A powerhouse lineup of speakers will be at the annual business valuation conference in New York City on May 18, hosted by the New York State Society of CPAs. The speakers and topics include:
- Nancy Fannon: Withstanding a Daubert Challenge; S Corp. Tax Adjustment;
- Chris Mercer: Unlocking Private Company Wealth;
- Mark Zyla: Fair Value Measurements;
- Panel Discussion: Business Divorce and Appraisers with Sam Rosenfarb (Rosenfarb LLC) and Peter Mahler (Farrell & Fritz, P.C.);
- Valuation Issues in a New York Divorce: Jeffrey Gilbralter (Klein Leibman & Gresen LLC) and Adam J. Wolff, Esq. (Kasowitz Benson Torres Friedman LLP);
- Brian Pearson: Fairness Opinions; and
- Juli Saitz: Preparing Expert & Rebuttal Reports
This is the premier event for valuation and forensic professionals in the New York City area. For details and to register, click here.
An internal IRS document is now available that reveals the agency’s most current thinking on the valuation of S corps, one of the hottest topics in business valuation. The document was written to help IRS professionals who are examining S corp valuations—and it presents a wealth of information for valuation analysts.
How to get it: The 33-page Job Aid, entitled The IRS Valuation of Non-Controlling Interests in Business Entities Electing to be Treated as S Corporations for Federal Tax Purposes, is posted on several websites, including the website of Jim Hitchner’s Valuation Products and Services. The Job Aid is included on a dedicated web page created by Business Valuation Resources that also includes articles, videos, and other resources devoted to S corp and other pass-through entity valuations. Michael Gregory (Michael Gregory Consulting), while working at the IRS, was a champion of the IRS internal team on valuing S corps. Gregory will host a webinar on June 16 for BVR and he will give his unique insights on the Job Aid.
BVR’s new S corp webpage also includes information on a new book, Taxes and Value: The Ongoing Research and Analysis Relating to the S Corporation Valuation Puzzle, which is a major advance in thinking about S corp valuations. A special 4-hour workshop that will reveal a new approach to PTE valuations will be held on May 20. The workshop will be conducted by the new book’s authors, Nancy Fannon (Meyers, Harrison and Pia LLC) and Keith Sellers (University of Denver).
The Appraisal Foundation and its Business Valuation Resource Panel have asked BVWire and the valuation associations to distribute this survey of the business valuation community and its members’ areas of expertise, so that TAF can better “serve and inform the business valuation community.”
If you have any questions about the survey (some of the questions are potentially confusing), you can contact TAF at 1-855-414-9332 (toll free) or via email at SurveyofValuers@westat.com.
TAF has notified us that the survey server has limited bandwidth, so try again if you can’t get in the first time…the questionnaire is fairly short and your answers are confidential.
Did the total value of announced M&A deals in 2014 exceed those in 2013? What were the top five seller industries in 2014, in number and dollar value of announcements? Which U.S. states announced the greatest number of corporate sales/divestitures in 2012? The answers to these questions—and more–are all in a new free download of selected data from the newly released 2015 Mergerstat Review, which gives you quick access to selling price multiples by industry and premiums paid by industry. The link to the free download is included in the April 15 issue of BVWire (free registration required).
BVWire reports that, in a recent interview in the upcoming May issue of Business Valuation Update, Ascanio Salvidio (Salvidio & Partners) describes the valuation profession in Italy and the importance of a convergence of valuation standards in his country. He also talks about the data sources he uses.
“There is extensive information (financial data, transactions, ownership, etc.) for both public and closely held Italian companies available through the national Company Registrar (Registro delle Imprese),” says Salvidio. “However, search capabilities are limited and there are almost no screening tools. Therefore, every professional valuer in Italy must also rely on other, more sophisticated, sources.” He mentions Standard & Poor’s Capital IQ, Alacra, the databases of Thomson Reuters or Bloomberg for financial data of public companies, and Bureau van Dijk for transaction data. He also uses financial newspapers and periodicals, most of which are available online.
“The Internet is an enormous source of information for valuers,” says Salvidio. “I recently was involved as counsel in a litigation concerning the value of a wedding planner firm that had not filed financial statements for a few years. I was able to do a rough estimate of its revenues because all of the events it organized had been proudly put on its public Facebook page.”
Appraisers and accountants who opted for indefiniteness in a trademark’s life when doing the original valuation seem to maintain this preference permanently, according to new research reported in BVWire. “This approach is, however, not fully in line with ASC 350 and IAS 38, which state ‘the term indefinite does not mean (the same as) infinite.’ At some point in time, an end of the trademark’s life should be foreseeable,” say the authors of a new article that discusses the new research.
Once indefinite—always indefinite: The authors, Christof Binder (Capstone Branding GmbH) and Robert Morrison (Morrison Valuation & Forensic Services LLC), analyzed 100 trademarks (or trademark portfolios) that were valued and accounted for in 2004 with an indefinite life. The sample was taken from the MARKABLES database of trademark valuations. They traced the reporting of these trademarks from 2004 until the 2013/2014 reporting season. “Only in very few cases the option of shifting from indefiniteness to finiteness was chosen,” say the authors.
