BV News and Trends March 2023
A monthly roundup of key developments of interest to business valuation experts.
Global BV News and Trends March 2023
Business valuation news from a global perspective.
Damodaran to give critical perspective of ESG
Never one to mince words, Aswath Damodaran (New York University Stern School of Business) called it “the most overhyped, oversold concept in the history of business.”
Tax returns as a source of historical data
The vast majority (91%) of valuation experts say federal tax returns are crucial or very important sources of historical financial data.
Is Expected Inflation the Best Long-term Sustainable Growth Rate?
When using the income approach to value a business, selecting a sustainable long-term growth rate is a necessary input into the valuation model, one that can have a material effect on the value of the business. The business valuation literature has provided little guidance for estimating and understanding sustainable long-term growth rates. Apart from relying on macroeconomic indicators and historical industry averages, appraisers have few options for selecting sustainable long-term growth rates and are often ...
Adjusting Tech Company Financial Statements When Applying the Value Driver Formula
This article follows the authors' article in Business Valuation Review (November 2020) that explored typical errors when capitalizing cash flows in the terminal period of the Discounted Cash Flow Method. Since investments related to intangible assets are often expensed immediately through the income statement under generally accepted accounting principles, the article demonstrated that without significant adjustment, the value driver formula would likely overstate the net reinvestment into fixed assets and working capital when calculating the ...
From the Editor
Sustainable growth is one of the key inputs in the income approach.
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.
Reminder: Take a survey on tax return data extraction
Is the historical financial information you get from client tax returns in usable form? Do you have to extract it by hand? Do you use an automated solution?
SEC climate proposal is key topic during KPMG panel
At the recent Global Financial Reporting and Valuation Conference, a panel of KPMG leaders shared their knowledge and insights on the evolving landscape regarding environmental, social, and governance (ESG) factors. During this session, audience members were particularly interested in how the SEC climate proposal can impact private companies.
How do you extract tax return data?
BVR is always on the lookout for new offerings that will help practitioners. One area where we see some potential need is in extracting historical financial data from client tax returns.
O’Mahony v. Whiston
In a case of disputes among the owners of an Irish soccer bar in New York City, the court awarded economic damages and punitive damages after the controlling owners took proceeds of a lease buyout of the bar’s prior location to establish a new identical bar in a new location while cutting out the minority owners from the new bar. Using assets of the old corporation and thereby misappropriating a corporate opportunity of the old corporation, they started a new identical bar (including the name) in a new location in a corporation the control owners set up.
New York Court Awards Lost Corporate Opportunity and Punitive Damages in Restaurant-Related Case
In a case of disputes among the owners of an Irish soccer bar in New York City, the court awarded economic damages and punitive damages after the controlling owners took proceeds of a lease buyout of the bar’s prior location to establish a new identical bar in a new location while cutting out the minority owners from the new bar. Using assets of the old corporation and thereby misappropriating a corporate opportunity of the old corporation, they started a new identical bar (including the name) in a new location in a corporation the control owners set up.
BVResearch Pro adds another issue of the ASA’s BV Review
Among many other resources, the BVResearch Pro platform contains the full archive of the Business Valuation Review going back to 1982.
BV News and Trends January 2023
A monthly roundup of key developments of interest to business valuation experts.
High ESG scores lower the cost of capital, study finds
A recent paper says there is significant evidence that companies having a higher environmental, social, and governance (ESG) score have a lower cost of capital.
Business Valuation Case Law Yearbook, 2023 Edition
January 2023 PDF, Softcover (195 pages)
BVR (editor)
Business Valuation Resources, LLC
The NICE Method Theory and Application
The Nonmarketable Investment Company Evaluation (NICE) Method, a valuation method under the Income Approach to value, determines the fair market value of noncontrolling equity interests in closely held investment entities such as family limited partnerships.1 In this paper I describe the theory of the method and the mechanics of its application in a valuation model. Recently, I have developed the Excel-based NICE-R Model, which is designed to be a transparent and user-friendly valuation tool.2 Finally ...
Hot Topics at the 2022 VSCPA Forensic and Valuation Conference
It was back to in-person attendance at the 22nd annual Forensic and Valuation Conference hosted by the Virginia State Society of CPAs. Topics included the income approach, effective recruiting, reasonable compensation, guideline transactions, surviving cross-examination, IRS developments, and a “Hardball With Hitchner” session that covered some front-burner issues.
BV News and Trends December 2022
A monthly roundup of key developments of interest to business valuation experts.
Chase v. Chase
On appeal, the husband asked the court to review whether the wife needed alimony given the assets she otherwise received in the equitable distribution and her earning capacity as a pharmacist, whether an award of rehabilitative alimony and alimony in futuro by the trial court was appropriate, and whether the trial court’s valuation of the husband’s medical practice was in error. The appellate court affirmed the trial court in all aspects reviewed and did not award legal fees to either party.
Tennessee Appeals Court Affirms Trial Court Decision on Spousal Support and on the Value of Husband’s Medical Practice
On appeal, the husband asked the court to review whether the wife needed alimony given the assets she otherwise received in the equitable distribution and her earning capacity as a pharmacist, whether an award of rehabilitative alimony and alimony in futuro by the trial court was appropriate, and whether the trial court’s valuation of the husband’s medical practice was in error. The appellate court affirmed the trial court in all aspects reviewed and did not award legal fees to either party.
Valuing Assisted Living Facilities
This webinar will cover the basics of valuing assisted living facilities. We will look at valuation methods under each approach – cost, market, and income – and discuss pro’s and con’s of each. Before getting into each method, we will address industry factors and economic conditions pertinent to these valuations, as well as current topics and issues. An example valuation will be reviewed incorporating the methods and conditions discussed.
BV News and Trends November 2022
A monthly roundup of key developments of interest to business valuation experts.