Equity Value Enhancement: A Tool to Leverage Human and Financial Capital While Managing Risk

371 Pages·2015·1.84 MB·English

by  Carl L. Sheeler

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InourholdingcompanyandintwoofthesinglefamilyofficesIhelprun,the
blueprintsofvaluemachinesthemselvesareworthmillionsofdollars,andcan
be leveraged in many different industries or asset classes. While most books
on the industry focus on statistics or outdated stressing of fee-only models,
no other publication dives into the structures that drive value creation for
ultra-wealthyfamilieslikethistextdoes.Infactwhenyoufirststartreadingthe
bookyouwillrealizeitspeakstoprofessionalswhoareoperatingonanother
levelinthespace.IhavehiredCarltospeakatourmostprivateandexclusive
eventsforsinglefamilyofficesand$100M+familiesandifyoureadthisbook
youwillseeexactlywhyandbegladyouspentthetimedoingso.
RichardC.WilsonisthebestsellingauthorofTheSingleFamilyOffice:
Creating,Operating,andManagingInvestmentsofaSingleFamilyOffice,
WilsonHoldingCompany,KeyBiscayneFL
Carl’s book brings a refreshing twist to the valuation discipline. While most
equityvaluationliteratureouttherefocusesontechnicalandmethodological
aspects, Carl thinks outside of the box and delves into unique concepts and
tools,namely,Governance,Relationships,Risks,andKnowledge(GRRK)and
riskIdentification,Measurement,Management,andMitigation(IMMM)that
lead to Equity Value Enhancement (EVE). This book is especially useful for
valuationprofessionalswhodesiretobemorethanjustroutinecommodityser-
viceprovidersandhaveagreatercallingtobecomepro-activeparticipantsof
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aholisticadvisoryteamintegraltohelpingcompaniesproduceresults,reduce
operationalrisk,andleverageonandmaximizevaluableintangibleassets.
AngelaSadang,MBA,ASA,CFA,Director,FinancialAdvisoryServices,
MarksPanethLLP
Carl is a very introspective individual. He approaches family businesses and
public companies with a holistic approach; not just a single focus. Having
grown up in a family owned business in manufacturing and working with
many family businesses, I know firsthand that Carl understands the dynam-
icsinherentincertainfamilybusinesses,andthatprovidestruevalue.Carlhas
atalentforsizingupabusinessforitsvalue,challenges,andgovernance.Hav-
ingworkedwithhim,heissomeoneIwouldlovetoworkwithagainforhis
impressiveandconsistentabilitytocreatevalueandhelpbusinessesgrow.
JamesM.Hill,ChairmanofthePrivateEquityPracticeGroup,and
formerManagingPartner,Benesch,Friedlander,Coplan&AronoffLLP,
Cleveland,OH
This wonderful book shines a light on a universal but widely unrecognized
truth: value is only created in the networks of relationships, conversations
andcommitmentsbetweenpeople.Thefailuretolookbeyondthenumbersto
culturalandsystemicfactorsgoesalongwaytoexplainthedismalrecordof
valuedestructioninmergersandacquisitionsacrosstheglobe.Carl’sbookis
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essential reading for executives, advisors and investors seeking sustainable
valuecreationstrategies.
PaulSweeney,ManagingDirector,BerkeleyResearchGroup(UK)Ltd,
BerkeleyResearchGroup(UK)Ltd,LondonUK
While advisors provide advice to their clients, Dr. Carl Sheeler, based on 2
decadesofexperienceandresearch,targetstheadvisorssothattheycanbetter
assist their clients. As a professional appraiser, I fully agree with Carl that
GRRK is so important to see what’s driving operational performance. I am
sureappraisersandotheradvisorswillbeabletobecometrustedadvisorsand
provide the advice that clients need to enhance the value of their businesses
afterreadingthisbook.
