Business Valuation Update
- How to Review a Report’s Valuation Methodology
- Ideas for Solving Two Problems in the BV Profession
- How Do Your Firm’s Benefits Stack Up?
- Using Rule of Thumb Data to Uncover Cooked Books
DealStats Yields Insights on How Crises Impact Exit Values for Small Firms
Recently, BVR provided some assistance to researchers at Colorado State University who were examining the sales of small businesses in the wake of a crisis, such as the pandemic. Their study offers some new insight on how crises impact exit value and the selling process.
BV News and Trends June 2022
A monthly roundup of key developments of interest to business valuation experts.
Global BV News and Trends June 2022
Business valuation news from a global perspective.
New Jersey U.S. District Court Dismisses Plaintiffs’ Complaint That Public Company Defendant Overvalued Its Goodwill
In this securities putative class action litigation, plaintiff shareholders alleged that the defendants (Ascena) misrepresented the value of Ascena’s goodwill and trade names in order to inflate Ascena’s stock price artificially. In June 2017, Ascena announced an impairment charge to those assets of $1.3 billion “causing Ascena's already-declining share price to fall precipitously. Ascena ultimately declared Chapter 11 bankruptcy in July 2020.” The defendants moved to dismiss for failure to plead material misrepresentation or scienter or both. The court granted the motion to dismiss but allowed the plaintiffs to amend their complaint.
Bankruptcy Court Uses the ‘Replacement Value Standard’ as It Determines That Debtor ‘Enterprise Value’ Is Lower and Inappropriate
The debtor, S-Tek 1 LLC, submitted a motion to value to the Bankruptcy Court to determine the value of the collateral of Surv-Tek Inc. as to debt owed it by the debtor pledged as collateral for debt owed by S-Tek to Surv-Tek. The valuation was to be used in the confirmation of a Chapter 11 reorganization of S-Tek. The court used the replacement value standard of value instead of the “ongoing concern” value since the replacement value provided a value greater than the “enterprise value” (i.e., ongoing concern value).
Comments on an Article on Attracting More Practitioners to BV
An article in last month’s Business Valuation Update discussed the need to make business valuation a more recognized career path. This article includes some very thoughtful comments by Dr. Michael A. Crain, CPA/ABV, CFA, CFE, an academic and practitioner.
How Direct Loan Market Participants Are Handling the Handoff From LIBOR to SOFR
The transition from the London interbank offered rate (LIBOR) to the secured overnight fund rate (SOFR) will continue to present challenges for private lenders and their operating and valuation teams as long as loan portfolios have a mix of LIBOR- and SOFR-based deals and as long as there are numerical differences between term SOFR and term LIBOR. The author is chairman of Valuation Research Corp. and head of its portfolio securities valuation practice.
A Lesson in Healthcare Supply and Demand—and Market Power, Part 2
This is Part 2 of a two-part article that follows up on the author’s landmark research on the fair market value of physician compensation. The issue of insurance market structure and the related impact on the negotiating of provider contracts was addressed in Part 1 of this article. Physician distribution and the impact of local payment rates that determine compensation is addressed in Part 2.
A Bird’s-Eye View of Major Intangible Asset Benchmarks
This is an analysis of over 30,000 intangible assets and the types most prevalent in acquisitions, including asset values, royalty rates/profit margins, and useful lives.
Breaking Into Bankruptcy Valuations With Little—or No—Experience
There are a lot of opportunities for business valuation analysts in the context of financially distressed or bankrupt companies. A veteran expert gives some advice on how to add this area to your practice regardless of your level of direct experience.
BV News and Trends May 2022
A monthly roundup of key developments of interest to business valuation experts.
Global BV News and Trends May 2022
Business valuation news from a global perspective.
Using the Valuation Report as a Selling Tool
A business valuation report is the perfect forum for selling the valuation analyst’s conclusion regarding the value of the valuation subject. This is an excerpt from the new sixth edition of Understanding Business Valuation, which has a companion website that includes a good selection of full sample valuation reports.
Minority Shareholder Receives Award of $12 Million for Breach of Contract, $58 Million Buyout Award for Minority Interest
This shareholder dispute case involved two businesses three brothers in Minnesota owned. One of the brothers, Jim Koch, had a falling out with the other two, Randy and Dave Koch. A temporary agreement was made among them in 2006, but subsequently the relationship and actions of the parties deteriorated. In particular, an IRS audit of the two businesses triggered a disagreement as to whether required payments under the agreement had to be tax deductible. Certain actions by the defendants breached the 2006 agreement as determined by a jury resulting in a damages award of $12 million. The court then held a bench trial to determine the value of the two businesses for determining the buyout amount for Jim’s interest in both businesses. Experts for each side testified as to value. The opinion provided a good analysis of the various issues in the methodologies each of the experts used.
Proposed Rule 702 Change Targets Unqualified Experts
Too many experts who are not qualified are being allowed to testify in court, and this has triggered proposed changes to strengthen Rule 702, which is the federal rule of evidence regarding testifying experts.
Business Valuation Needs to Be a Recognized Career Path
Despite all the progress the business valuation profession has made, BV is still not understood or widely recognized as a career path. Most individuals who enter the profession continue to discover it by accident.
A Lesson in Healthcare Supply and Demand—and Market Power, Part 1
This is a follow-up to the author’s landmark research on the fair market value of physician compensation. The issue of insurance market structure and the related impact on the negotiating of provider contracts is addressed in Part 1 of this article. Physician distribution and the impact of local payment rates that determine compensation is addressed in Part 2.
Reconciling the Results of Various Valuation Methodologies
This is an excerpt from the author’s new sixth edition of Understanding Business Valuation. It illustrates the clear, simple way he explains key concepts and provides real-world examples.
Two BV Firms Collaborate to Serve Clients Better—and Boost Business
Solo and small-business valuation practitioners can scale up their practices using an idea that two firms have discovered: collaboration. It allows them to take on engagements that they otherwise would have turned away and gives them access to each other’s knowledge, resources, and contacts.
BV News and Trends April 2022
A monthly roundup of key developments of interest to business valuation experts.
Global BV News and Trends April 2022
Business valuation news from a global perspective.
A ‘Radical’ Market Data Approach to Startup Valuations
Michael Blake (Brady Ware & Co.) has issued a challenge to appraisers of early-stage companies: add rationality to valuing startups by relying more heavily on market inputs. The income approach is not always effective in prerevenue situations, so Blake turns to guideline public-company and transaction method alternatives.
Book Review: Valuing a Business—The Analysis and Appraisal of Closely Held Companies, 6th Edition
The new edition of Shannon Pratt’s book, which gives a heavy dose of theory and has been updated by a team of 67 contributors and published by the American Society of Appraisers, is reviewed.
Book Review: Understanding Business Valuation, 6th Edition
Gary Trugman (Trugman Valuations) has updated his book, which shows you how to apply valuation theory with practical examples from actual engagements and sample valuation reports, written in an easy-to-understand style.
Appraiser Uses Direct Way to Estimate Private-Company Cost of Equity
One appraiser, after 25 years and over 1,000 valuations of small owner-operated businesses, says that these firms bear no relation to public companies, so why look to the public markets for data when estimating cost of capital? Here’s the method he uses, which looks directly at the private capital markets and does not require any expensive resources.