Bob Cimasi becomes fellow at RICS
Bob Cimasi (HCC) was elected a “Fellow of the Royal Institute of Chartered Surveyors” (FRICS) on December 15, 2011. While it’s not quite a peership or elevation to the Royal Family, the RICS citation recognizes Bob’s “extensive experience in and contribution to the valuation field.” He’s previously been recognized in various ways by ASA, IBA, the AICPA and other organizations–and has worked with BVR on a number of projects over the years.
Congrats, Bob–we look forward to many more contributions to the profession in the future!
Pratt’s Stats’ top five industries in 2011
Restaurants continue to top the list of transactions added to Pratt’s Stats in 2011, followed by business services (not classified elsewhere) and software companies: “There were no remarkable changes this year as compared to last,” says Adam Manson, BVR’s manager of financial research. Barring any atypical trends, such as the consolidation of automobile dealerships during the 1990s and the tech “bubble” of 2000-2001, the industry sectors that traditionally see the most business sales are the ones that have the most businesses. “There are a lot of restaurants,” Manson says, “so you will see many restaurant sales.” Sales from these top five business sectors helped add 1,637 transactions to the Pratt’s Stats database this year, bringing total transactions to 17,751. Mean vs. Median? Notably, the current data reveal the differences between (1) pricing multiples in the various industries; and (2) the median and harmonic mean. “It’s interesting that many appraisers use median figures,” Manson says, “when, more often than not, the median may overstate the multiple.”
BizMiner updated to include 2Q ’11
BVR’s recommended source of industry data, including state-by-state data and market share analyses, is BizMiner. We continue to feel it offers the greatest range of sources, eliminating most of the biases inherent in other industry databases.
Plus, BizMiner has been able to get their quarterly updates done reasonably quickly, given the volume of data required. In fact, Jon Brandow announced that 2nd quarter 2011 final figures were posted yesterday–prior to year end. Users have access to preceding 12-month comparisons for the FYE June 2011 now.
There have also been some name changes to some BizMiner reports, as follows:
- Industry Financial Profiles are now Industry Financial Reports
- Micro Firm Profit-Loss Profiles are now Micro Firm Profit-Loss Reports
- US Industry Market Research Reports are now US Industry Market Reports
- Local Market Research Reports are now State-Metro Industry Market Reports
A banner year at Valuation Advisors–with great steps forward for their pre-IPO DLOM database
BVR just received an update from Valuation Advisors this morning that’s been posted online. That database now contains 8,690 pre-IPO transactions used to calculate a discount for lack of marketability. The database started 2011 with 4,917 transactions – so we’ve seen an increase of 3,773 transactions.
In addition to the regular monthly updates Valuation Advisors provides us, they’ve also undertaken two major efforts this year:
- The addition of international deals. This added 797 new transactions to the database. There are now 26 represented countries.
- The addition of IPO transactions greater than two years prior to the IPO date (this added 2,444 new transactions).
Both of these additions provide benefits to the database’s users in that international transactions are now represented—as are transactions with longer time periods between the issuance of pre-IPO stock or options and the IPO date.
The Valuation Advisors Lack of Marketability Discount Study is the largest DLOM database.
Lilly’s experience offers more evidence that patents are not “indefinite lived”
When Eli Lilly’s patent protection for its antipsychotic drug Zyprexa expired last fall, analysts sought information on how Lilly would make up for the loss of $3B in related revenues. They were comfortable in forecasting 2011 earnings per share of $3.67. In addition, most companies facing the patent cliff force significant reductions in sales expenses and overheads, and it was anticipated Lilly would follow suit.
Eli Lilly disappointed on both fronts, as Lilly is now predicting an EPS of no more than $3.20, and Derica Rice, Lilly’s CFO, stated sales and overhead expenses “will remain unchanged.” Investors reacted by taking Lilly down over 2% in early trading on January 5.
IPWire will continue to cover how organizations manage the revenue and profit squeezes that accompany a blockbuster coming off patent protection.
Congress steps into DOL/ERISA fiduciary controversy that’s keeping many appraisers away from ESOP valuations
The 2012 fiscal year appropriations bill in Congress boosts funding levels for the Department of Labor (DOL)—but comes with several constraints on the DOL’s most controversial regulatory proposals, says an update from the Washington D.C. Employment Law blog. Of particular interest to BV appraisers, the current appropriations package includes a provision that would:
Prevent the Employee Benefits Security Administration (EBSA) from using appropriations funds to promulgate a proposed rule issued in 2010 that revises the definition of “fiduciary” for the purposes of rendering investment advice under the Employee Retirement Income Security Act (ERISA). In September 2011, the EBSA announced that it had decided to re-propose this rule. The Manager’s Statement explains that this section shall not be construed as preventing the agency from publishing a new or revised [rulemaking] relating to the definition of a fiduciary, provided that interested parties and stakeholders are afforded a sufficient opportunity to review and comment on the proposed rulemaking.
BVR adds updated “bible” of Canadian business valuation
The Guide to Canadian Business Valuations, published by Thomson Carswell, was just updated last month. BVR has signed an agreement with the publisher to help promote this three-volume, looseleaf guide for our customers with Canadian or cross-border clients.
Written by Richard Wise, this Guide is intended to
- Provide practical information that is easy to understand and use – Incorporates a unique “engagement approach” to the valuation process, an accessible, step-by-step system.
