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BV News and Trends March 2024

A monthly roundup of key developments of interest to business valuation experts.

Court KO’s market comp analysis due to industry choice

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In re Marriage of Bornhofen

In this Illinois divorce case, the trial court adopted the value of the husband’s expert as to the value of the husband’s business and rejected the wife’s expert’s value. The trial court determined that the husband’s expert’s value was the only credible value. The wife sought to introduce additional valuation evidence, which the trial court also rejected. The appellate court affirmed the decision of the trial court.

Appellate Court (Illinois) Affirms Trial Court’s Rejection of One Expert’s Business Value and Adopts the Other Expert’s Value

In this Illinois divorce case, the trial court adopted the value of the husband’s expert as to the value of the husband’s business and rejected the wife’s expert’s value. The trial court determined that the husband’s expert’s value was the only credible value. The wife sought to introduce additional valuation evidence, which the trial court also rejected. The appellate court affirmed the decision of the trial court.

Doe v. Trs. of Dartmouth Coll.

The defendant in this action, trustees of Dartmouth College, moved to have the testimony of the plaintiff’s expert as to lost wages and lost earning capacity excluded. The plaintiff had filed an action against the defendant for breach of contract and violation of Title IX by expelling him from Dartmouth’s Geisel School of Medicine. The court granted in part and denied in part the motion to exclude.

U.S. District Court Allows Expert Testimony on Lost Wages and Lost Earning Capacity in a Title IX Private Action

The defendant in this action, trustees of Dartmouth College, moved to have the testimony of the plaintiff’s expert as to lost wages and lost earning capacity excluded. The plaintiff had filed an action against the defendant for breach of contract and violation of Title IX by expelling him from Dartmouth’s Geisel School of Medicine. The court granted in part and denied in part the motion to exclude.

In re Marriage of Sommerville

This Iowa divorce case dealt with an appeal by the wife of the determined earnings of the husband and awards of child support and spousal maintenance. She also contended that the husband dissipated marital assets by failing to pay taxes and incurring penalties and interest. The appellate court determined that the trial court erred in determining the husband’s income and thus remanded for redetermination of child support and spousal support awards. The appellate court also affirmed the determination that the husband did not dissipate marital assets and affirmed the property division. Issues of evidence to determine income or earnings were also discussed.

Appellate Court Remands for New Determination of Husband’s Earnings, Affirms No Dissipation of Assets

This Iowa divorce case dealt with an appeal by the wife of the determined earnings of the husband and awards of child support and spousal maintenance. She also contended that the husband dissipated marital assets by failing to pay taxes and incurring penalties and interest. The appellate court determined that the trial court erred in determining the husband’s income and thus remanded for redetermination of child support and spousal support awards. The appellate court also affirmed the determination that the husband did not dissipate marital assets and affirmed the property division. Issues of evidence to determine income or earnings were also discussed.

Global BVU News and Trends June 2023

Business valuation news from a global perspective.

Chalasani v. Bollempalli

In this Arizona appeal of a divorce case, the husband physician did not engage a valuation expert and impeded the discovery of information relevant to the valuation to the wife’s valuation expert. The Appeals Court affirmed the trial court’s decision of value and its apportionment of 50% of the husband’s value in the practice, noting the lack of an expert by the husband and the failure of the husband’s practice to cooperate with the wife’s expert.

Appeals Court Affirms Value of Husband’s Medical Practice—He Fails to Provide Expert Testimony as to the Value

In this Arizona appeal of a divorce case, the husband physician did not engage a valuation expert and impeded the discovery of information relevant to the valuation to the wife’s valuation expert. The Appeals Court affirmed the trial court’s decision of value and its apportionment of 50% of the husband’s value in the practice, noting the lack of an expert by the husband and the failure of the husband’s practice to cooperate with the wife’s expert.

Global BVU News and Trends May 2023

Business valuation news from a global perspective.

Reasonable comp at center of dental practice dispute

In a Massachusetts divorce case, the wife argued that the normalization adjustments to her salary from her dental practice were based on unreliable data.

Court OKs including PPP loan in cash flows for CCF

In a Vermont divorce case, the valuation expert for the husband valued his business by excluding proceeds from a Paycheck Protection Program (PPP) loan as a one-time windfall for purposes of a capitalized cash flow (CCF) analysis.

