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Two new resources from BVR

Valuations in the cannabis industry and BV benchmarks are the subjects of two new resources from BVR.

A Masterclass in the Valuation of Family Limited Partnerships and LLCs (A BVR Web Workshop)

As professional appraisal methodology has advanced, so has the valuation of family limited partnerships (FLPs) and limited liability companies (LLCs). Adopting an analytical method for valuing FLPs and LLCs using the income and market approaches allows appraisers to more accurately and objectively determine a value that can withstand the scrutiny of IRS challenges. Experts Bruce Johnson, Jim Park, and Spencer Jefferies conduct case studies to teach the best practices for valuing noncontrolling, nonmarketable FLP and ...

Case Study: How an expert business appraiser used DealStats to value a popular Italian restaurant in California

BVR’s most recent case study explains how a valuation professional used DealStats to help determine the value of an Italian restaurant and how the platform provided the real-world data necessary to arrive at a reliable value conclusion.

Rules of Thumb Highlight the 2019 Business Reference Guide

By far, the most valuable information in the newest edition of this book is the coverage of pricing rules of thumb. This article discusses caveats when using rules of thumb and also reviews their use in litigation with reference to relevant court cases.

Don’t Make Me Call Security!: How to Consider Data Security in a Business Appraisal

Cyber liability is of increasing concern for business owners and executives. With the average total cost of a single data breach of $8.19 million in the U.S., shareholder value can be wiped out with the click of a mouse. Cyber risk is a relatively new risk yet is a particularly lethal one. According to Inc. Magazine, 60% of successful cyberattacks force the target business to close. Appraisals that fail to explicitly address this risk are ...

Court Says Asset Approach ‘Is Simply an Improper Method’ in Present Appraisal Proceeding

Appellate court upholds trial court’s finding that majority shareholder breached fiduciary duty to minority shareholder and buyout order; trial court performed careful valuation analysis finding defense expert’s asset-based approach was “simply an improper method of valuation in the present case.”

Linde v. Linde

Appellate court upholds trial court’s finding that majority shareholder breached fiduciary duty to minority shareholder and buyout order; trial court performed careful valuation analysis finding defense expert’s asset-based approach was “simply an improper method of valuation in the present case.”

A Script for Pharmacy Valuation

The U.S. healthcare industry is very large, complex, and changing rapidly. This highly regulated industry is also a significant user of valuation services, primarily to support transactions, contracting, and internal strategic planning purposes. The importance of consummating transactions within fair market value cannot be overstated, as the alternative can result in substantial financial consequences to the parties involved. As such, advisors need to know the operational and valuation issues associated with healthcare entities so they ...

Kress gift tax case signifies approval of tax affecting—at least in federal district court

One aspect that has valuators excited about the Kress v. United States gift tax case is that the federal court that ruled on the taxpayers’ challenge to the IRS’s gift tax assessment accepted valuations from both parties’ experts that applied a C corporation tax rate to value minority shares in an S corporation.

Exciting times for UK business valuation

Writing for Business Valuation Update, Andrew Strickland (Scrutton Bland Chartered Accountants) notes that new techniques are now ‘sweeping away’ business valuation methodologies that have held sway for decades in the UK.

Pratt’s Stats/Deal Stats analysis holds up in divorce litigation

A Maryland divorce case illustrates the difficulties an appraiser charged with valuing a small company in the divorce context may face and how he or she may prevail in court.

Court Validates Expert’s Reliance on Pratt’s Stats/DealStats for Sales Transaction Analysis

Appeals court upholds valuation of plaintiff’s interest in dissolved company and jury award; plaintiff expert’s analysis of sales transactions of comparable companies was admissible; Pratt’s Stats/DealStats database provided a reliable basis for expert to identify relevant sales, court says.

Alkayali v. Boukhari

Appeals court upholds valuation of plaintiff’s interest in dissolved company and jury award; plaintiff expert’s analysis of sales transactions of comparable companies was admissible; Pratt’s Stats/DealStats database provided a reliable basis for expert to identify relevant sales, court says.

The Legend of Weighted Average Return on Assets and Benchmarking Purchase Price Allocation Data

The author's research shows that only current assets, non-competes, and customer relationships have any predictability to WACC in limited industries. In general, when intangibles have significance, their coefficients are negative, which reduces WACC and implied risk. This finding supports the claim by Lev and Gu (2008) that intangibles are important assets, which reduce, not increase risk. The concept that intangible always should have a premium above WACC is unfounded, and the premise of ARM 34 that intangibles are ancillary assets is outdated. The author suggests and alternative method to use purchase price allocation data to support the selection of premiums above WACC.

Enterprise Value Adjustment Multiple for Post-Tax Reform Valuations

An intuitive method to adjust enterprise values that were calculated using pretax reform M&A multiples that arguably do not reflect the tax characteristics of the new tax law.

BVU News and Trends March 2019

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

Pratt’s Stats/DealStats Market Analysis Survives Appeal by Owner Spouse

Appellate court finds no error in trial court’s adoption of market-based value determination by husband’s expert; expert acknowledged this was not the preferred method to value the small company, but company’s problematic financials and uncooperative attitude “compelled” use of this approach.

Hultz v. Kuhn

Appellate court finds no error in trial court’s adoption of market-based value determination by husband’s expert; expert acknowledged this was not the preferred method to value the small company, but company’s problematic financials and uncooperative attitude “compelled” use of this approach.

Updated Business Reference Guide available

Now in its 29th year, the Business Reference Guide (BRG) has been updated for 2019.

Simplified MUM approach weathers attacks in Illinois divorce case

One of the key questions in an Illinois divorce case was how to allocate goodwill between enterprise and personal goodwill.

Letter to the Editor: Comments on Adequate Sample Size in the Transaction Method

A letter to the editor in response to the article “Valuation Experts Clash Over Analysis of Transactional Data” and accompanying supplement that appeared in the April 2018 issue of BVU.

Letter to the Editor: Comments on an Article on the Number of Transactions for the GCTM

This letter is in response to the article “Valuation Experts Clash Over Analysis of Transactional Data” that addresses how many transactions to use in the guideline company transaction method (GCTM).

In re Marriage of Preston

In divorce case, appellate court upholds valuation based on opinion of husband’s expert using MUM method to separate total goodwill value into personal and enterprise components; court also upholds use of small marketability discount where owner spouse is the sole owner of the company.

Court Favors MUM Method for Goodwill Allocation in Illinois Divorce Case

In divorce case, appellate court upholds valuation based on opinion of husband’s expert using MUM method to separate total goodwill value into personal and enterprise components; court also upholds use of small marketability discount where owner spouse is the sole owner of the company.

Letter to the Editor: Comments on an Article on the Use of Statistics in the Transaction Method

A valuation expert weighs in on dueling experts’ opinions on the use of statistics, including how many transactions should be used in the application of the transaction method of appraisal.

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