ChengjunWang,Phd,FRICS,ASA,FCPV,FCPA,Vice-Chairman,Senior
Partner,ZhongheAppraisalCo.,Ltd.,BeijingPRC
Dr. Sheeler’s Equity Value Enhancement should be a wakeup call for busi-
ness owners, large corporations and the people who provide a wide range
of services to these firms. Sheeler sheds light on the tangible and intangible
driversofbusinessvalue.Hisperspectiveisvaluableforbothbusinessowners
andtheiradvisors.Hisapproachtoexplainingthemanywaysbusinessvalue
is misunderstood and miscalculated is insightful and important. He does an
exemplaryjobofestablishingafoundationofunderstandingaboutthetangi-
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bleandintangibledriversofbusinessvalueandthenprovidingthe“how-to”
approachtoaccessingandoptimizingthebenefitsofastrongadvisoryteam.
Thebookalsoclearlyarticulatesthesourcesofvaluecreationforadvisors.For
adiverserangeofserviceprovides,hetrumpetsthecriticalityofdifferentiating
themselvesbygoingbeyondtheirtechnicalexpertisetooffervaluableperspec-
tive and advice, founded on understanding, that can help owners enhance
business value. Equity Value Enhancement offers vital insight and offers an
indispensablelearningtoolforallbusinessleadersandtheprofessionalswho
servicethem.
CarolE.Robbins,ExecutiveBusinessDriver&DigitallySavvyBrand
Builder
Thisisn’tjustanotherbooktostickontheshelf-itisatooltobeutilized.Carl
hastakencomplexconceptsandtransformedthemintoaccessible,actionable
recommendations. What Carl refers to as “technical myopia” costs business
ownerclientsvastamountsofmoneyeachyear,butitdoesn’thavetobethat
way.Withthelargesttransitionofgenerationalwealthwellunderway,Carl’s
approachtoEquityValueEnhancementisamustreadforadvisorsandbusi-
nessowner’salike.
AllieHarding,PartneratOrangeKiwi,LLC&PlanforTransition.com
With Carl’s book, you find that a basic feature of modern enterprises is the
need to create effective intangible assets through unique approaches. As a
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professor,Igleaned fromthisthatabusinessschoolshouldhelpitsstudents
identify the intangibles that are not disclosed by a balance sheet. This book
opens a new window and shows the reader how to judge the value of a
business with innovative thoughts and methods that transcend the typical
limitationsofvaluationanalysis.
HaisuWang,ProfessorandDirectorofResearchCenterofBusiness
Value,ZhongnanUniversityofEconomicsandLaw,WuhanPRC
Dr.Sheeler’sbooksucceedsinimpressingupontheappraisalandadvisorycom-
munitythatriskidentificationandmeasurementneednotbeacommodity.The
realopportunityliesinestablishingastrategyandculturewhereownersand
advisors align their activities to leverage their knowledge and relationships.
Thebook’sfocusisonthenecessityfortheoftenoverlookedriskmanagement
andmitigationroles.Thisseparatesthedabblersfromtheindustryprofession-
alsandallowsformorelucrativeengagementswhilemakingarealdifference
fortheownerandinvestorsinbothliquidityandlegacy.
JohnK.Paglia,Ph.D.,CFA,CPA,AssociateDean&AssociateProfessor
ofFinance,PepperdineUniversityGraziadioSchoolofBusinessand
Management,LosAngelesCA
CarlSheelermovespastthelimitingaspectsofvaluationanalysisbycreating
(cid:2) theGovernance,Relationships,RisksandKnowledgeframework.GRRKgives (cid:2)
advisorstoolsthatleveragegovernanceintoculture,relationshipsintoadvisory
boards,risksintoopportunities,andknowledgeintoinsight.ApplyingGRRK
methodstovaluationsprovidesinsightsandopportunitiesthatadvisorsshould
sharewithclientstogrowtheirbusinesses,expandtheirinfluencewithintheir
markets, and grow professional networks that can be new sources of rev-
enue.Thebusinessservicesindustryismovingawayfromhourlyratestowards
valuepricing.Consultantsshouldusethisbookandelevateserviceofferingsto
becomedeeplytrustedadvisorswhobillontheirvalueandnotontheirtime.
VitoColombo,Principal,TrügliConsulting,MiddleVillageNY
CarlSheeler’sworkisafinecontributiontothefieldofappliedandpractical
economics, which at a certain basic level is to understand human behavior.
