Business, Asset, Business Process, Leasehold, Patent & IP Valuation Services
Business Valuation, Tangible & Intangible Asset Valuation Services Worldwide
A Primer on Business Valuation
Business Valuation, involving the valuation of an entire business, is often at the heart of some of the largest matters that attorneys ever handle, such as corporate financing, mergers, acquisitions, carve-outs, other business purchases or sales, tax matters, estate valuations, divorce settlements, and many others. Yet very few attorneys can intelligently discuss business valuation. The subject of business valuation is not a part of a typical (or any that I know of) law school curriculum. Consequently, many attorneys and others feel that business valuation and real estate appraisal (a process with which most people in the business world are familiar) are the same process. The truth is that there are a few very basic overlapping theories of value, but few similarities beyond that.
This survey of some of the more common approaches to business valuation was prepared by Don Coker, a Banking, Management, Valuation, Economic & Real Estate Expert Consultant who holds a Certificate in Business Valuation from the Harvard Business School.
Mr. Coker is frequently called on as an expert consultant to perform business valuations as well as valuations of tangible and intangible assets, and economic damages, worldwide; and he has been called on as an Expert Witness over 390 times nationwide on behalf of Plaintiffs and Defendants, as well as by the IRS seven times, 8 of the top 10 banks in the country, 13 of the top 45 banks in the world, 35 of the country's top 250 law firms, has testified 107 times, and achieved 12 courthouse settlements.
Related areas of valuation activity include the valuation of assets used in business, specialized assets, intellectual property assets, patents, and other difficult valuation engagements.
Mr. Coker has served clients nationwide and worldwide in 28 countries in the Americas, Europe, Asia, and Africa from his office in the northern metro Atlanta, Georgia USA area.
Methods for Valuing Businesses
There are many appropriate and acceptable methods of business valuation due to (1) the unique nature of each business, and (2) the purpose of the business valuation. Here is a rundown of a baker's dozen (there are many more) of the most common approaches to business valuation:
Market Comparison Approach - Compares the market value of the subject business with that of similar businesses. While this may seem similar to the market data approach used in real estate valuation, the business valuation process is much more difficult since there is no common yardstick for measurement, such as dollars per apartment unit or dollars per square foot of rentable office building, shopping center, or warehouse space. Instead, you only have the equity (net worth) of the businesses, and the concomitant problems of variations in levels of equity, relative size of the businesses, locational and market differences, differences in the level and quality of services or products offered, and other unique features of each business that require prudent adjustments in order to result in meaningful value numbers.
Replacement Value Approach - Measures value by determining what it would cost to replace the assets and business processes used by the business today. Differs from the Market Comparison Approach in that this approach deals with acquiring the parts that make up the whole business rather than looking at prices for the entire business, as does the Market Comparison. Often used in settling insurance claims.
Future Net Operating Income Approach - Uses the present value of reasonable future net operating income. Useful for a prospective purchaser whose chief interest is the business's future net income. Due to the speculative nature of this approach, great attention must be given to the assumptions for the projections of future revenues and expenses. Likewise, the rate at which those future earnings are discounted to a present value must be sound.
Historical Net Operating Income Approach - Takes the actual net income figures for the last few years and capitalizes them into a value figure. Any factors that caused any year to have higher or lower than typical earnings must be considered and adjusted.
Going-Concern Value - Basically the value of a company as an operating entity. Often used in conjunction with other approaches in order to determine a residual goodwill amount (i.e., organizational value). Often used in income tax valuation situations.
Liquidation Approach - The reasonable prices for the various assets or business entities that make up the business are calculated and totaled. Assumes that the master entity is ceasing to carry on business and is selling its parts in the most advantageous manner. Often applied to businesses that have a strong underlying asset value but a poor earnings performance record.
Formula Approach - Earnings, dividends, and book value are considered in this approach and weighted in accordance to their appropriateness to the particular company under consideration and their importance to the acquirer.
Capitalization of Dividends Approach - Looks upon an acquisition more as an acquisition of an investment security that will be held indefinitely. While it is a unique and limited approach, it is appropriate for some circumstances, and can be used as an indicator of value for consideration in some difficult evaluation cases.
Debt-Free Approach - Permits an analysis of the company's operations without consideration to the present debt structure. Allows a prospective purchaser who might acquire the business and pay off the existing debt to see what the business might be worth under those circumstances.
Reconstructed Capital Structure Approach - Similarly to the Debt-Free Approach, this methodology allows a prospective purchaser to see what a company would be worth with different capital and debt structures. Typically, several competing debt and equity structures will be examined and compared.
Capitalization of Future Cash Flow Approach - When there are large non-cash deductions from income and when the owner or acquirer is more interested in long term growth of their investment, this approach might be more meaningful than the capitalization of past or anticipated net income.
Capitalization of Historical Cash Flow Approach - Actual cash flows over the most recent years are capitalized. Assumes that the business will continue to operate in the future as it has in the past.
Adjusted Book Value Approach - Starts with the company's most recent financial statement. Then the values of the assets and liabilities are adjusted to reflect current values rather than historical values that may be inaccurate from a market value stand-point due to depreciation deductions, increases in asset value, collectability, payment terms, etc.
Tax Value Approach - In valuing a business's taxable real and personal properties for ad valorem tax purposes, it is typical to rely more heavily upon the assessed values of other similar properties than you would otherwise consider. Real estate is part of a business, but generally is not valued separately - except in special circumstances such as where a business has excess real estate that has a significant market value and is capable of being sold separately without negatively impacting the remaining operations of the business.
How Not to Value A Business
Financial Statements - Do not rely on the stockholders' equity or net worth figure on the company's financial statements. They are only useful as a starting point. Some assets, such as real estate, are probably carried at depreciated values that are lower than their market value. The financial statement may contain some intangible assets that are incapable of being sold separately.
Spreadsheet and Mathematical Models - Do not use a comparative spreadsheet model, or an economic consultant that relies on one. Many analysts (MBAs are notorious for this) think that they can simply develop a clever spreadsheet model, insert the appropriate inputs, and voila, a value figure pops out like a piece of toast. This weak methodology does not allow for the many differences that most likely exist between the subject and the companies used as a basis for setting up the comparative spreadsheet.
