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Determining Working Capital Adjustments Using a Bardahl Analysis

During a recent conference, the issue of adjusting for working capital came up and the audience seemed unfamiliar with the Bardahl analysis. Here is an excerpt from Gary Trugman’s Understanding Business Valuation, 6th edition, which gives some very practical advice on how to use this analysis.

Are you up on the recent BV-related court cases?

One of the highlights of the BVR webinar schedule is the regular update on valuation-related court cases.

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.

Adjusting the P&L for a Cannabis Dispensary Valuation

A sample valuation report for a cannabis firm reveals an interesting technique to get inside, and otherwise unavailable, information to help adjust the income statement.

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.

Determining Reasonable Compensation + an RCReports Case Study

This session explains the accepted methodologies for normalizing owner compensation in business valuations. The cost, market, and income approaches will be explained with examples. Demonstrations of RCReports software will show how to obtain compensation data for each approach. Practical tips and recommendations for improving efficiencies, documenting analyses, and avoiding common mistakes will also be provided.

BV News and Trends October 2022

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

Normalizing Owner Compensation + RCReports Case Study

This webinar is for business valuators, business advisors who may be involved in shareholder litigation over compensation and tax advisors who help closely held businesses during IRS audits. This webinar explains the accepted methodologies for normalizing owner compensation in business valuations.

Car dealer blue-sky values remain at record levels, per Haig report

“Blue sky” values are 6% higher than at the end of 2021, and they are at the same level as they were at the end of the first quarter of 2022, according to the Q2 2022 Haig Report.

The Dental Valuation Revolution

The valuation landscape for dental practices is changing rapidly. Private equity funds and dental service organizations have entered the industry in force. Experts Matthew Howard and Kam McQuay will engage in discussions around what is the definition of “any given buyer” for practices and how to include this relevant buyer in your valuations. They will also discuss industry-specific considerations for valuations concerning the officer compensation adjustment and typical and some not-so-typical income statement and balance ...

Court tweaks blue-sky method in valuing a car dealer

A Tennessee appellate court recently considered the Chancery Court’s determination of the value of an oppressed minority shareholder’s interest in an “ultra-high-end” car dealership.

Buckley v. Carlock

The Tennessee appellate court affirmed the Chancery Court’s determination of the value of an oppressed minority shareholder’s interest in an “ultra-high-end” car dealership. The valuation of an expert utilized the “blue sky method,” a rule of thumb method, to value the dealership and ultimately the minority interest. The Chancery Court conducted a hearing on which it heard valuation expert testimony. The appellate court affirmed the Chancery Court’s valuation and its methodology since it was generally accepted by the financial community.

Appellate Court Affirms Use of the ‘Blue Sky Method,’ a Rule of Thumb, to Value a Minority Interest in an Oppression Case

The Tennessee appellate court affirmed the Chancery Court’s determination of the value of an oppressed minority shareholder’s interest in an “ultra-high-end” car dealership. The valuation of an expert utilized the “blue sky method,” a rule of thumb method, to value the dealership and ultimately the minority interest. The Chancery Court conducted a hearing on which it heard valuation expert testimony. The appellate court affirmed the Chancery Court’s valuation and its methodology since it was generally accepted by the financial community.

Valuing Small Owner-Operated Business

Small owner-operated businesses have unique characteristics that are fundamentally different from other businesses. These differences should be taken into consideration when performing valuations. Join David Coffman for a dive into those characteristics and a detailed description on how they impact valuation procedures and conclusions. Learn about the market for small owner-operated business valuations.

Control Discounts and Premiums - What is Old and What is New

Where do they come from? Do they even exist? Should I fear using them? No, this October event doesn’t delve into the supernatural but rather attempts to demystify the methods and resources available to quantify control discounts and/or premiums. Join Jim Ewart and Jim Alerding to learn what is new, what is old, and what matters. Learn the sources, context, and usefulness of control premiums and discounts, and the best practices for determining what they ...

Masterclass in Normalizing Compensation

Three nationally known experts will explain how to determine reasonable compensation amounts. The principal author of the Job Aid, Mike Gregory, will explain the “IRS Job Aid on Reasonable Compensation” and share case studies with many tips and traps. One of the foremost national experts on reasonable compensation, Stephen Kirkland, will share insights and sources to help determine reasonable compensation for your clients. Paul Hamann will show how easy it is to use RCReports to ...

BVU News and Trends April 2020

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

Facing a roadblock to your site visit?

During a recent BVR webinar, Karolina Calhoun (Mercer Capital) discussed valuation adjustments and potential forensic implications in litigation.

Valuation Adjustments & Potential Forensic Implications in Litigation

In a contentious divorce, shareholder dispute, damages matter, or other litigated corporate matter involving the valuation of a closely held business, the issues can be multifaceted and may require additional forensic investigative scrutiny. As such, it is important to consider the potential forensic implications of valuation adjustments as they may lead to other analyses. Join Karolina Calhoun for an examination of what adjustments you may need to consider and what to watch for in different ...

On double-dip issue, Ohio appeals court agrees with Gallo analysis

A recent Ohio appeals court decision expressly agreed with its sister court’s 2015 ruling in Gallo that state law does not prohibit double dipping but does require the trial court to avoid unfairness in distributing marital assets and determining spousal support.

BVU News and Trends January 2020

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

Ohio Court Affirms Facts of Case Don’t Require ‘Double-Dipping Offset’

Ohio appeals court upholds trial court’s spousal support determination based on husband’s average, rather than normalized, income, finding “equity did not require a double-dipping offset”; court agrees with sister court’s ruling in Gallo that applicable statute does not prohibit double dipping.

Kim v. Kim

Ohio appeals court upholds trial court’s spousal support determination based on husband’s average, rather than normalized, income, finding “equity did not require a double-dipping offset”; court agrees with sister court’s ruling in Gallo that applicable statute does not prohibit double dipping.

Spend more time on the numerator, expert panel advises

Attendees at a recent online workshop were urged to spend more time on the numerator (forecasts) of the valuation equation rather than the denominator (cost of capital).

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