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
BV News and Trends July 2021
A monthly roundup of key developments of interest to business valuation experts.
Global BV News and Trends July 2021
Business valuation news from a global perspective.
Valuers and Attorneys Advise How to Stay Out of Daubert Trouble
Several sessions at the inaugural BVR National Economic Damages Virtual Conference discussed how valuation experts can avoid the nightmare of having their testimony excluded in court. Of course, much of that applies to any type of case, not just damages.
Timely Insights From the NYSSCPA Business Valuation and Litigation Services Conference
Topics include emerging issues (SPACs, cryptocurrency, and Zoom as a practice-builder) and some new perspectives on evergreen topics (estate valuations, cannabis, distressed firms, and collaborations).
Court Denies a Motion to Dismiss Plaintiffs’ Claims That Defendants “Hid” Losses and Impaired Goodwill
In this case regarding alleged fraud in the purchase or sale of securities, the defendants pled a motion to dismiss the plaintiffs’ claims. The parties categorized the defendants’ alleged misstatements into two groups: (1) the Nutrisystem claim, where the defendants allegedly misled investors as to the success of the Nutrisystem acquisition; and (2) the goodwill claim, where the defendants allegedly impaired goodwill by carrying goodwill at a value that exceeded its implied fair value. The court denied the motion to dismiss.
Updated Data in Largest Pre-IPO Study Reveal High Discounts
New pre-IPO data for the first quarter of 2021 has been added to the Valuation Advisors Lack of Marketability Discount Study, which is the largest study of its kind. The use of pre-IPO data is a widely used and accepted method for estimating a discount for lack of marketability (DLOM).
COVID-19 Just a Speed Bump in Hot M&A Market, Say Speakers at Transaction Advisors Forum
Coverage and key takeaways on valuation from the April 30 M&A Strategy Forum that included sessions conducted by corporate development leaders, in-house M&A counsel, board members, and private equity investors.
Eliminating Outliers in Financial Data Without Cherry-Picking
The author discusses one method for determining outliers that is defensible from the allegation of cherry-picking—that is, bias in selecting data to either suit the client’s wishes or to generate a specific result for the client.
BV News and Trends June 2021
A monthly roundup of key developments of interest to business valuation experts.
How to Use New Data on Invested Capital Premiums
To estimate acquisition premiums the use of invested capital premiums is highly encouraged in certain situations. This article presents a case study and step-by-step guide to using these data that are now included in the Factset Mergerstat/BVR Control Premium Study.
Economic Damages From Design Patent Infringements
The authors discuss the challenges of determining lost profits for design patent infringement. This is an excerpt from The Comprehensive Guide to Economic Damages, 6th edition.
Defining Terms: Forecasts v. Projections—Why Does It Matter?
One area that can trigger some confusion is the difference between the terms “forecast” and “projection.” Some people use them interchangeably, but these are formal terms found in the literature, so they should be used appropriately.
Global BV News and Trends June 2021
Business valuation news from a global perspective.
Trial Court Fails to Consider Apportionment of Goodwill in a Marital Dissolution Case
In this unpublished opinion, the Kentucky Appellate Court remanded the decision as to the value of the husband’s business for, among other things, the Family Court’s failure to consider an apportionment of goodwill between enterprise and personal goodwill. It also remanded for a reconsideration of the maintenance award to the wife since that award is based in part on the value of the business and the income of the husband.
New Study Analyzes Earnout Data in DealStats
What the BVR DealStats database reveals about the nature of earnouts, keeping in mind the fact that the pandemic has affected some industries far greater than a “normal” recession.
Company-Specific Risk Is Not All That Specific
All firms face company-specific risks, many of which are somewhat similar across industries and companies. So is anything really company-specific? An alternative method eliminates the need to totally guess at the company-specific risk premium.
The Strategic Premium: An Inside Look at M&A Prices
Synergistic/strategic value should not be combined into one level in the typical chart that shows levels of value. Some buyers pay a “strategic premium” that propels strategic value to the top of the value chart and well in excess of the expected synergistic value. The author uses real-world examples to illustrate this concept.
Fair Price for Delaware Fiduciary Actions Can Exceed Appraisal Fair Value
Can fiduciaries of Delaware corporations breach their duties and face damages for a merger that provides stockholders with the equivalent of fair value in a judicial appraisal? The answer may surprise you.
Letter to the Editor: The Use of the Arithmetic Mean to Average Multiples
The author takes issue with an article that concludes that the harmonic mean should be used as the appropriate measure of central tendency for a sample of market multiples.
Personal v. Enterprise Goodwill in Florida Divorce Cases: What the Appellate Courts Say
In the wake of the recent King case, this is an analysis of marital dissolution case law from the Florida Supreme Court and the five District Courts of Appeal (DCA) of Florida that relates to the valuation of personal and enterprise goodwill in that state.
BV News and Trends May 2021
A monthly roundup of key developments of interest to business valuation experts.
Global BV News and Trends May 2021
Business valuation news from a global perspective.
Tax Court Hands Jackson Estate Major Win but Finds Reasoning for Tax Affecting Unpersuasive
Tax Court mostly sides with estate of late superstar in valuing three contested assets; assets had to be valued separately, based on parties’ stipulations, and at death; court says Jackson’s “tattered” image and likeness meant he earned little money apart from his music; court rejects tax affecting.
Letter to the Editor: Comments on Using Jensen’s Alpha for Active and Passive Appreciation
This is a Letter to the Editor from Ashok B. Abbott, Ph.D. (West Virginia University), in response to a prior article on segregating passive from active increases in the value of an asset in the context of marital dissolution.
Letter to the Editor: Response to Dr. Abbott’s Comments on Using Jensen’s Alpha for Separating Active and Passive Appreciation
This is a Letter to the Editor from Mark Filler that responds to comments from Dr. Ashok Abbott about Mr. Filler’s prior article on the use of Jensen’s alpha. Dr. Abbott’s comments can be found elsewhere in this issue.