In-House Hired Help - If the valuation issue with which you are dealing could possibly go to trial, do not use an in-house person from the company or bank as your expert. You will never convince a jury that the person has any objectivity or would be capable of voicing any opinion that was contrary to the interests of their employer that signs their paycheck. Spend the few bucks it will take to obtain a credible estimate of value.
CPAs - Do not use a CPA to value a business. With all due respect, their service is accounting, which is basically making sure that numbers track and go in the right places. This is totally different from determining value. It just so happens that the financial statements that they produce have a net worth figure, but it was explained supra that these figures cannot be relied upon as meaningful indicators of value until they have been subjected to numerous adjustments that are beyond the training, experience, resources, and scope of a CPA.
Entire Website © 2002 - 2010 by Don Coker. (May be cited with proper attribution.)
This article was written by Don Coker, a Banking, Management, Economic, Real Estate & Business Valuation Consultant with over forty years experience in banking, corporate lending, business valuation, and financial economics. He completed the Harvard Business School's intensive Business Valuation program on-campus at Harvard University, and was awarded a Certificate in Business Valuation. Mr. Coker has served in various high-level banking, credit, and mortgage banking positions, as a high-level governmental financial institution regulator, and as an expert witness (over 445 cases, 107 testimonies for plaintiffs and defendants nationwide, and 12 courthouse settlements), and as a consultant to financial institutions, attorneys, corporations, and governmental entities nationwide and worldwide.
As a banker, corporate lender, and mortgage banker, Mr. Coker reviewed, critiqued, and approved or declined hundreds of corporate financing proposals and business valuations; and as a mortgage banker and consultant, Mr. Coker has had the opportunity to capitalize on his inside knowledge of the inner workings of the loan approval process by preparing meaningful and effective business valuations for clients.
Mr. Coker has been an independent consultant since 1986, is widely published in many fields of finance, banking, management, and other areas, and is listed in Who's Who in America, Who's Who in Finance & Industry, and Who's Who in the World.
- Bank Consulting and Expert Witness Website
- Interim, Turnaround, Temporary, Project & Crisis Manager
- Investment Banking & Due Diligence Services
Business, Patent and IP Valuation Services
Don Coker is an independent consultant offering business valuation, consulting, financial, real estate, research, and expert witness consulting services worldwide. Consulting assignments have involved financial matters as large as $20+ billion and have included matters in 45 states and 56 foreign countries in the Americas, Europe, Asia, and Africa.
Expert witness experience includes assisting both plaintiff and defense counsel in over 430 cases involving 107 testimonies and 12 courthouse settlements, as well as extensive work for various agencies of the United States government including the IRS, FDIC, USAID, and others. Listed in the recommended consultant databases of both the American Association for Justice (f/k/a ATLA) and DRI.
Prior employment positions include 20+ years experience in management at banks, savings & loans, credit companies, mortgage banking companies, and a governmental financial institution regulatory agency. Positions held include Board of Directors member, Executive Vice President, Senior Vice President, Manager of Lending, Manager of Mortgage Banking, Regulatory Supervisory Agent (tantamount to CEO). Committee memberships included Loan Committee, Executive Committee, Audit Committee, and Pension Plan Trustee. Served as a corporate officer of various financial institution subsidiaries.
Management responsibilities have included as many as 300 people in 22 locations nationwide in ten states and $1 billion in gross assets. Directly responsible for originating over 36,000 loans of all types totaling approximately $5 billion, and reviewing well over 100,000 financial statements and credit reports, and well over 25,000 real estate appraisals.
Mr. Coker has been called on by banking regulators to provide regulatory oversight management at several troubled financial institutions over a period of several years.
Representative Client List:
The World Bank
Bank of America
Bank of America - Canada
Bank One/JP Morgan Chase Bank
Wachovia/First Union Bank
National City (Bank) Corp.
MBNA America Bank
The Provident Bank, OH (now PNC Bank)
Credit Suisse First Boston Mortgage Capital, LLC
Bank of Oklahoma
Sunbelt Federal Bank
Standard Pacific Savings Bank
First National Bank of Brewton
Southeast Bank of Miami, FL
Barnett Banks, Inc.
Bank of the Southwest
Southern Security Bank
Tanzania Institute of Bankers
Bank of Tanzania (central bank)
Goldome Realty Credit Corp.
Western Gulf Savings & Loan
American Savings & Loan
EDS - BEI Golembe (Banking) Consultants
Resolution Trust Corp.
Federal Reserve Bank of Atlanta
Federal Savings & Loan Insurance Corp.
Federal Home Loan Mortgage Corp.
U.S. Department of Education, Inspector General's Office
Farm Credit Bank
State of Texas, Savings & Loan Department (Regulators)
Internal Revenue Service, U.S. Treasury Department
Ten Municipalities in CA and CO
Tanzania Revenue Authority (tantamount to IRS)
U.S. Agency for International Development
United Nations Conference on Trade and Development
U.A. Air Force, Judge Advocate General's Office; Guantanamo Bay, Cuba, and CA (spy translator case)
New York Governor George Pataki's Office of Regulatory Reform
Lloyds of London, UK
St. Paul Travelers
Liberty Mutual Insurance Co.
Acadia Insurance Co.
Military Premium Managers
Reliance Insurance Company
International Transport Intermediaries Club, Ltd., UK
North River Insurance Co.
American Casualty Insurance Co.
National Union Fire Insurance Co.
Continental Casualty Insurance Co.
Crum & Forster Managers
Physicians Mutual Insurance Co.
Physicians Life Insurance Co.
Xerox Financial Services
Thomas Miller & Company, UK
IBM - Lotus Development
Ford Motor Credit Corp.
Wal-Mart Stores, Inc.
Wal-Mart Business Trust
International Accounting Standards Board Foundation
Ukrainian Accounting Reform Project
Network Software Associates
Prentice Hall Publishing
NAPA Auto Parts
Heritage Motels. Inc.
Barron's Educational Software
Phivos Karnaos (London & Moscow)
Jancik Concrete Specialties
George B. Kaiser, Forbes 400 List
Concord Boat Corp.
ButtonWare Software (PC Calc+)
Fillette Green Shipping
Zapadnoe Koltze (Russia)
Gary Tharaldson, Forbes 400 List
Simon & Schuster Publishing
Cliff's Notes Publishing
Christian Bay Shipping Company
Boston Credit Corp.
Books, Publications & News Media:
Complete Guide to Income Property Financing & Loan Packaging, Prentice Hall, 1984.