- Offers valuable insight into the practices, concepts, and procedures for a variety of valuation engagements.
- Explain each step of the valuation process with “real life” examples – Includes detailed case studies, sample engagement letters, computation worksheets, questionnaires, checklists, and forms.
All BV professionals in this area will find the complete set of easy-to-use practice aids extremely helpful in their day-to-day activities. Nothing else like it exists specifically for the Canadian market.
Table of Contents
Volume 1
• Overview of a Business Valuation Engagement
• Overview of Valuation Terms and Methodology
• Pre-Engagement Procedures
• Data Gathering and Analysis
• Capitalized and Discounted Returns Methods
Volume 2
• Valuation Methods Based on Guideline (Comparative) Company Data
• Underlying Assets, Excess Earnings and Other Methods
• Wrapping up the Engagement
• Valuation Reports
• Income Tax/Capital Gains Valuation
• Valuation Professional Practices
• Canadian Securities Commissions – Valuation Requirements
• Litigation Support
Volume 3
• Valuing Preferred Shares
• Fair Value Under Shareholder Dissent and Oppression Remedies
• Valuation for Divorce Engagements
• Forensic Valuations – Reconstructing Business Income for Valuation Purposes
• Fair Value Determination for Financial Reporting – Business Combinations, Goodwill and Other Intangible Assets
• Valuing Non-Traded Financial Options
• VAL – Practice Aids – Independent Valuation Consultants
• INT – Practice Aids – Internal Accountants/Analysts
• Index
• Firm Policies.
Top free 2011 downloads from BVR: a snapshot of BV issues & interests
By far the most popular free download from BVR this past year was the IRS’s DLOM Job Aid, followed by another tax-centered topic, a copy of the Tax Court’s Gallagher decision (see table below). Recent updates to the Goodwill Hunting Guide illustrate the continuing interest in this complicated topic, as does number six on the list, on factors influencing personal goodwill allocations in selected case law. For the complete, current list of complimentary resources, visit the BVRfree downloads page.
This year, look for future updates to perennial favorites, such as new excerpts from Mergerstat and transactional databases as well as just-published downloads on IRS and tax-related topics, such as the long-anticipated revised FLP appeals guidelines and any guidance on qualified appraisals/appraisers. We’ll continue to offer the latest “landmark” valuation cases as well as regulatory and industry overviews. If there’s any particular download that you’d like to see in 2012, please email the BVWire editor.
| Download Title | Count |
| Discount for Lack of Marketability Job Aid for IRS Valuation Professionals |
930 |
| Estate of Gallagher v. Commissioner, T.C. Memo. 2011-148 (June 28, 2011) |
603 |
| Goodwill Hunting in Divorce |
573 |
| The Generous Helping of Company-Specific Risk That May Already Be Included in Your Size Premium |
430 |
| Economic Outlook Update Monthly – December 2010 |
397 |
| Examples of Factors Implementing Personal Goodwill in Cases |
356 |
| How Much Is Your Business Worth – According to Inc. and BVR |
319 |
| Duff & Phelps Risk Premium Calculator – Cost of Equity Estimates |
307 |
| Excerpts from 2011 Mergerstat Review |
294 |
| Control Premiums: Application & Analysis Special Report Excerpt |
220 |
Got a guideline public company method analysis in your future?
BVR has just negotiated a 75% price discount with our partner for software to speed up the increasingly time-consuming steps involved in doing a public company comparables analysis. The BVR/PB Public Company Comps Tool (PCCT) will be available for $995 for a single user license starting this week–for all new accounts and renewals. Since nearly every appraisal requires a consideration of this method (even if the results are not weighted), BVR has felt that an affordable tool to automate interative comps selection and comparison is essential. This is the first time a product of this sort has been available for under $3500. This new low price despite the high cost of licensing the EDGAR On-line database to support public company comparable analyses.
To take advantage of this great new pricing, contact your BVR account executive! Low-cost multi-user options are available too, for the first time.
BV standards already in close conformity, say industry leaders
We’ve heard from various sources that top BV experts and representatives are considering how to formulate a response to the SEC’s recent call for “unification” of the BV profession and its standards. In the meantime, we are reminded of the article by Nancy Fannon (Fannon Valuation Group), Mark Hanson (Schenck Valuation and Litigation Support), and Edward Dupke (Clifton Gunderson), in the May 2011 BVUpdate, “Let’s Build on the New NACVA/IBA Standards Unification,” in which the authors state:
A conscious effort was made by NACVA and by IBA to have their common professional standards be in conformity with SSVS1. It is our belief that the unification and resulting conformity with AICPA will enhance clarity for both preparers and users of valuation reports. If a valuation analyst adheres to either of these two sets of professional standards in performing the valuation or calculation engagement, then the valuation analyst will likely be in compliance with both sets of standards.
“On the positive side, the similarity of the NACVA/IBA valuation standards and the AICPA valuation standard is a testament to the efforts these organizations have made in the development process,” the authors conclude. “Such efforts provide strong encouragement for the valuation profession moving forward.”
In a follow-up article, “AICPA, NACVA, and IBA (at Least) Unify Standards,” in the July 2011 BVUpdate, Mark Kucik (Kucik Valuation Group) lauds the BV professionals who led the unification effort. “Ultimately, at the end of the day, the principals of the AICPA, NACVA, and IBA have come together,” he says, with a reminder that NACVA has posted the updated standards.
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