August 16 , 2006 | | Issue 47-3

Business valuation on trial in Bankruptcy Court

First, back in December the U.S. Bankruptcy Court (E.D.N.Y.) threw out the defendant’s expert business valuation report for failing to satisfy federal requirements of reliability.  You’d think the plaintiff in In re Med Diversified, Inc. would sail all the way to court (or settlement)—but then just two weeks ago, the same Judge (Epstein) threw out the plaintiff’s expert report by Robert Cimasi, MHA, ASA, CBA, AVA , FCBI, CM&A, CMP, president of Health Capital Consultants (St. Louis) and one of the more notable authorities in the healthcare valuation field.  That leaves the Court to reach a valuation conclusion without any expert witness or report in the case.

Has the federal Judge gone too far?  “Perhaps this memorandum…may assist other bankruptcy courts in framing their decisions…under the evolving standards of disqualification of purported non-scientific expert witnesses.”  Statements such as these have bankruptcy bloggers citing the opinion for possible arrogance and a general disrespect for the BV profession.  Bob Cimasi was understandably more circumspect, as the litigation still remains unsettled.  This case “is putting business valuation on trial,” he said. "I fully stand by the validity of my report, conclusion, opinions and testimony in this case. I believe that any fair reading of the trial transcripts and documents on the record will support my opinion."

For a copy of the full-text court opinion, click here.

BVNewsletter sample features abstract of first In re Med opinion

And if you want to read the abstract of the first In re Med Diversified, Inc., it’s featured in the free sample of BVResource’s client newsletter service.  Click here and then click on the “sample issue” link.  You’ll find the abstract on pages 2-3 of the sample issue.

Latest IRS statistics on S Corp entities

The Internal Revenue Service had just released its Spring, 2006 Statistics of Income Bulletin, which extracts detailed information from high-income individual income tax returns for tax year 2003 as well as S Corporation returns for the same time frame.  Of note: S Corporations continue to be the single most popular choice for business organizations, representing 61.9% of all corporate entities.  S Corporation shareholders now number 5.8 million, up 2.9% from the previous year.  Total net income (less deficit) reported by S Corps increased from $183.5 billion in 2002 to $213.7 billion in tax year 2003; total net assets went up from $169.9 billion to $2,186.6 billion.  Less than a quarter of 1% of S Corps reported a net federal tax liability in 2003, while nearly two-thirds (62.7%) reported positive total net income.
For a copy of the bulletin, go to,,id=117514,00.html

Is fair market value ever different from fair value?

“Value is a useless word by itself,” according to Bruce Bingham, ASA, Trenwith Valuation, LLC (New York), who spoke at the ASA’s 2006 International Appraisal Conference at the beginning of August.  Without any accompanying standard or definition, “value” has no real value in the business appraisal industry, most would agree.

Most appraisers might also debate the differences between fair market value and fair value in varying contexts—but Bingham challenges any appraiser to come up with “a specific instance where fair market value and fair value are different.”  If you can do it—“Business Valuation Review will publish it on page one.”  If anyone’s up for the challenge, contact the BVWire editor, and we’ll forward your email to Bingham.

2nd Quarter 2006 Control Premium Data have arrived

We’ve just posted the 2nd Quarter 2006 update to the Mergerstat® / Shannon Pratt's Control Premium Study™ online at  This latest posting includes 110 new transactions and the corresponding summary documents.  Overall, the database contains transaction details on over 5,120 public companies with a median revenue of $93 million and a $122 million median selling price.

And don’t miss Damodaran, et. al on control

Aswath Damodaran, the noted NYU professor whose seminal work has helped dispel the notion of the “20%-30% control premium” rule of thumb, will share his research and experience working with Wall Street firms in the upcoming BVR telephone conference on Control Premia.  Two representatives from Mergerstat will also be on the panel, to address the most hotly-debated aspects of using the Mergerstat® database.  To register for the August 24, 2006 telephone conference, click here.

All-inclusive BV education & conference calendar now available

Did you know that there are now 1,309 CFA charterholders (out of over 69,000) who specialize in business valuation?  Or that the IBA (Institute of Business Appraisers) is offering several new courses on “Creating Value”—including Business Appraisal in a Global Economy, by Rob Slee, CBA?  Or that NACVA (National Association of Certified Valuation Analysts) has added fourteen new courses to its 2006 training lineup? 

Well, now you don’t have to crawl the Web to find the latest offerings from these and other major BV societies, including the AICPA, ASA, CICBV, CFA Institute, IBA, NACVA, and more.  We’ve posted the most current BV conferences and seminars, education and BVR telephone conferences at one comprehensive and convenient location.  Just click on the “BV Calendar” link at

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