Self-Management: A Guide to Career Advancement and Development, written under contract for Prentice Hall, 1985.
Complete Real Estate Computer Workbook, Technical Editor, Prentice Hall, 1986.
The Complete Loan Officers Handbook, presently writing.
"Money Laundering: A Dirty Business," White-Collar Crime Reporter, Oct. 1991.
Treasury Magazine published by The Economist. Interviewed and quoted in an article written by a U.S. News and World Report Editor.
"How You Can Help Your Client Get a Loan to Finance Real Estate Projects," Practicing Attorney's Newsletter, April 1984.
"Getting a Grip on Core Deposit Intangibles," American Banker newspaper, 1996.
"The Dollars and Sense of Business Valuation," published on the website of the American Bank Attorneys Association, April 1996.
"Putting a Cash Value on a Business," interviewed by Lawyers Weekly, May 6, 1996.
"Business Valuation Techniques," Business Locator, May 1996.
"Valuing Businesses," TAB Letter, Technical Assistance Bureau, June 1996.
"Using Business Value to Achieve Ad Valorem Tax Reductions on Commercial Real Estate Properties," Journal of Property Management, June 1997.
What's Working in Credit & Collection, interviewed, quoted re: bank drafts, March 1997.
"Making Sense of Internet Stock Values," TAB Letter, July 1999.
Africa Today, extensive video coverage by Reuters News Agency of Tanzania Revenue Authority training program, Arusha, Tanzania, March 11, 2001 and other dates.
Interviewed by ITV Television Network on the subjects of banking, taxation, economic growth and development, and capitalism in Tanzania, in Arusha, Tanzania, March 16, 2001. Aired on March 17, 2001, and subsequent dates.
The Atlanta Journal-Constitution, interviewed for an article on banking regulatory policies and procedures, and banking practices, August 21, 2001.
The Atlanta Journal-Constitution, interviewed for an article on banking practices and procedures to help deter terrorism, September 19, 2001.
Collections & Credit Risk, interviewed regarding banking procedures, September 20, 2001.
The Atlanta Journal-Constitution, interviewed for an article on banking practices and procedures involving funds transfers and money laundering by terrorist groups. September 21, 2001.
The Baltimore Sun, interviewed for an article regarding considerations for the future of Allied Irish Banks, PLC's, American subsidiary Allfirst Bank. May 30, 2002.
The Atlanta Journal-Constitution, interviewed for an article on changes in banking practices and procedures as a result of the September 11, 2001, terrorist attacks. August 29, 2002.
ESPN.com and Outside the Lines television show, interviewed regarding identity theft matters. November 1 - 3, 2002.
Lending Intelligence magazine and website, interviewed regarding lending practices and interest rates, November 25, 2002.
NBC Evening News, interviewed regarding identity theft, November 25, 2002.
Lending Intelligence magazine and website, interviewed regarding credit scoring and loan approval policies and procedures, December 10, 2002.
Charlotte Observer newspaper, interviewed regarding bank branching and operations policies, January 21, 2003.
Street & Smithï¿½s SportsBusiness Journal, interviewed regarding business ethics and corporate governance issues involving the U.S. Olympic Committeeï¿½s Chief Executive Officer, February 25, 2003.
Family Finances column that appears in The Boston Herald, the Pittsburgh Post Gazette, the Palm Beach (FL) Daily News, and some Scripps Howard newspapers. interviewed regarding credit card debt matters, September 23, 2003.
The Denver Post, interviewed regarding banking economics and bank branching January 21, 2004.
Mortgage Lending Compliance Alert, interviewed regarding housing market outlook, economic and interest rate outlook, and lender profitability strategies. Feb. 2004.
CFA (Chartered Financial Analyst) Magazine, published by the Association for Investment Research, which recently became the CFA Institute. Interviewed by this professional certification organization that promulgates standards for investment professionals worldwide regarding business ethics and corporate governance issues. May 2004.
Continental magazine, interviewed regarding banking and its effect on economic resurgence, especially as it relates to Ireland. July 6, 2004.
European Business School, International University; Schlob Reichartshausen, Germany. Interviewed regarding intellectual property and business valuation techniques. July 24, 2004.
San Francisco (CA) Daily Journal, a legal newspaper, quoted regarding the alleged bank fraud and credit card fraud factors related to alleged Guantanamo Bay, Cuba, U.S. Air Force translator spy Ahmad Al Halabi, July 28, 2004.
Bank Tech & Security Newsletter, provided direction to a bank on the proper way to handle an attempted fraudulent international wire transfer. September 30, 2004.
Small Business Times, provided information concerning business valuation issues. September 30, 2004.
Mortgage Lending Compliance Alert, interviewed regarding the Bank Secrecy Act and Suspicious Activity Reports (SARs). October 12, 2004.
Mortgage Lending Compliance Alert, provided input for an article concerning compliance with the rules and regulations of lending. November 4, 2004.
Mortgage Lending Compliance Alert, provided input for an article on the Fair and Accurate Credit Transactions Act of 2003, a/k/a/ FACTA or FACT Act. Mar. 16, 2005.
Bank Technology & Security Alert, provided input for a question and answer section regarding online bill paying. April 11, 2005.
Mortgage Lending Compliance Alert, provided input for a question and answer section regarding closing costs for home mortgages. May 18, 2005.
Newark Star-Ledger newspaper, interviewed on the subjects of check cashing and the need for enhanced identification verification systems. May 26, 2005.
Bank Insurance & Securities Marketing Magazine, interviewed regarding ethical training considerations and the Securities & Exchange Commission's recently enacted Investment Adviser Code of Ethics. June 21, 2005.
Mortgage Lending Compliance Alert, provided input for an article regarding the legal, regulatory, and marketing considerations of providing lending services to Spanish speakers. June 21, 2005.
Bank Security & Technology, provided input for a question and answer section regarding bank facility security. August 11, 2005.
Bank Security & Technology Alert, provided input for an article regarding the security of bank computer systems. November 9, 2005.
Chicago Sun-Times, interviewed on bank marketing issues. January 9, 2006.
American Prospect Magazine, provided input for an article on business and banking ethics written by a reporter for the Philadelphia Daily News. February 1, 2006.
Bank Security & Technology Alert, provided input for a question and answer section regarding bank record retention. February 8, 2006.
