BVWire is just back from the NACVA conference in Las Vegas—and we hit the jackpot! There were lots of great sessions with speakers who generated a slew of new ideas and actionable takeaways. Here are just a few highlights.
Watch what you write, advises Mel Abraham (Practice Builder Academy). You never know where it may end up. He mentions a colleague who, at the request of an attorney, wrote a letter explaining the concept of the blockage discount. Unbeknownst to the writer, the attorneys used the letter as the basis for adjusting a valuation—and the letter got attached to a tax return! Later, when the valuation was called into question, the expert got a surprise phone call asking him to explain what he wrote. The idea here is to state explicitly what the document you’re preparing is for and how it can—and cannot—be used.
More disclosure is creeping into valuation reporting, observes attorney Stephanie Loomis-Price (Winstead PC). The courts are now more interested in what you are considering when doing your analysis. Does this mean you should start citing court cases in reports? No. It’s still generally not a good idea to cite cases, but think about attaching an appendix to your report that lists the cases you considered.
Don’t be afraid of calculation reports, says Marc Bello (Edelstein & Co. LLP). They’re being used more and more. But a risk with these reports is that they can—without your knowledge—end up in a litigation setting, and you could be called to testify. If that happens, simply tell the judge the truth about the report and how it came about. When doing a calculation report, clearly state in the engagement letter what it is for and how it should be used. Some experts go so far as to state they will not testify about the report. Others have the client sign the engagement letter where it has the language about the nature of the report.
Lots of interest in IPCPL, a new methodology for developing cost of capital for small private companies. The implied private company pricing line (IPCPL) and the implied private company pricing model (IPCPM) were developed by BobDohmeyer (Dohmeyer Valuation Corp.), Pete Butler (Valtrend), and Rod Burkert (Burkert Valuation Advisors). Toby Tatum (Alliance Business Appraisal) helped develop a companion tool to calibrate IPCPL to the build-up method. Read a free BVR special report for everything you need to know about this new methodology.
We’ll have more from the NACVA conference here in the BVWire and also in a future issue of Business Valuation Update.
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