What to know from the ASA Fair Value Conference

It was another great turnout for the ASA Fair Value Conference in New York City last week. In-person attendance was sold out, and, with the virtual audience, the total attendance was about 200. The conference was sponsored by Empire Valuation Consultants, and EisnerAmper hosted the event at its offices. Here are some key takeaways (there will be detailed coverage in the next issue of Business Valuation Update):

• A panel of Big Four leaders spent half their session discussing practice management issues, indicating that this is a topic of increasing importance;

• AI will lessen the need for valuation analysts but increase the need for midlevel professionals to check the AI output;

• Low-cost providers have invaded the fair value space, prompting more offshoring (one firm set up a staff office in India);

• Audit trouble areas include prospective financial information, attrition, royalty rates, unsubstantiated company-specific risk, implied control premiums, and impairments;

• The final version of the AICPA’s business combinations guide is due out this summer;

• Take care when applying various models for determining technical obsolescence—the topic needs further development, and there is a lack of supportable data;

• The SEC’s Private Fund Adviser Rule, which kicks in March 14, 2025, is presenting opportunities for independent third-party valuation experts interested in this space;

• ESG impacts should be accounted for in cash flows, not the cost of capital, and upcoming disclosure rules (and there are many) will help analysts assess the effects; and

• As with other areas of fair value, the bar is being raised on valuing equity award structures.

The outspoken Professor Aswath Damodaran (New York University Stern School of Business) gave an interesting presentation on risk, particularly catastrophic risk, which was relatively calm, but he couldn’t help dropping a few bombs (e.g., fair value is an “oxymoron,” the size effect is “fiction,” and company-specific risk is “nonsense”), which show a level of disconnect in thinking between academics and practitioners. But his point about global equity risk premiums is a good one, i.e., don’t use ERPs based on where a company is incorporated but rather on where the operations are, which could be a weighted average for operations in several different locales (his website provides data on ERPs by country).

Court’s valuation is out of bounds

In an Indiana divorce case, the subject company was a gift shop and boutique the wife owned. Both sides focused on the value of inventory, with the wife estimating a “liquidated inventory” of $84,824 and the husband figuring $123,000, but, with the store’s markup, the value could jump to $150,000. The parties’ accountant came up with an inventory value of $105,790, with no additional income or goodwill attached to the business.

Great beyond: The trial court assigned a value of $160,000, which was outside of the range of values presented, giving no explanation for how or why it came up with that figure. The wife appealed, and the appellate court reversed and remanded the matter back to the trial court, finding that it “did not make findings of facts to explain its valuation.”

The case is Bergquist v. Bergquist, 2024 Ind. App. Unpub. LEXIS 4341, and a case analysis and full court opinion are on the BVLaw platform.

What has been your experience with college recruiting?

Bringing new talent into the business valuation profession is a challenge. Has your firm reached out to colleges to recruit new hires? How has it worked out? Please let us know by taking our latest Two-Minute Practice Builder survey on this topic. All responses are confidential, and we’ll present the results here at the end of the month. Click here to take the survey. Thank you!

FactSet Review 2024 PDF now available

The PDF version of the 2024 edition of the FactSet Review (formerly known as the FactSet Mergerstat Review) is now available. Print copies will ship very soon, but they can be ordered now. The FactSet Review includes rosters and statistics on mergers and acquisitions between U.S., U.K., and global privately held, listed, and cross-border enterprises. This is one of the most referred-to sources of industry pricing, premia, and payment terms. Each annual subscription includes current updates via the Flashwire US Monthly, an update on M&A activities, trends, and deal data by industry.

Valuation conferences for May on our radar

Conference season is in full bloom in May, and here is what we’re planning to attend and cover for some interesting news and insights:

• May 13: New York State Society of CPAs Business Valuation and Litigation Services Conference. This is one of our favorite events, which is in New York City on May 13 (full day). Always a strong slate of speakers, the topics this year include complex valuation issues in marital dissolution, IRS audits, IP finance, valuing music, blockchain, AI, and more. For more details and to register, click here.

• May 16: Houston ASA Energy Valuation Conference. BVR is pleased once again to partner with the Houston Chapter of the American Society of Appraisers (ASA) to present a live webcast of the Energy Valuation Conference on May 16 (full day). The conference will feature presentations from nationally recognized speakers, who are profession leaders, covering a range of important topics in the industry, including downstream, midstream, upstream, and emerging trends in the growing renewables sector. For the full agenda and to register for the webcast, click here.

• May 29 (virtual only): ASA Beyond Valuation—Professional Development and Growth Conference. This event debuted last year, and it was a big hit, so here it is again with new speakers and topics, but all geared toward appraisal career development and the soft skills the next generation of valuation experts needs. This is a half-day event, and it is virtual only and will be on May 29 (1:00 p.m. to 5:15 p.m. EDT). Click here for details.

Mark your calendars, and we hope to see you at one—or more—of these events!

Reminder: Take the IVSC survey on ESG

To investigate the evolution of how environmental, social, and governance (ESG) factors are being incorporated into the valuation process, the International Valuation Standards Council has launched a survey. The survey relates to all types of valuations including those for financial reporting, market capitalizations, secured lending, and tax reporting purposes and will only take approximately five to 10 minutes to complete. The survey will be open until May 31, and the results are expected to be published during the latter half of 2024. To access the survey, click here.

KPMG provides global market data

The Q1 2024 International Valuation Newsletter from KPMG Switzerland includes some key financial market data, including:

• Comparison of major stock market performance for the 12 months ending March 31, 2024;

• S&P Eurozone BMI Index sector multiples;

• Risk-free rates for major currencies; and

• Country risk premiums and inflation forecasts for the BRICS countries.

To download the issue, click here.

BV movers . . .

People: James Weaver has joined Crowe LLP as a consulting partner in the firm’s Valuation Services practice; he has over 20 years of experience in the valuation industry and will play a key role in strengthening Crowe’s market focus in the valuation sector, particularly in the Southeast; he will also serve as the national leader for Crowe’s healthcare valuation team.

Firms: Houlihan Lokey has been named “Best Valuation Firm for Hard to Value Assets” at the 2024 HFM European Services Awards, the fifth consecutive year the firm’s European Portfolio Valuation and Fund Advisory Services team has won this accolade … Toronto-based Grant Thornton LLP (Canada) is rebranding to Doane Grant Thornton sometime later this year … BDO will be moving its Pittsburgh office from the current space in the Heinz 57 Center at 339 Sixth Ave. to smaller space in the new FNB Financial Center at 632 Washington Place … Milwaukee-based Wipfli is partnering with dbt Labs, a company that empowers data practitioners to create and disseminate organizational knowledge.

Please send your professional and firm news to us at editor@bvresources.com.

CPE events

A Saga About S Corporation Tax Affecting: It’s a Thriller! (A BVR Workshop), May 8, 10:00 a.m.-1:15 p.m. PT/1:00 p.m.-4:15 p.m. ET. Featuring: L. Paul Hood Jr., The University of Toledo Foundation. CPE credits: 3.5.

This presentation includes a comprehensive, up-to-date discussion of a still-unsettled issue: whether earnings of an S corporation should be “tax affected,” i.e., increased or offset to account for S corporation status.

Effectively Utilizing Review Reports in Valuation and Damage Litigation, May 14, 10:00 a.m.-11:40 a.m. PT/1:00 p.m.-2:40 p.m. ET. Featuring: P. Dermot O’Neill (Rider University College). CPE credits: 2.0.

The role of review (not rebuttal) reports including a discussion of review report standards and how best to craft them based on the circumstances of the engagement is included in this presentation.