Chief Executive magazine, CEO Newswire, quoted regarding economic
Not Born Yesterday: How Seniors Can Stop Investment
ABC News/Disney -
WJNO AM 1290 Clear Channel Radio,
Mortgage Lending Compliance Alert, provided input for an article about documentation requirements for closing a loan.
Virginia Pilot newspaper, Provided opinions for an investigation into suspected mortgage
Virginia Pilot newspaper, Provided opinions about an on-going
Financial Commentary on the economy
The Importance of Credit
A Primer on Subprime Mortgage Loans, website of Technical Advisory Services for Attorneys,
Business Valuation, published on the website of Technical Advisory Services for Attorneys,
Managing Failed Banks for Maximum Advantage, published on the website of the Gerson Lehrman Group,
A Primer on Business Valuation, a re-write of an earlier article I wrote, published on the website of the Gerson Lehrman Group,
A Primer on Subprime Loans, an update of an earlier article I wrote, published on the website of the Gerson Lehrman Group,
Comments on the Legacy Loan Program, published on the website of the FDIC,
A Banker’s Guide to Effectively Managing
The Facts on the FACTA Clarification Act, published on the website of Technical Advisory Services for Attorneys,
A Primer on Intellectual Property Valuation, published on the website of IP Experts.com,
of Hieros Gamos on
The Wacky World of Interim Management, published on the website of Hieros Gamos,
Check Scam Fundamental Considerations, published on the website of Hieros Gamos,
How Private Equity Firms Can Profitably Invest in Troubled Banks, published on the website of Hieros Gamos,
Troubled Bank Management 101: A Detailed Analysis of an FDIC Cease
A Primer on Intellectual Property
Bernie Madoff is a Bad, Bad
Toxic Bank Asset Valuation Principles, published on the website of Hieros Gamos,
Considerations in Defending Banking
Defending Fair Debt Collection Practices Act
Considerations in Defending State Attorneys General Class Action Lawsuits Against Mortgage Lenders, published on the website of Hieros Gamos,
Why We Need Fannie Mae
Litigation Involving Bank Trust Departments, Wealth
Bank Security Principles
Construction Lending Industry Standard Practices Applicable to Construction Lending Litigation, published on the website of Hieros Gamos,
Bank foreclosure burden soars 324%, Interviewed by
Defending Checking Account
Litigation Involving Offshore Banking, Offshore Bank Accounts, Offshore Finance, Trade Finance,
Letters of Credit, Bills of Lading & International Trade Finance Documentation Issues Important in Litigation, published on the website of Hieros Gamos,
Litigation Over the Calculation & Application of Mortgage Loan Payments & Late Fee Charges & Escrow Accounts, published on the website of Hieros Gamos,
In Stingy Market, TrustAtlantic Makes Do with Sliver of Funding, interviewed
Measuring Bank Capital
Banking Litigation Involving Check Deposits Made at an ATM, published on the website of Hieros Gamos,
Spousal Guaranties in Business Lending Litigation, published on the website of Hieros Gamos,
Defending Banking Litigation Involving Check Fraud, Checking Account Administration,
Defending Bank Director
Feds Order Bank to Bolster Capital, interviewed by
Record or not, troubles sweep smaller banks, interviewed by
On July 8, 2002, the United States Patent & Trademark Office registered a Provisional Patent to Don Coker for a business process for improving the prevention and detection of financial fraud involving personal and business checks, cashier's checks, postal and commercial money orders, letters of credit, bills of exchange, drafts, and many other types of financial instruments. On July 1, 2003, the formal Patent Application was filed. This Patent was successfully marketed in late 2006, early 2007.
Business & IP Valuation's Biographical Data
Don Coker, Business Valuation Expert Consultant
College & University:
- University of Alabama, BA.
- University of Alabama, post-graduate work.
- University of Houston, post-graduate work.
- Spring Hill College, masters degree-level work.
- Southern Methodist University, executive education work.
- Harvard Business School, Harvard University, Certificate in Business Valuation.
- American Bankers Association - American Institute of Banking: financial statement analysis, business finance, bank investments, principles of bank operations, bank management, trusts.
- National Institute of Real Estate Boards, commercial real estate finance.
- International Council of Shopping Centers, shopping center finance.
- National Hospital Association, one-week workshop in healthcare entity finance and valuation.
- Mortgage Bankers Association, workshops in multi-family and SFR lending.
- Federal Home Loan Bank of Dallas, training workshops on financial institution management, lending, investments, operations, et. al.
- Texas Savings & Loan Department, training workshops on financial institution management, lending, investments, operations, et. al.
- Federal Home Loan Mortgage Corp., real estate financing workshop.
- First National Bank of Mobile, AL (now AmSouth Bancorporation), financial statement analysis, business finance, bank investments, credit card operations, deposit operations, bank management, trusts.
- Gibraltar Savings Association (now Citigroup), commercial real estate finance, valuation, joint-ventures.
- Citicorp, business, corporate, and real estate finance, valuation, deposit products, investments.
- Southwest Bancshares (later Bank One, now JPMorgan Chase Bank), business finance and real estate investments.
- Commercial Credit Corp. (now Citigroup), one-week Corporate Marketing Conference covering in-depth training in all financial products, plus 28 CDC Learning Center courses in business and economic subjects.
- Frost Bank, advanced credit analysis and business finance.
Other Professional Activities:
- Consultant on various economic, valuation, real estate, marketing, and banking matters for clients in 45 states and several foreign countries.
- Expert Witness, for plaintiff and defense, listed in BOTH the American Association for Justice's (f/k/a Association of Trial Lawyers of America) and the Defense Research Institute's databases of recommended consultants, plus state and local databases in AR, CO, DC, HI, IL, IA, KY, LA, MN, MS, NH, NY, NC, OH, PA, SD, WA, and San Francisco.
- Phillips College, former Adjunct Professor of Business.
- Institute of Financial Education, approved instructor for the educational arm of the U.S. League of Savings Institutions.
- Prentice Hall Publishing, Simon & Schuster, Paramount Communications, technical editor and consultant on banking and real estate subjects.
- Holiday Inn, Lender Advisory Panel.
- Rodeway Inn, Lender Advisory Panel.
- Novick's Money Market Seminars, panelist.
- National Directory of Corporate Distress Specialists, approved management consultant.
- Licensed Sports Agent, approved by the NCAA, Major League Baseball Players Association, and the AL Athlete Agents Regulatory Commission.
