Business Valuation Update

In the August 2020 issue:
  • Valuers Stand Ground in Clash Over Purchase Price in SPAC Merger
  • 25 Tips on Dealing With COVID-19 From the NACVA Conference
  • Flaws in North Carolina Court’s Appraisal of Reynolds American
  • The SEC’s Not-So-Gentle Reminder: Show Your Work
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Welcome to Business Valuation Update
The Business Valuation Update (BVU) has been the voice of the valuation profession since its inception in 1995. Each monthly issue includes new thinking from leading professionals, detailed reports from valuation conferences, analysis of new business valuation approaches, coverage of “landmark” legal cases in key business valuation issues, regulatory and standards updates, and much more!  Learn more and subscribe >>
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The value of marketability as illustrated in IPOs: May 1997 - December 2000

A critical aspect in determining the fair market value of closely held securities is the discount for lack of marketability. The term discount for lack of marketability is a general term in business v ...

Using Convertible Preferred Stock Transactions to Calculate DLOM

The Valuation Advisors DLOM Study™ database, with over 4,300 transactions, is a valuation tool that compares the initial public offering stock price to pre-IPO common stock, common stock option, and convertible preferred stock (CPS) prices. Brian Pearson ...

Do You Really Know Your Data for Determining Discounts?

The analysis of a popular data source used in determining discounts for asset-holding entities. An advanced understanding of the data is critical in order to avoid overvaluing your client’s investments by understating the discounts.

Fair value versus fair market value: Is there a place for fair value in marital dissolution?

Previously, the concept of "fair value" has been limited strictly to shareholder oppression or shareholder rights matters. State law—including family law statutes—typically does not define fair value ...

The value of marketability as illustrated in dot.com IPOs: May 1997-March 2000

This study is an outgrowth of the eight pre-IPO discount studies published by John D. Emory, Sr. covering 1980-1997. The complete results of this study, with exhibits and expanded text analysis ...

Getting Ready for 409A: Some Practical Considerations

The issuance of the Section 409A tax regulations (and the current effective date of January 1, 2008) has renewed interest in the valuation of common stock for equity compensation purposes. By now, most appraisers have been exposed to the relevant Interna ...

Have the Familiar ‘Levels of Value’ Changed?

“If you have absolute control, you obviously have no adjustment to value,” said Bob Grossman during his session, “Discounts and Premiums,” at the NACVA 2012 Annual Consultants’ Conference in Dallas in June. “But what about 95%? Is that worth as much as a ...

Restricted Stock Studies That Back Up the DLOM

One of the most convincing types of evidence that supports the concept of a discount for lack of marketability (DLOM) is found in studies of restricted stock. Not only do these studies establish the existence of DLOMs, but they also reveal the factors tha ...

Why are restricted stock discounts actually larger for one-year holding periods?

The FMV Restricted Stock Study™ has long been the largest empirical analysis of restricted stock transactions and is becoming a commonly used data source for appraisers looking to determine ...

Liquidity and levels of value: A new theoretical framework

The author provides an illustration of the use of restricted stock studies in a two-step process to estimate the discount for lack of marketability for a closely held stock.

New Survey Spotlights Current Practices and Continuing Questions in Determining DLOM

An exclusive survey by the BVWire on the current methods for calculating the discount for lack of marketability (DLOM) showed an increasing sophistication among business appraisers, particularly in their understanding and appreciation for the factual, legal, and empirical underpinnings of any DLOM conclusion. The survey s record response (more than any other BVWire e-poll to date) demonstrates the continuing and keen interest in this hot topic of BV practice a topic that will be on center at ...

This Short Paragraph Can Bolster the DLOM Section in Your Next Report

Are you using a simple “benchmark average approach” for your analysis of a discount for lack of marketability (DLOM)? That type of analysis may have passed muster years ago, but times have changed.

Empirical Method for Determining DLOM

The vast majority of business appraisers still rely on the restricted stock studies to determine a discount for lack of marketability (DLOM) in their standard practice of valuing a closely held, noncontrolling interest. These studies, shown in Exhibit 1 ...

Bogdanski on Giustina: The Tax Court, Discounts, and DCF

“The Tax Court was stingy with discounts” in Estate of Giustina v. Commissioner, Professor Jack Bogdanski (Lewis and Clark Law School) told the audience in his fifth annual address on “Recent Developments in Federal Tax Valuations” held in Portland in Dec ...

Wanted: better expert testimony - Appellate judge sees trend toward lawyers' recognition of need for competent experts

Before serving on the Oregon Appeals Court Bench, Judge William Riggs was Chief Judge of the Oregon Family Law Division . The American Society of Appraisers' Portland chapter November newsletter ...

Experts Size Up Controversial IRS Estate Valuation Regs

Valuation experts were anxiously awaiting the proposed IRC Section 2704 regulations designed to crack down on estate valuation discounts. Now that they have been released, they have triggered strong reactions from the valuation community, the legal profes ...

Pre-IPO Studies Endure to Retain Foothold in the DLOM Toolbox

Pre-IPO studies have withstood criticisms and court challenges to remain a viable method for developing a discount for lack of marketability (DLOM). Over a third (38%) of valuation experts use them, according to a survey. The article includes an interview with Brian Pearson of Valuation Advisors, a provider of the largest pre-IPO study.

BV News At-a-Glance

A monthly roundup of key developments from the standard setters, regulators, and valuation professional organizations (VPOs), plus noteworthy new books, research papers, and studies of interest to business valuation experts.

Cultures and Continents Clash in High-Stakes Divorce Valuation

Valuation experts who find themselves involved in a divorce engagement with globe-trotting spouses can glean some valuable insights from a recent United Kingdom case. The judge in the English Family Court found herself bemused by wholly different approac ...

Introducing the Rudich/Jaroudi BIZCOMPS DLOM Study

The authors do an analysis of the BIZOMPS database of sales of small private companies to uncover an imbedded discount for lack of marketability (DLOM) in a specific industry. The authors would like feedback on this study and methodology.

Seven Cases to Read Before Writing Your Next Valuation Report

“Valuation report writing is a lot more challenging than we think,” says former IRS official Howard Lewis (International Society of Business Analysts and RiskGuidance Co. LLC). Speaking at the recent NYSSCPA Business Valuation Conference in New York City ...

Do put rights affect the discounting of charitable donations?

A subscriber recently asked if we’ve seen any case law on charitable contributions with put rights—i.e., when a donor gives a stock interest in a company as a charitable donation along with a put right to sell the stock back to the company. BVU asked Chri ...

Why NAV May Not Be The Best Method for Valuing Multi-Tiered Entities

Despite the recommendations of Revenue Ruling 59-60 §5(b), the net asset value (NAV) method may not be the correct approach for valuing a many-tiered asset-holding company, based on theoretical as well as practical grounds, including the “bottom-up”

BVResearch Pro Tackles Tricky Search for Guidance on a 50% Interest

During a webinar, an appraiser challenges BVR’s BVResearchPro platform to find court cases, articles, or any other material that discusses a marketability discount for a 50% ownership interest in a private company.

Is the Lingering Criticism of Using Pre-IPO Studies for DLOM Justified?

The use of pre-IPO studies to measure a discount for lack of marketability has gained acceptance among valuation analysts and the Tax Court even though the method continues to be a target of some criticism. Of course, criticism can be made of all data tha ...

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