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  • Writer's pictureMike Williams

News and Articles of Interest - Jan 2019

January is usually a quiet month news wise - but some items that caught our interest have been listed below.

Merger and Acquisition Articles

A slow month is to be expected for January in M&A activity, however the IT sector has continued its acquisition pace with several announcements such as:

Valuation Articles

  • The endowment effect is a big deal in valuation - I have seen many owners think their business is worth more than others would expect. Exit Oasis recently published this excellent article on the endowment effect and details some questions you can ask to highlight if you are valuing your business more than it is worth.

  • Bob Deutsch, CTA, Senior Tax Counsel reported in a recent The Tax Institute newsletter on a recent High Court decision ( High Court in Commissioner of State Revenue v Placer Dome Inc [2018] HCA 59 (the Placer Dome case)) that has left the door ajar to the consideration that legal goodwill may be different to accounting goodwill. One of the High Court judges (Gageler J) made differing comments by noting a broader concept of goodwill, where the going concern value could be substantially greater than goodwill represented by custom alone. In essence the comments raise the notion that a business "...which is not profitable or trading at less than industry average profitability...the legal value of goodwill may differ from the value agreed upon by accountants and businessmen." We will explore this concept further in a future whitepaper.

  • Whilst not specifically about valuation, the latest news release from IBISWorld highlights the concept of a cost of capital continuum, which we often refer to when determining the cost of capital for SME's. It highlights that returns on investment of different asset classes over the past 5,10 and 20 years. Interesting to see Australian shares returning an average 10% over the past 5 years.

  • Another view on the importance of reducing owner dependence before a sale

Business Articles

  • More growth is expected in ride sharing services as well as organic farming and softare publishing, according to IBISWorld.

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