- American Arbitration Association, approved Professional Commercial Arbitrator.
- State of Texas Real Estate Commission, approved instructor and writer of courses.
- Texas Real Estate Broker's License held for over ten years.
Past Professional Memberships:
- American Bankers Association
- American Institute of Banking, Chapter Officer and Bank Consul
- U.S. League of Savings Institutions
- Institute of Financial Education, Instructor
- Mortgage Bankers Association
- Texas Mortgage Bankers Association
- American Council of State Savings Supervisors
- American Bankruptcy Institute - Committee assignments: Public Companies, Real Estate, International, U.C.C., Commercial Fraud Taskforce, Real Estate, Healthcare.
- Board of Realtors
- National Association of Homebuilders
- International Council of Shopping Centers
- Houston (TX) Chamber of Commerce, Economic Development Committee, 9 years
- Katy School District (Houston suburb), Trustee, elective position.
- U.S. Army Reserve, 1966-1968, Officer Training, Ft. Bragg, NC; Honorable Discharge.
- Nottingham Country Civic Club, officer, 1,500 family neighborhood association.
- Sunday School teacher, usher, host.
- Member of the High Museum of Art, Atlanta, GA.
- Grady Health System - Uncompensated volunteer consultant to the Metro Atlanta Chamber of Commerce's Greater Grady Task Force studying the financially troubled Grady Hospital and Grady Health System for the purpose of making recommendations to improve the operations and finances of Georgia's largest hospital and healthcare system.
Recognition in Biographical Reference Books:
- Who's Who in America, 52nd - 56th eds.
- Who's Who in the World, 12th - 16th eds.
- Who's Who in Finance & Industry, 26th - 29th, 33rd eds.
- Who's Who in Medicine & Healthcare, 1st - 4th eds.
- Who's Who in the South & Southwest, 21st - 29th eds.
- Directory of Distinguished Americans, 5th ed.
- Who's Who Registry of Global Business Leaders, 1993 - 1994 ed.
- Who's Who of Emerging Leaders of America, 3rd ed.
- Who's Who Registry of Business Leaders, 1994 ed.
- Personalities of America, 5th ed.
- Personalities of the South, 14th ed.
1986 - Present: Banking, Management & Economic Consultant, Woodstock, GA.
- Consulting assignments covering a broad range of activities such as governmental regulatory oversight, interim management, workout and restructuring of troubled loans, business valuation, intangible asset valuation and issues, bank income tax issues, merger & acquisition assistance, due diligence, business plans, management advice, policy and procedure manual matters, international engagements, writing & editing business books, feasibility studies, marketing studies, research, commercial real estate studies & advice, training & educational activities.
- Expert Witness engagements nationwide for plaintiffs and defendants covering all areas of banking, business valuation, tangible and intangible asset valuation, securities, economics, economic damages, trusts & estates, real estate, credit cards, leasing, international matters, management, credit, finance, FACTA cases, and business. Over 368 cases and 93 testimonies nationwide.
1985 - 1986: Executive Vice President, Manager of Lending & Board of Directors Member, Home Savings (now Citigroup), Houston, TX. Manager of all lending & mortgage banking. Number Two Executive. Heavily involved in investments & deposit activities. Officer of several subsidiary companies. Member of Loan Committee, Executive Committee, Audit Committee, et. al. Restructured the management responsibilities of several departments, increasing production, efficiency, and staff utilization. Completed a $54 million Collateralized Mortgage Obligation loan securitization transaction through Salomon Bros.
1984 - 1985: Senior Vice President, Manager of Lending, First Federal Savings (now Guaranty Federal Savings), San Antonio, TX. Manager of all lending and mortgage banking. Number Two Executive. Heavily involved in investments and deposit activities.
1983 - 1984: Southwest Regional Manager, Ford Motor Credit Corp., Houston, TX. Manager of commercial real estate finance, and some financing with dealers.
1977 - 1983: Regional Manager, Commercial Credit Company (now Citigroup), Houston, TX. Manager of commercial and residential real estate financing for the southwest, and involved in all financial products offered by the $7 billion company. Received the largest bonus ever awarded by the company - twice.
1974 - 1977: Manager of Commercial Real Estate Lending and Mortgage Banking, Southwest Bancshares (later Bank One, now JPMorgan Chase Bank), Houston, TX. Also involved in the origination and administration of construction loans, deposit and investment activities for lending clients including wealthy foreign nationals, corporate and personal lending, and credit card operations.
1973 - 1974: Assistant Regional Manager and Assistant Treasurer, Citicorp Real Estate, Houston, TX. Mortgage banking and construction lending for Citibank, N.A. (NY), and deposit and investment activities for wealthy foreign clients.
1972 - 1973: Loan Officer and Manager of Lending Department, Gibraltar Savings (now Citigroup), Houston, TX. At age 26, managed the day-to-day operations of Texas' largest S&L (55th largest in the U.S.). Handled construction and subdivision development loans, joint-ventures, and high-volume builder accounts.
1968 - 1972: First National Bank of Mobile (later AmSouth,now Regions Financial), Mobile, AL. Mortgage and real estate specialist in the Trust Department. Trained and worked in all areas of the bank including checking and savings, credit, corporate lending, personal lending, international, investments, trusts and estates, portfolio management, corporate pension plans, stock transfer, corporate bond trustee, credit cards, and funds transfers.
Copyright by Don Coker 2002 - 2008
Selected Key Words to Help Locate This Website:
Accounting Practice Appraisal
Bank Branch Appraisal
Business Process Valuation
Closely-Held Business Appraisal
Core Deposit Intangible Appraisal
Damages Appraisal (see "Damages")
Dental Practice Appraisal
Discounted Cash Flow Analysis
Economic Value Appraisal
Financial Institution Appraisal
Health Maintenance Organization Appraisal
Intangible Asset Appraisal
Intellectual Capital Appraisal
Law Practice Appraisal
Loan Portfolio Appraisal
Medical Practice Appraisal
Mortgage Portfolio Appraisal
Mortgage Servicing Contract Appraisal
Professional Practice Appraisal
Partnership Interest Appraisal
Reasonableness of Appraisals
Savings and Loan Appraisal
Savings and Loan Evaluation
Savings and Loan Valuation
Savings Bank Appraisal
Savings Bank Evaluation
Savings Bank Valuation
Subprime Loan Portfolio Appraisal Valuation
Subprime Mortgage Loan Appraisal Valuation
Human Life Valuation
Intellectual Property Valuation
LLC Appraisal Valuation
Loss of Life
Lost Wages Estimates
Relief from Royalty Approach
Entire Website © 2008 - 2009 by Don Coker
Previous Websites Included for Reference Purposes:
Intellectual Property & Website Appraisal
Don Coker offers professional business valuation and appraisal services that cover the valuation of all intellectual property assets, intangible assets, and website valuation, as well as standard business valuations. These are highly specialized valuation engagements that require special skills.