BVU News and Trends April 2023

A monthly roundup of key developments of interest to business valuation experts.

Kwak v. Bozarth

The Appeals Court of Massachusetts affirmed the trial court determination of the value of the wife’s dental practice. A large amount and growth of the revenues was from prosthodontics. The wife provided her own value without expert testimony, and the trial court found the methodology not appropriate. The husband’s expert determined the value based on a capitalization of earnings method, with adjustments for compensation to the owner and a 21% discount for goodwill. The appeals court affirmed the decision of the trial court, primarily accepting the valuation of the husband’s expert.

Massachusetts Trial Court Rejects Wife’s Nonexpert Value of Her Dental Practice—Appeals Court Affirms

The Appeals Court of Massachusetts affirmed the trial court determination of the value of the wife’s dental practice. A large amount and growth of the revenues was from prosthodontics. The wife provided her own value without expert testimony, and the trial court found the methodology not appropriate. The husband’s expert determined the value based on a capitalization of earnings method, with adjustments for compensation to the owner and a 21% discount for goodwill. The appeals court affirmed the decision of the trial court, primarily accepting the valuation of the husband’s expert.

Free report on public-company multiples

Salvidio & Partners has developed a quarterly research report that provides multiples for global operating public companies by industry.

Griggs v. Griggs

The husband appealed this Vermont divorce case to the State Supreme Court inter alia to challenge the inclusion of PPP loan proceeds by the wife’s expert in determining the cash flows of the husband’s electrician services business for purposes of determining a value of the business using the capitalization of earnings method. The Supreme Court affirmed the lower trial court on this issue and allowed the PPP proceeds to be included in the cash flows.

Vermont Supreme Court Allows Inclusion of PPP Proceeds in Cap Earnings Cash Flow for Determination of Value

The husband appealed this Vermont divorce case to the State Supreme Court inter alia to challenge the inclusion of PPP loan proceeds by the wife’s expert in determining the cash flows of the husband’s electrician services business for purposes of determining a value of the business using the capitalization of earnings method. The Supreme Court affirmed the lower trial court on this issue and allowed the PPP proceeds to be included in the cash flows.

Tax Court (Grudgingly) Allows Tax Affecting Under the SEAM Method

This was a gift tax valuation case the U.S. Tax Court decided. Gifts of minority interests in The Biltmore Co. were made from the its shareholders, the Cecils, to their children and grandchildren. The IRS audited the gift tax returns and assessed deficiencies for reporting too low fair market values of the gifts of The Biltmore Co. stock. Both sides presented experts to value the gifted interests. The experts agreed that the cash flows should be tax affected. The court accepted the tax affecting while allowing that it was not an admission by the Tax Court that tax affecting should apply in all cases. The Tax Court made changes to the values presented and cobbled together a final value that resulted in refunds to the taxpayers/petitioners.

Estate of Cecil v. Comm’r

This was a gift tax valuation case the U.S. Tax Court decided. Gifts of minority interests in The Biltmore Co. were made from the its shareholders, the Cecils, to their children and grandchildren. The IRS audited the gift tax returns and assessed deficiencies for reporting too low fair market values of the gifts of The Biltmore Co. stock. Both sides presented experts to value the gifted interests. The experts agreed that the cash flows should be tax affected. The court accepted the tax affecting while allowing that it was not an admission by the Tax Court that tax affecting should apply in all cases. The Tax Court made changes to the values presented and cobbled together a final value that resulted in refunds to the taxpayers/petitioners.

SaaS valuation multiples see dramatic decrease

While the software-as-a-service (SaaS) industry is poised for significant growth, revenue multiples are projected at a three-year low, averaging a prepandemic level of about 5.5%, according to a report from FirstPageSage.

Global BV News: 2022 was a record year for Swiss M&A, per KPMG

Despite the gloomy economy, the number of mergers and acquisitions with Swiss involvement hit a new record high in 2022, surpassing the numbers of the past 10 years, according to KPMG in its report “Clarity on Mergers & Acquisitions.”

Global BV News and Trends January 2023

Business valuation news from a global perspective.

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