The BV E-Update is your complimentary source for the latest valuation court cases, plus timeless tips, information, and definitions.

March 23, 2006 Telephone Conference:

Compensation, Hiring, and Retention in the BV Industry

Featuring John Borrowman

The BV firm presents unique challenges when it comes to hiring and retention—not to mention figuring out what compensation to offer, especially as any new talent is often subject to a steep learning curve. Recruiting for the BV practice is an art and a science, much like the practice of business valuation itself.

Renowned industry expert John Borrowman, principal of Borrowman Baker (www.borrowmanbaker.com), hosts this session that will answer the toughest questions on compensation, hiring and retention for the BV firm. He will share key insights from his first ever BV Employee Compensation Survey and share his strategies for successfully taking on new talent and growing your business. Key topics include:

• When to say “when” – gauge when it’s the right time to hire new talent
• Where to look for talent – internal vs. external talent pools and how to find the best – and most enthusiastic – business valuation minds
• How do the unique aspects of the business valuation industry affect the hiring process?
• Answering the big question – how much should you expect to pay for business valuation talent?
• Retaining top talent – how to keep them happy and make them want to stay!

You will not want to miss this important session!

Date/Time:
Thursday March 23, 2006
10:00am-11:40am PST/11:00-12:40MT/12:00-1:40CST/1:00-2:40EST

More information on current and future telephone conferences is available at www.BVResources.com /Conferences

New Court Cases

• Carbo Ceramices, Inc. v. Keefe , 2006 U.S. App. LEXIS 1995 (January 26, 2006) (Judge Reavley); How to calculate lost profits in trade secret misappropriation case, without losing sight of precedent—or losing the confidence of court.
  
• VFB LLC v. Campbell Soup Co., 2005 U.S. Dist. LEXIS 19999 (September 13, 2005) (Judge Jordan). In this corporate fraudulent conveyance case, Delaware court compares two market comparable approaches—and explains why it finds one more trustworthy than the other.
  
• Mahoney-Buntzman v. Buntsman , 2006 N.Y. Misc. LEXIS 533 (February 8, 2006)(Judge Giacomo). New York Supreme Court determines which party has burden of proof to establish valuation date for active/passive asset.

NEW! Click here for your complimentary abstract of Carbo Ceramices, Inc. v. Keefe .

 

These cases and more are available to subscribers to the BVLaw database at BVLibrary.com . Abstracts will be available in an upcoming issue of Business Valuation Update® at BVLibrary.com

BVMarketData Update

New updates to the BIZCOMPS® database have been posted online. We’ve added 424 new transactions of “ Main Street” businesses to the BIZCOMPS® database, which now contains 8,740 transactions. The transactions in BIZCOMPS® have median revenues of $360,000 and a $135,000 median selling price. In addition to over 1,460 transactions in the restaurant industry, the database also contains 835 deals in business services and over 680 deals in the area of personal service.

In addition to the BIZCOMPS® update, we’ve also added new transactions to the following database since the last E-Update:

• Pratt’s Stats™ (now has 8,226 count)
• Public Stats™ (now has 1,946 count)

These databases and more are available at BVMarketdata.com

BV Q&A

Specific company risk—three methods of presentation

Question: How do you quantify and present specific company risk in either the modified Capital Asset Pricing Model (CAPM) or Build-up Model (BUM)?

Answer: There’s no direct way to get to a number and defend it by saying, “I got to 5 percent because of this number plus this number plus this one.” It’s a completely qualitative assessment. In analyzing the individual company, you can look at the cash flows they’ve provided and see how comfortable you feel with those, their ability to project and predict what the company will be able to achieve in light of whatever the growth rates and margins you’ve seen and tested in the industry. That’s part of what you take into account in the company risk premium. You can also look to the finer points of the business: Do they rely on one customer for all of their business? If it’s a smaller company, do they rely on one key individual? Factors such as these can enter into what is, in the end, an entirely subjective analysis.

To present the data, you have three choices. First, we’ve seen appraisers quantify each individual factor and then sum those numbers to derive an overall rate (component detail method). A second would be to present those same factors, but instead of quantifying each individual factor, you might assign them a plus, minus, or neutral ranking, and then present an overall quantification of that particular group of factors (component observation method). A third alternative would be to present the factors, but without weighting each individual one, you just pick a number that best reflects the summary factors (component summary method).

Jim Hitchner, CPA/ABV, ASA and Katherine Morris (The Financial Valuation Group, Atlanta)

Source: February 1 2006 teleconference, “Top Controversies in Determining Cost of Capital." Copies of the conference and transcripts available at www.bvresouces.com

BV Definition of the Week

Control

Control is the power to direct the management and policies of a business enterprise. When valuing control for an existing company, you can derive its status quo value (incumbent control) or optimal value (hypothetical ideal). “The difference between optimal and status quo values can be considered the value of controlling the business.”

Source: Damodaran, Aswath, Control Value: Key Factors in Determining a Control Premium, presented at ASA/AICPA National Business Valuation Conference (Nov., 2005).

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