A Website Valuation Appraisal involves the dual considerations of the costs that are incurred in order to create a functioning website, and then also the net profits that result from the operation of the website. Typically, a multi-year projection of realistic financial performance must be completed, a net present value calculated, and the results incorporated into the Website Valuation Appraisal.
Articles by Don Coker
Click on this link to read: “Spousal Guaranties in Business Lending Litigation”
Click on this link to read: “Banking Litigation Involving Check Deposits Made at an ATM”
Click on this link to read: “Measuring Bank Capital and Bank Financial Health”
Click on this link to read: “Litigation Over the Calculation & Application of Mortgage Loan Payments & Late Fee Charges & Escrow Accounts
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How Private Equity Firms Can Profitably Invest in Troubled Banks, By Bank Management Professional Don Coker
Private Equity firms can profitably invest in banks by injecting reasonable capital, engaging experienced, professional bank management, and prudently investing the bank’s funds in loans and other investments that make economic sense.
News Bulletin: The old banking model still works, if given a chance
It is quite encouraging that I recently have received numerous calls from Private Equity (“PE”) firms and other investors wanting to buy troubled banks, and seeking either my advice on how to profitably run them, or wanting to hire me to run one for them the way that a bank should be run. In fact, considering what banking has been through in the last couple of years, it’s down right refreshing!
How is it that these people who only a short time ago were relying on alchemistic derivatives schemes and others that purport to guarantee that no one ever loses are now getting some of that old time religion? Thank God for pendulums that swing and for cycles.
Running and restructuring troubled banks is a tough business, and I have been on the front lines several times, primarily hired by the banking regulators as a consultant and “army of one” to run insolvent banks and their wholly-owned mortgage banking companies.
At this point, allow me to cite for you verbatim the entire set of instructions that I was given by a much-older-than-me governmental banking regulatory deputy commissioner immediately prior to my first assignment as a governmental banking Regulatory Supervisory Agent during the mid-1980s-mid-1990s banking meltdown. As we stood in the parking lot of the insolvent bank, he put his arm around my shoulder in a fatherly way and said, “Son, go in there and run that son of a ‘gun’ the way a bank should be run.” (Please notice that I have taken artistic license to clean up his language.)
And the funny thing was, I knew exactly what he meant! I knew how to run a bank, and he knew that I knew how to run a bank. No further instructions were needed. So I went in there and ran it the way that it should be run. After extensive organizational restructuring, financial restructuring, product realignment, staff adjustments, and many other required corrections, the result was that the bank was cleaned up to the point that it was merged into Norwest which soon became Wells Fargo. Not a bad outcome for an insolvent bank.
However, I must mention that there is another factor that has to be considered in a situation like this, and that is the old saying: “When one enters a chess game after the twelfth move, one makes the thirteenth move.”
Accordingly, you do not walk into an insolvent or troubled bank and simply sit down and start profitably banking without first dealing with some highly unusual factors. For example:
• Immediately (assuming you did not do so before accepting the job) examine all regulatory restrictions under which the bank is operating, and make sure that you are in compliance.
• Next, “Job One” is to stop the bleeding immediately. Look for and plug any expense leaks, revenue leaks, and any sources that are producing red ink. This is a major job, and not nearly as obvious and easy as you might think. You will find situations within the bank that everyone there assumes are SOP and okay, and many of them are just flat wrong. Ferreting out these problems is a good way to show the banking regulators that you have a handle on things, and that you are turning things around; and it gives them another reason to leave you alone and to go take down the next guy who is not dealing with his problems.
• Do a profitability analysis on every transactional product in the bank, such as all deposit account types, and all loan types. Dump anything that is unprofitable, even if it means reducing deposits or assets. Recognize that customers come and go and that it is stupid to take a loss on a product in order to “gain a customer” when the new customer will immediately jump ship as soon as your competitor offers him ¼% more in interest on his CD or ¼% less in interest on his loan.
• Jump into the foreclosed properties and those in more serious stages of delinquency, and take corrective actions. Make sure that energetic marketing plans are underway for all properties of all types owned by the bank.
• Determine which officers and employees can help you and which ones are working against you. Impress upon all officers and employees that your success helps the chances of the continuation of the existence of the bank, and concomitantly, their jobs. If some continue to work against you, boot them out.
• Do a periodic GL scrub where you look at every item going in and out. You will be surprised how quickly you can identify problems that are obvious to you but commonly accepted by the bank’s staff.
• Require complete breakdowns on numbers that appear in summary form on financial statements. For example, break down the “Real Estate” heading and see if there are any surplus properties. Look at the “Miscellaneous Assets” as well. (Note: Once while doing this, I discovered a hunting lodge that the staff had been hiding from me.)
• Ask questions AND GET ANSWERS. Do not accept throwaway answers, incomplete answers, or answers that dodge the question. In a troubled financial institution (or corporate) situation, you do not have the luxury of allowing your officers and employees to play games with you. You will probably have to pare down some staff anyway, so start with these non-answerers.
Here are some simple Rules that will help you avoid many of the problems that bank managers have encountered recently:
1. Don’t originate stupid loans. Use your head. Make sure you actually have an excess of collateral value over your proposed loan amount, and make sure that the borrower has the income (now) to make the loan payments.
2. Don’t originate a loan that you would not want to retain in your own portfolio. Be a gatekeeper for the financial system, and make sure that only decent quality loans enter it.
3. Don’t make loans for the wrong reasons, such as: The borrower is financially irresponsible, but he is a relative, neighbor, buddy, golf buddy, lunch buddy, club buddy, hunting buddy, fishing buddy, church buddy, been in town a hundred years, etc.
4. Don’t extend an irresponsible borrower’s loan just because he is a relative, neighbor, buddy, golf buddy, lunch buddy, club buddy, hunting buddy, fishing buddy, church buddy, been in town a hundred years, etc.