The standard-setters introduced the concept of indefinite-lived intangibles in 2001, but they certainly did not “contemplate the creation of an asset category that would sit on the balance sheet forever,” say the authors. But that’s what appears to be happening. Appraisers and accountants continue to prefer annual impairment testing and irregular impairments over a determination of RUL and regular amortization.
The article, Indefinite Is Not Infinite—Solving a Dichotomy in Trademark Valuation, discusses the serious effects that the assumption of indefiniteness can have on valuation and accounting. It also suggests some guidelines and tools for how to analyze the life cycle of a trademark and how to estimate its RUL. The article will appear in the May issue of Business Valuation Update (subscription required).
A soon-to-be-published book is being hailed as a major advance in the area of valuations of pass-through entities. It challenges traditional notions about the differences in value between a pass-through entity and the public market C corporation. The new book reveals an abundance of research that shows that shareholder-level taxes do indeed affect a firm’s value. Up to now, this position has been refuted by the IRS and the Tax Court, largely because data has never been presented to support it. This work should provide valuation professions with the evidence they need to support their valuation conclusions. It also provides a suggestion for a new, more direct approach to pass-through entity valuation.
In the works for seven years, the book presents over 60 academic studies and papers that demonstrate that shareholder-level taxes have a definite effect on firm value. The new book, Taxes and Value: The Ongoing Research and Analysis Relating to the S Corporation Valuation Puzzle by Nancy J. Fannon (Meyers, Harrison and Pia LLC) and Keith Sellers (University of Denver), will be published by Business Valuation Resources.
Although the book will not be available until April, you can pre-order it now if you click here.
“As a maturing industry, valuation services have become increasingly commoditized,” observes Kevin Yeanoplos (Brueggeman and Johnson Yeanoplos PC). “As more people have considered the profession as a career choice, there has been continued downward pressure on fees. At times I’ve wondered if we will ultimately be paying the clients for the chance to do the work,” he tells BVWire.
Rod Burkert (Burkert Valuation Advisors LLC) weighs in on the fee issue: “I believe fee compression will continue to be a concern, especially for practitioners who don’t differentiate themselves by specializing in a niche and whose deliverable is ‘just’ a report.” BVWire notes that Burkert is a co-developer of the Practice Builder Academy, which is designed to help BV practitioners attract more work.
Other developments affecting fees are changes in GAAP for private companies that have also changed the need for fair value work, according to Yeanoplos. “As a result, the pool of companies requiring valuation of intangibles has diminished, putting the brakes on this area somewhat as an area of practice growth.” He also points out that, because of fundamental economic changes over the past six years, “more divorce attorneys are attempting to settle their cases without having a formal valuation done, thereby reducing overall fees.” He points out that valuation experts “have been forced to consider innovative ways to provide value to clients, such as strategic planning.”
Another way BV experts can provide value to clients is to help business owners understand value and help them see how they can tap into that value. “Interest in the BV arena has been keen on this topic, since it provides a different way of talking to business owners and a means of enhancing the relevance of what we do in the private wealth planning process,” says Z. Christopher Mercer (Mercer Capital). Mercer is the author of a new book, Unlocking Private Company Wealth, which is designed to help you help business owners manage the wealth they create in their private business and understand how to talk to them in this regard.
For more comments, see the February 4 issue of BVWire (free registration required).
With the help of business intermediaries who submit deal information, Pratt’s Stats continues to be the leading private-company merger and acquisition (M&A) transaction database. BVWire reports that there is a Pratt’s Stats Hall of Fame, created by Business Valuation Resources to thank those intermediaries who have contributed the most transactions. For 2014, they are:
- Paul Chambliss, Front Range Business Inc. (Boulder, Colo.);
- Ronald Chernak, First Business Brokers Ltd. (Colorado Springs, Colo.);
- Jim DeShayes, Colorado Business Exchange (Fort Collins, Colo.); and
- Mark Doran, Choice Business Opportunities Ltd. (Denver).
Sincere thanks to these and all of the individuals who have helped BVR build Pratt’s Stats into the trusted and reliable data source that it is today.
When a Canadian trial court decided last year to strictly control the interaction between experts and counsel and compel production of draft reports, business valuators mobilized. Together with lawyer associations, they supported the ensuing appeal. BVWire reports that the Court of Appeal’s newly released decision is cause for cheer—it sided with the challengers. The case is Moore v. Getahun, 2015 ONCA 55 (Jan. 29, 2014).
Even though this opinion carries no weight in U.S. courts, it merits attention from practitioners in this country. In addition to discussing the discovery rules applicable to draft expert reports, the Ontario appeals court provides a rationale for why mandatory disclosure and production of drafts has a negative effect on a party’s case and on judicial proceedings.
For more details, see the February 4 issue of BVWire (free registration required).