Download Trugman’s ‘11-factor checklist’ for valuing covenants not to compete
A covenant not to compete only has value to the extent that it “protects the value of the purchased assets of the business (both tangible and intangible) by restricting the seller’s competitive conduct after the sale,” writes Gary Trugman (Trugman Valuation Assoc. Inc.), in a new article for the February 2012 BVUpdate. As a result, a CNC’s value [...]
New source (besides ERI) of CEO compensation data for reasonable compensation analyses
BVR has consulted over the last year with Chief Executive Group (CEG) – publishers of CEO Magazine, on their new study of private company owner pay. The result was released this week–and it adds a second very strong benchmarking resource for reasonable compensation calculations (the first, of course, being data from ERI). The new CEO and [...]
Questions to answer when drafting shareholder agreements
In a case study of three close friends who started a business, Don Bays (Henry & Horne) demonstrates the need for a well-written shareholder agreement—including the following: Valuation date: What is the date of the valuation of the departing (or deceased’s stock)? Is it the date of termination? The date of death (as may be [...]
Questions to answer when drafting shareholder agreements
In a case study of three close friends who started a business, Don Bays (Henry & Horne) demonstrates the need for a well written shareholder agreement. Listed below are some important issues to consider when drafting the buy-sell portion of a shareholder agreement: Valuation date: What is the date of the valuation of the departing [...]
The call to be the third appraiser can be problematic
Chris Mercer (Mercer Capital) posted this insight on his Valuation Speak blog this week: “Over the last several years, I’ve been involved in several multiple appraiser valuation processes as the third appraiser. These experiences provide the basis for a few ideas to ‘fix’ a process that is already underway and headed for almost certain trouble [...]
Do “swing vote” shares deserve a premium?
There’s an interesting discussion on this topic at the Business Valuation Professionals group on LinkedIn (you’ll need to register if you’re not a member)begun by Kevin Czerak (Kutchins, Robbins & Diamond, Ltd.). He’s got a case where a 39% shareholder is trying to acquire the shares of a 14% owner. One noteworthy response so far [...]
Valuing healthcare AR: Can you spot the errors?
The owner of several dialysis centers in San Antonio sold to a national provider in 2006. But the parties couldn’t account for the pre-sale accounts receivables (AR) and wound up in front of a jury, which awarded the plaintiff/seller $750,000 based on expert testimony (that calculated damages as high as $2.8 million). The defendant’s challenged [...]
Oral agreements only make breach of contract valuations more difficult
As appraisers know only too well, the fact pattern in Kia v. Imaging Sciences Internat’l, 2010 WL 3516850 (E.D. Pa.)(Sept. 2, 2010)) plays out in countless startup companies—especially in the biotech sector—trying to recruit key personnel. During an employment interview in 2003, the plaintiff, a Ph.D. and one of the “world’s leading engineers” in digital imaging, [...]
New York Times small business center recommends BVR…
Owners looking to sell can benchmark their financial thinking by using Pratt’s Stats and other databases available from BVResources.com–as reported by the New York Times.
AICPA and NACVA BV standards help persuade court re: importance of normalization adjustments in income approach
First the trial court found that two shareholders in a South Carolina medical supply company had been diverting funds to pay themselves excessive salaries. Next, it ordered the shareholders to buy-out the dissenting owners and appointed a business appraiser to determine statutory fair value. In his engagement letter, the appraiser agreed to comply by the [...]
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