5. Don’t hire someone just because he is a relative, neighbor, buddy, golf buddy, lunch buddy, club buddy, hunting buddy, fishing buddy, church buddy, been in town a hundred years, etc.
6. Make sure that you have a healthy spread (at least 3% minimum and hopefully more) between your cost of funds and your interest rates on your loans. (Note: I once worked for a CEO that believed in paying savers 13.5% interest and lending that money out at 8.5%, and people thought he was a genius. I thought he was an idiot. Soon afterwards, he was out of banking.)
The Question of Allowing Private Equity Firms to Buy Banks
Private equity firms have very astutely recognized the potential profits to be realized from acquiring and rehabilitating troubled banks in today’s economy. Every time one of these financial system meltdowns occurs, the handwringers declare that banks are toast and will not survive to be a significant part of the economy in the future. And every time, the handwringers have been wrong. Banks are essential to our economy; and if you look around the world, you will see that every strong economy has strong banks, and every weak economy has weak banks, or virtually no banks at all. Banks in the United States of America will survive and will thrive in our soon-to-be-rejuvenated economy,
It is my opinion that PE firms can inject significant capital funds that will make a positive contribution towards resolving many of the problems in banking today. Even today, there is apparently an incredibly large pool of funds available to be tapped for investment in, among other things, the acquisition of banks. (Don’t take my word for it on the large pool of funds, just ask Bernie Madoff.)
It is also my opinion that the banking regulators are justified in having some concerns about bank owners who have no experience at managing banks. Nevertheless, it is my opinion that it is erroneous for the banking regulators to place unrealistic capital, future funding, and cross-guarantee requirements on PE firms that acquire banks. Enacting these stringent requirements will certainly scare off a potential significant source of capital funds that can be used to recapitalize troubled banking institutions. Furthermore, enacting unreasonable requirements on PE firms that purchase banks is like punishing the guy that closes the corral gate rather than the one who opened it in the first place. Certainly there is some middle-ground position that will be acceptable to the PE firms and the banking regulators.
Having been through the previous banking meltdown in the mid-1980s to mid-1990s, it is my opinion that the banking regulators should welcome the entry of PE firms into the ownership and recapitalization of banks; but the banking regulators should make sure that the decision makers and the top management of each bank are not investment bankers and financial alchemists but rather are truly knowledgeable bankers that know how to run a bank the way a bank should be run. Increased capital, from PE firms and other sources, and competent management will be major steps toward the restoration of the health of our country’s banking system.
© 2009-2010 By Don Coker
About the Author – Banking Management Professional & Consultant Don Coker
Don Coker is a heavily experienced financial institution management professional and former high-level governmental banking regulator who was previously chosen by the banking regulators to serve as an interim manager, banking management and operational troubleshooter, nonperforming loan specialist, and in regulatory oversight positions. Based upon extensive experience and achievements in banking and lending at Citicorp and entities that are now Bank of America, JPMorgan Chase Bank, and Regions Financial, he was chosen to serve as the on-site supervisory regulatory agent interim manager for two insolvent financial institutions and two bank-owned mortgage banking institutions. Duties included the hands-on management of $1.8 billion (2009 USD) in assets including over $600 million in nonperforming loans (troubled loans and foreclosed properties), and participation in the review, restructuring, and recommendation of various recapitalization and merger plans. Mr. Coker also was called upon by the governmental banking regulators to serve in regulatory oversight positions for various insolvent institutions under the supervision of the banking regulators. In addition, Mr. Coker has been called on numerous times by the governmental banking regulators as well as the IRS to serve as their expert witness consultant in various significant banking litigation matters including one matter that exceeded $26 billion in value (2009 USD).
Mr. Coker is active in litigation consulting, serving as an expert witness consultant in over 430 cases nationwide since 1989, and has testified 106 times. He has been engaged by hundreds of law firms including 34 of the country’s top 250. In addition, he has been engaged by 8 of the country’s top 10 banks, over 60 banks worldwide including 12 of the world’s top 45 banks, and 8 of the country’s top 10 mortgage banking companies.
In addition to litigation-related work, Mr. Coker is active in performing business valuations, IP valuations, core deposit valuations, intangible asset valuations, feasibility studies, commercial real estate studies, marketing studies, business plans, anti-money laundering consulting, and advising investment funds on banking matters.
Mr. Coker’s work has involved clients in 27 countries and work covering 56 countries. He serves clients worldwide from his office in the northern metropolitan Atlanta area, and can be reached at:
© 2009-2010 By Don Coker
A Banker's Guide to Effectively Managing and Marketing Foreclosed Real Estate Properties
By Don Coker
When a bank’s level of non-performing loans and foreclosed assets increases to the point that the bank’s costs and expenses exceed its revenues, the resulting deficit erodes the bank’s net worth and reduces stockholders’ equity. Depending upon the particular bank’s level of net worth, a serious problem will result at some point in time unless steps are taken to mitigate the problems. This article deals with the administration of real estate properties that have already been foreclosed.
It is imperative that the lender examine and thoroughly understand both the loan documents for the particular loan and foreclosure laws in the area where the collateral property is located. Depending upon the various factors contained in loan documents and the nuances of state foreclosure laws, there are usually factors that dictate the timing of when a foreclosure must be initiated. In some cases, a lender’s failure to initiate a foreclosure at the proper time might result in the postponement of the foreclosure to a much later time, allowing further arrearages to accrue and possibly further deterioration or damage to the collateral property.
Once the foreclosure decision is made, the bank needs to automatically involve its foreclosed property department. In a commercial bank, foreclosed real estate properties are referred to as Other Real Estate Owned, or “OREO,” as distinct from real estate owned and used in the operation of the bank, such as the main bank building and bank branch properties. The equivalent term at savings banks is Real Estate Owned or “REO.”
Here are some guidelines for the successful management of foreclosed properties:
• Make sure that the homeowners’ or fire and extended casualty insurance is cancelled and that the property is added to the bank’s blanket insurance policy for foreclosed properties. (Note: I have seen properties lost to fire where there was no insurance coverage due to failure to monitor this activity.)
• Assign the responsibility for managing foreclosed properties to one person. If the level of foreclosures is sufficient to occupy one or more people fulltime, then this person almost certainly must be a new-hire. Don’t rely on the loan officers that initiated the problem loans to begin with to now miraculously solve the problems that they could not foresee in the beginning. It is advantageous to have some “distance” between the OREO/REO managers and the original borrowers.
