium Subscription $2,645 (single user)

RMA Valuation Edition

Sources of Financial Benchmarking Data:

• RMA Annual Statement Studies

• IRS Corporate Ratios

• Integra

• First Research Industry Profiles

• Public Company Group

• Bizminer

The Risk Management Association (RMA)

• Created in 1915 by a group of bankers to mitigate credit risk through exchange of info.

• Named Robert Morris Association

• Changed name in 2000 to Risk Management Association

• Create the Annual Statement Studies every year

• You need a license to reproduce in your reports

RMA Standard Edition vs. RMA Valuation Edition

RMA Standard Edition

• National geography

• Median and mean data

RMA Valuation Edition (VS Exclusive)

• 6 geographic regions available

• 10 X more data (Contains deciles: 10-90 percentile)

Ability to rank

Why do we need RMA data?

• In a valuation we need to benchmark the subject company financial performance against peers

• Provides empirical evidence for strengths and weaknesses

• Use benchmark to make and justify decisions regarding risk

Financial statement industry comparison data

Data comes from RMA member banks from loan applications

Primary data:

• Common size balance sheets

• Common size income statements

• 19 Common ratios

Data slices available:

• 1 year or multi-year data (see industry trends)

• North American Industrial Classification System (NAICS)

• Criteria – M=000 so MM is millions

Assets: 0 – 500M, 500M – 2MM, 2MM – 10MM, 10MM –50MM, 50MM to 100MM, 100MM – 250MM

Sales: 0-1MM, 1MM-3MM, 3MM-5MM, 5MM-10MM, 10MM-25MM, 25MM and up

Historical: 5 years of data presented but not broken down by size

Regions: Northeast, Southeast, Central, North Central, South Central and West in VE edition

Benchmarking vs Ranking

What is standard mean?

What is ranking, why is it better?

RMA$925 All yearsTitanium Subscription $2,645 (Single)

RMA Ranking in ValuSourceSoftware

Guideline

Data available from $hundreds to $tens of thousands (Bloomberg or CapIQ)

Three challenges

• Subject companies are too small

• Finding good data

• Analyzing the data

Guideline Application

IRS Corporate Ratios

Covers 250 industries in 13 asset categories

Based on 5 million corporate tax returns

Data is three years old

We format IRS ratios and common size statements exactly the same as RMA

Contains 10 years of data, great for industry trends

Understand some benchmarking sources use IRS data as their base and then forecast it to get current data.

$275/Year (included 10 years of data)

Subscriptions starting at $645

www.IRS.govSearch on Title

Mergerstat

Based on Mergerstat Review

Premium Data

By Industry, with 5 years history

Control premium for 100% acquired company

50 Industries Plus Total Blended Rate

Imply minority discount…1-(1/(1+Premium Paid))

P/E ratios

$125 each

Around the Valuation World

What is Around the Valuation World?

• A monthly 90 minute webzine

• Provides material handout

• CPE available for extra fee

What is your strategy to stay up with the avalanche of information in the BV world?

ATVW Agenda for Oct 2017

Webcast Details:

- Michael Gregory: Valuation Updates

- Cheryl Hyder interviewing P. Dermot O’Neill: Understanding Review Reports

- Alan Zipp: Tax Affecting S-Corporations—It’s a Matter of When

- Michael Gregory interviewing Chris Mercer: What Are Your Secrets to Success?

Final Eight

Business Appraisal Practice (BAP)

Industry & Metro Report (1000+ reports)

Valuation Articles (2,000+ articles)

Federal & State Case Law (1,800+ cases)

Conference Presentations (500+ presentations)

Compensation Data (from BLS)

S-1 filings (55,000+ filings)

All this Data is Available from ValuSource’s BVDataWorld

Thank you!!Questions?

What I can send you:Pluris DLOM Guide, ATVW Sample, NER Sample, RMA VE Sample, BAP Sample,

Industry/Metro Sample

Dave Miles

dmiles@valusource.com

20 valuation databases & resources in 100 minutescw.nacva.com/perc/database and...

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