BV titans at NACVA’s silver anniversary conference

BVWireIssue #165-2
June 15, 2016

Shannon Pratt, Roger Grabowski, Jim Hitchner, Nancy Fannon, and Honorable Judge David Laro of the Tax Court are just a few of the valuation thought leaders dubbed by NACVA as “industry titans” who gave presentations at the organization’s 25th anniversary conference in San Diego last week. BVWire was there, and here are some notable quotes from a few of the early sessions.

"The valuation method that is best, whether for large or small target companies, is the one for which you have the strongest support,” says Fannon.

Pratt, Hitchner, and Jay Fishman are the authors of a new book, A Consensus View: Q&A Guide to Financial Valuation. “But the one area where we could not come to a consensus is whether you apply a DLOM to controlling interests,” says Hitchner. “I don’t do it and Fishman doesn’t do it, but Pratt says it’s OK.”

In terms of supporting a DLOM, Pratt says: “The pre-IPO studies have received a bad rap because people haven’t adjusted the data for time periods.”

What are the option models of choice? “We’ve been using John Finnerty’s option model heavily (rather than Black-Scholes) at Duff & Phelps, but we never rely entirely on one option model,” says Grabowski. He pointed out that studies show that actual market behavior is different than what Black-Scholes theory suggests.

“I'm coming to the conclusion that appraisers should include a sensitivity analysis in their reports so the judges can see the impact of assumptions,” says Judge Laro. “That would make a huge difference in how reports are received by the courts.”

We’ll have more takeaways in the next issue of BVWire plus additional coverage will be in the August issue of Business Valuation Update.

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