Itsucceeds because he simply makes sense. This is no easy task,and itis no
minorcontribution.Sheeler’sworkisimportanttoadvisorsandclientsalike,
as it reminds us to focus on adding value and managing risk in pursuit of
excellence by focusing on the relationships and practices that increase the
probabilityofdesiredanddesirableoutcomes.Thisisabookworthkeeping
offtheshelfandonthenearbytabletouseasapracticalguideandreminder
ofsustainedbestpractices.
RichardLevine,Esq.andAdjunctProf.,ColoradoSchoolofMines,Law
andEconomics,EvergreenCO
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Most business owners believe their value comes from what appears on their
financial statements – sales, gross profit, EBITDA or net income. However,
all acquirers buy the future, not the past, and the future is always driven by
intangibles.InEquityValueEnhancement,CarlSheelercreatesacompelling
argument for why and how business owners should use A-level advisors to
identifyandleveragetheirintangiblestomaximizethevalueoftheirtime,effort
andinvestment.
TimothyG.Malott,Partner,ShorelinePartners,LLC,President/CEO,
ShPSecurities,LLC
Equity Value Enhancement is a must for any business school, private equity
firmorinvestmentbankingfirmworthitssalt.Carltakesanesotericsubject,
equity valuation, and makes it come alive, in all its facets–well beyond
‘the transaction’, and carves a path for those who would endeavor to
become better at being strategic value architects. His lessons on understand-
ing the differences between value, price, worth and risk are intellectually
thought-provoking, motivating, engaging, full of wisdom and fact-based.
Frankly, I wish I’d had his book in hand three years ago. An excellent and
well-organizedreadthatyou’lltaketothebank
LaraAbrams,ManagingMember,LaraAbramsCommunications,LLC
(cid:2) Exceptional!IwishIhadthisinformationwhensettingupourgenerational (cid:2)
investingplans.WhatCarladdressesgoesbeyondpracticaladvicetoencom-
passcontrarianviewpointsthateveryadvisorandfamilymembershouldcon-
sider.Attentiontofocusingonthecost-benefitanalysisoftheprovider-client
relationship as a key metric is a valuable consideration too often ignored by
thosewhoselectaproviderbasedsimplyonafriend’srecommendation.Read-
ingthisbroughtmetotherealizationthatthewaytoanalyzeprovider-client
relationshipisnotsimplybywhatisoffered,butbythevalueoftheprovider
asaknowledgebaseonhowtopreserveandgrowequity,fromsomeonewith
skin in the game, from the very beginning of the provider selection process
throughoutthelengthoftherelationship.
BillTownsend,Founder,BestSellingAuthor,Interminds,PasadenaCA
Overanalmost40yearcareerIhavebeenaninvestmentbanker,anadvisor
toprivateequityfirmmanagementteams,acompanydirectorandanowner
ofsmallbusinesses.Mr.Sheeler’sbookexpertlydescribesthewaytooptimize
the effectiveness of professionals in each of these rolls (and several more!). I
wishIcouldhavereadit40yearsago.Icouldhaveavoidedlotsofon-the-job
learning!
KevinK.Albert,ManagingDirector,PantheonVentures,NewYorkNY
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Equity Value
Enhancement
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Equity Value
Enhancement
A Tool to Leverage Human
and Financial Capital While
Managing Risk
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CARL L. SHEELER
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LibraryofCongressCataloging-in-PublicationData:
Names:Sheeler,CarlL.,1960–
Title:Equityvalueenhancement:atooltoleveragehumanandfinancial
capitalwhilemanagingrisk/CarlL.Sheeler.
Description:NewYork:Wiley,2015.|Series:Wileyfinance|Includesindex.
Identifiers:LCCN2015035909|ISBN9781118871003(hardback)|ISBN
9781119092025(ePDF)|ISBN9781119091981(ePub)
Subjects:LCSH:Humancapital—Management.|Capitalmarket.|Value
investing.|Riskmanagement.
Classification:LCCHD4904.7.S43842015|DDC658.15/5—dc23LCrecordavailableat
http://lccn.loc.gov/2015035909
CoverDesign:Wiley
CoverImages:BlackandWhiteMarbles©iStock.com/stayorgo;
FinancialChart©iStock.com/dblight
PrintedintheUnitedStatesofAmerica
10987654321
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