• Secure the properties immediately after foreclosure or abandonment. Maintain a central key repository in the OREO or REO department.
• Keep the properties looking decent. Do whatever is required to avoid deterioration of the properties. No prospective purchaser wants to buy a problem property or a property that looks bad.
• If the property has problems, find a specialist in buying and fixing up properties, and provide financing to make the deal workable and attractive. Include a commitment to provide financing for the ultimate customer to whom the fix-up specialist will sell.
• Get “For Sale” signs up immediately after foreclosure. (Note: It is astonishing to me how many times I have gone into OREO and REO operations and found management amazed that a property has not sold, yet there is no “For Sale” sign on it!)
• Only list with a real estate agent if truly necessary. Your OREO or REO department will know more about the property than any real estate agent, and your financing to the purchaser will be a major selling point. You - not a real estate agent - control the financing offered.
• Talk to the neighbors of the foreclosed property. Often, their families and friends are prospective purchasers. Your offering favorable financing might be the factor that tilts the scales in favor of a relative relocating close to another relative.
• Inspect the properties regularly, and document what you find. Take any needed corrective actions immediately.
• Offer financing to entice buyers. Remember that a sale turns a cash consuming asset into a cash producing asset.
• Consider holding periods and the net present value of a probable future sale when setting a sales price. The “net” part of net present value allows for the holding costs which include taxes, insurance, any required maintenance, lawn care or landscaping, and any expenditures such as painting, carpet, and any other cosmetic expenditures that may be required in order to market the property.
• Review OREO / REO activities at meetings of the Board of Directors. Directors often have market knowledge and contacts that can help with OREO / REO problems.
Accomplishing all of these items is not as easy as it seems. It requires special expertise to initiate all of these various activities and to keep them moving toward the multiple finish lines.
© 2008 - 2010 by Don Coker
About the Author
Don Coker, as a manager, consultant, and banking regulator, has successfully managed hundreds of millions of dollars of distressed and foreclosed properties of all types including single-family houses, condominiums, subdivisions and land developments, apartments, office buildings, retail shopping centers, warehouses, industrial properties, and many others nationwide. He is available on a contract basis to discuss your bank’s portfolio management needs.
Mr. Coker offers opinions on compliance with nationwide industry standards for the banking, mortgage banking, lending, finance, credit card, and related industries. And in conjunction with these banking engagements, or as a separate engagement not related to banking, Mr. Coker provides consultation, affidavits, written Daubert-compliant reports, and testimony at deposition and in court nationwide for attorneys representing plaintiffs and defendants involved in economic damages and credit damages litigation.
Mr. Coker has been engaged for over 430 cases in all areas of finance, testified 106 times, and achieved 12 courthouse settlements nationwide in the fields of:
- Economic damages estimates, calculations, net present value calculations, and reports
- Economic damages and credit damages litigation support
- Economic damages assessments for personal injury and death cases
- Economic damages for personal lost wages and business lost income and lost profits
- Forensic analysis of economic damages and credit damages situations
- Credit damage estimates
- Intellectual property damages
- Patent damages
- Real estate damages
- Research on economic damages
- Advice on economic damages issues
- Class action economic damages issues
- Anti-trust economic damages issues
- Credit bureau issues
- Proximate cause of economic damages
- Forensic funds tracing and forensic accounting issues
- FACTA - Fair and Accurate Credit Transactions Act - cases
- Subprime lending issues
- Proximate cause of economic damages and credit damages
- Testimony on economic damages at deposition and in court
- And other banking, finance, valuation, damages, and business related cases.
Mr. Coker is an economic damages valuation expert that is capable of producing a credible value of economic damages for any situation. Alternatively, a critique of an opposing existing economic damages report can be produced.
Background as a high-level banker and lender provides an unusually advantageous foundational viewpoint to provide a credible forensic analysis, and to help explain from a banker's and lender's point of view the proximate cause and negative economic impact of financial circumstances, such as the loss of or damage to credit, loss of income, impaired income, damage to intellectual property assets, damage to a patent, etc., and other forms of economic damages on an affected individual, corporation, or other entity.
Mr. Coker has been engaged by 34 of the top 250 law firms in the United States as well as by hundreds of smaller law firms.
Many economic damages cases involve situations that result in damage to a company. Other cases involve economic damages to an individual. In both cases, the assessment of economic damages involves a process of comparing the net present value before and after a causal damages event. The basic process is very similar for corporations and individuals. Mr. Coker is adept at both, and in 2005 was awarded a Certificate in Business Valuation from the Harvard Business School.
High-level executive experience, over 430 cases, math skills, communications skills, and strong credentials as a widely published author provide a unique set of skills that result in superb testifying techniques and the ability to produce impressive and convincing economic damages reports that are equally understandable by a judge as well as a jury.
Credibility is assured based upon prior positions held at Citicorp, Ford Motor Credit Company, and entities that are now part of Citigroup, Bank of America, Bank One / JPMorgan Chase Bank, and AmSouth Bank / Regions Financial, as well as high-level positions with a governmental banking regulatory agency.
Hired numerous times by the FDIC, Resolution Trust Corporation, Federal Home Loan Bank, IRS (7 times), Federal Savings and Loan Insurance Corporation, World Bank, and other governmental entities as their expert consultant on valuation and other banking and financial matters.
Hired by 8 of the country's top 10 banks, 8 of the country's top 10 mortgage banking companies, and 60 banks worldwide including 12 of the world's top 45 banks.
Work for both plaintiffs and defendants.
Listed in the recommended consultant databases of both the American Association for Justice (f/k/a/ ATLA) and the Defense Research Institute (DRI).
A high level of professionalism and efficient management skills allow for a quick turnaround on short-fused work assignments without compromising quality.
Travel is not a problem, and consulting assignments have been completed for clients in 45 states and 27 foreign countries in the Americas, Europe, Asia, and Africa.
Professional appearance and personable demeanor as well as personal communications skills needed to relate to a jury. Listed in Who's Who in America and Who's Who in the World.
Mr. Coker serves clients worldwide from his office in the northern metro Atlanta, Georgia, area, and can be reached by telephone at (770) 852-2286 or by e-mail at: Bankexpert@cs.com
Entire Website © 2008 - 2010 by Don Coker
Entire Website Copyright 2008-2010 by Don Coker
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