The private capital markets are the venue where debt and private equity investments are made, and private business interests are exchanged. Valuation is the common language uniting them, enabling participants in private capital markets to communicate and exchange interests. Written for CEOs, CFOs, business appraisers, lawyers, and venture capitalists, this book introduces private capital market theory as an integrated body of knowledge for the valuation, capitalization, and transfer of private companies, especially those with annual revenue between $5 million to $150 million.
Foreword. Preface. Acknowledgement. Chapter 1 Capital Markets. Market Structure. Information. Why Are Markets Segmented? Chapter 2 Middle-Market Finance. Middle-Market Finance Theory. Triadic Logic. Middle-Market Finance Theory in Practice. Owner Motives. Authority. Triangulation. Part One Business Valuation. Chapter 3 Private Business Valuation: Introduction. Private Investor Expectations Drive Private Valuation. Private Business Valuation Can Be Viewed through Value Worlds. Valuation as a Range Concept. Triangulation. Chapter 4 Market Value. Levels of Private Ownership. Triangulation. Chapter 5 Asset Subworld of Market Value. Steps to Derive Net Asset Value. Triangulation. Chapter 6 Financial Subworld of Market Value. Specific Investor Return. Industry Specific Return. General Investor Returns. Triangulation. Chapter 7 Synergy Subworld of Market Value. Synergies. Capitalization of Benefit Streams. Discounting of Benefit Streams. Seller/Buyer Market Valuation. Non-Enterprise Market Valuations. Triangulation. Chapter 8 Fair Market Value. Appraisal Organizations. Business Appraisal Standards. Fair Market Value Process. Step 7: Derive a Final Value Conclusion. Key Steps to Derive Fair Market Value. Does the Fair Market Value Process Make Sense? Tearing Down the Build-Up Models. Triangulation. Chapter 9 Fair Value. Dissenting and Oppressed Shareholders. Triggering Events. Determination of Fair Value. Triangulation. Chapter 10 Incremental Business Value. Nature of Incremental Business Value. Problems with Using Traditional Methods. Value-Based Approaches. Net Present Value. Incremental Business Value. Private Cost of Capital Model. Ramifications of Using PCOC. Investment. Project Decision Making. Problems with Incremental Business Value. Value Creation Strategies. Increase Recast EBITDA. Reduce Risk. Employ High Yielding Capital. Incremental Business Value versus Market Value. Triangulation. Chapter 11 Insurable Value. Risk and Insurance. Buy/Sell Agreements. Valuation Mechanics. Triggering Events. Key Person Insurance. Business Interruption. Triangulation. Chapter 12 FASB Value Worlds. FASB Fair Value (ASC 820, formerly FAS 157). Business Combinations (ASC 805, formerly FAS 141R). Impaired Goodwill (ASC 350-20). The Valuation. Triangulation. Chapter 13 Intangible Asset Value. Subworlds. Intellectual Property. Intellectual Capital. Triangulation. Chapter 14 Other Value Worlds . Investment Value World. Owner Value World. Collateral Value World. Early Equity Value World. Bankruptcy Value World. Public Value World. Triangulation. Chapter 15 Private Business Valuation: Conclusion. Private Investor Return Expectations. Value Worlds. Private Business Valuation is a Range Concept. Triangulation. Final Thoughts on Valuation. Part Two Capital Structure. Chapter 16 Capital Structure: Introduction. Public Capital Markets. Private Capital Markets. Pepperdine Private Capital Market Line. Key Issues Regarding the Pepperdine Private Capital Market Line. Capital Structure Treatment. Triangulation. Chapter 17 Bank Lending. Types of Facilities. Interest Rates. Interest Rate Hedges. Loan Covenants. How Banks Deal With Covenant Violations. Loan Costs. Risk Ratings. Negotiating Points. Triangulation. Chapter 18 Government Lending Programs. Industrial Revenue Bonds. Business and Industry Loan Program. Small Business Administration Programs. 7(a) Loan Guaranty Program. Certified Development Company 504 Loan Program. CAPLines Loan Program. Export Working Capital Program. Negotiating Points. Triangulation. Chapter 19 Equipment Leasing. Types of Leases. Lease Rate Factors. Lessor Types. Comparison of Leasing and Purchasing. Negotiating Points. Triangulation. Chapter 20 Asset-Based Lending. How Asset-Based Lending Works. Asset-Based Lenders. Tier 1 Asset-Based Lenders. Tier 2 Asset-Based Lenders. Tier 3 Asset-Based Lenders. Negotiating Points. Triangulation. Chapter 21 Factoring. How Factoring Works. Mechanics of Factoring. Fees and Terms. Negotiating Point
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