Firms with better ESG ratings yield somewhat higher returns, per Kroll study
Companies with better environmental, social, and governance (ESG) ratings generally outperformed those with lower ratings over the 2013-to-2021 period, according to Kroll’s new ESG and Global Investor Returns Study.
Fifty percent premium:Globally, “ESG leaders” earned an average annual return of 12.9%, compared to an average 8.6% annual return “laggard” companies earned—about a 50% premium in terms of relative performance by top-rated ESG companies, the study says. This holds true for the U.S., where the “ESG leaders” earned an average annual return of 20.3%, compared to a 13.9% average annual return earned by “laggard” companies.
The study analyzes the relationship between a company’s total stock returns (dividends plus capital appreciation) and its MSCI ESG ratings over the 2013-to-2021 period. The study examines over 13,000 publicly traded companies across a variety of geographies and industries and their ESG ratings to determine the correlation of ESG ratings to company performance. For more information and to download the study, click here.
Internal billings trigger M&A damages; GPCM prevails
A case in Delaware Chancery Court shows that the court will not award damages from an M&A transaction gone bad when the calculations are based on speculative lost synergies.
GAAP gap: NetApp Inc. sued the sellers of the company it acquired, Cloud Jumper, a private software firm, for breach of contract and fraud in connection with the sale. The court held that the defendant breached multiple representations in the merger agreement, including that the financial statements were GAAP-compliant and represented bona fide transactions. But the seller included internal billings in company revenue and projections that it did not disclose to the buyer, who relied on those numbers when valuing the firm for purchase.
The court awarded expectation damages but did not accept the plaintiff buyer’s calculation, which used a DCF and projected as well as synergistic cash flows. The court accepted the seller’s estimate of damages, which was the purchase price minus the valuation using the guideline public company method (GPCM).
There are much more details in the case, which is NetApp, Inc. v. Cinelli, 2023 Del. Ch. LEXIS 220; 2023 WL 4925910, and a case analysis and full court opinion are on the BVLaw platform.
New book of essays by prominent valuation experts
Top experts from overlapping valuation disciplines tell their stories that capture a flavor of the romance, intrigue, art—and heart—of business appraisal in a new book, The Art of Valuation.
The book starts with a history of the profession and then reveals the nuances, tips, tactics, and ways of thinking about business appraisal that can help elevate your work from good to great. Practitioners are encouraged to look beyond the technical issues and mechanics of analyses and spreadsheet modeling to the “essence of the big-picture thinking that produces a powerful, effective, credible work product.”
The book, edited by Sarah von Helfenstein (Value Analytics & Design LLC), is a magnificent tribute to the valuation profession! It is available from The Appraisal Foundation, and you can click here to order it.
Extra: Several contributors to the book (including the book’s editor) will be presenting sessions at the upcoming 2023 ASA International Conference in New Orleans October 1-3. Click here for details on the conference.
BVResearch Pro adds to its archive of the ASA’s BV Review
Among many other resources, the BVResearch Pro platform contains the full archive of the Business Valuation Review going back to 1982. This is the business valuation journal of the American Society of Appraisers. The Spring 2023 issue has been added to the platform, and it includes these articles:
If you are not a subscriber to the BVResearch Pro platform, you can do a stand-alone subscription to the ASA’s BVReview if you click here.
ISBA appraisal review workshop November 9-10
The International Society of Business Appraisers (ISBA) is offering a two-day workshop for its Business Certified Appraiser in Review (BCA-R) credential. The workshop will be November 9-10 in Fort Lauderdale, Fla. Certified business appraisers with two full years’ experience or more in developing and reporting on the valuation of businesses or the equivalent are eligible to qualify for the BCA-R. For additional requirements and information on the workshop, click here.
Extra: Shawn Hyde (Canyon Valuations) recently gave an interesting BVR webinar on appraisal review. To access a recording, click here (free to BVR Training Passport holders).
Global BV News
IVSC annual meeting in Paris October 9-11
The International Valuation Standards Council (IVSC) will hold its annual general meeting (AGM) at the Maison de la Chimie, Paris from October 9 to October 11. There will be panel sessions, public board meetings, meetings of the Advisory Forum, and the formal AGM. Some parts of the overall program are restricted to IVSC board members and sponsor/member organizations, but other sessions and all networking events are open to anyone with an interest in valuation and the work of the IVSC. You can check out the agenda and register if you click here.
The International Association of Certified Valuation Specialists