BVWire Issue #161-1 | February 3, 2016


Call for change in New York’s DLOM stance gains steam

New York's out-of-step position with respect to the discount for lack of marketability in fair value proceedings is a hotly debated issue—and it’s getting even hotter. A “new note” in the debate was sounded in an article in the January issue of Business Valuation Update, according to a blog post by attorney Peter Mahler (Farrell Fritz) in the New York Business Divorce blog.

Stands alone: In the article, “NY’s Unfair Application of Shareholder-Level Marketability Discounts,” Gil Matthews (Sutter Securities) writes that New York “stands alone in that it favors (and some lower courts believe requires) the imposition of a marketability discount on dissenting shareholders in fair value determinations. There is broad consensus that DLOMs should seldom, if ever, be permitted in appraisal or oppression cases.” Matthews points out that New York is out of line with both the Model Business Corporation Act (MBCA) and the American Law Institute (ALI) “as well as the widely accepted view in other states and in legal literature.”

Mahler gives his perspective on the issue and says that it “would be nice if the business valuation community could speak with one, clear voice on the issue, which would then facilitate consideration by legislators or, should they defer to the courts, appellate judges, of any needed changes to New York’s policy toward DLOM in fair value proceedings.”

Stay tuned!

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What keeps you awake at night?

What is your biggest concern about your valuation practice? Is it expanding into new niche areas? Or is it regulatory issues and compliance with standards? And what about keeping up with current trends in the BV profession? In our online survey, we’ve supplied five choices for your most pressing issues—but also a category for write-in responses plus ample room for comment on any particular issue. You can respond anonymously or with full attribution. To complete the survey—which takes less than a minute—click here. We’ll present the results in the next BVWire.

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Ohio court provides test for tax affecting in divorce valuations

Conflicting law on whether to tax affect in divorce cases has valuators practicing in Ohio confused. A recent decision from the state appeals court aims to clarify matters by providing a test for when not to do it.

An Ohio divorce statute requires that “the Court … consider the tax consequences of the property division upon the respective awards to be made to each spouse.” But under case law the consideration is only proper “as long as those consequences are not speculative.” In litigating the value of the ownership interests a 44-year-old orthopedic surgeon held in four businesses, the parties focused their fight on the word “speculative.”

Current tax rates: Both sides retained experts whose pretax valuations were close. The husband’s expert determined the value of all interests before accounting for taxes was about $4.74 million. The wife’s expert arrived at an aggregate value of just above $5 million.

The husband’s expert also performed a valuation that tax affected, using the current tax rates. He maintained that, since the current tax rates and the husband’s current income were known, the valuation was not based on speculation. He added he did not believe the tax rates would change much in the near future. This calculation reduced the value by over $1 million. The wife’s expert did not tax affect because it was “speculative” and not done as “a general practice.” The wife argued that factoring in the tax consequences where the asset was distributed at divorce but not liquidated at the same time was improper.

The trial court sided with the husband even though “the considerations and offsets made at this time may in fact not be actually what would occur at the disposal of the asset in the future.” However, the wife’s position would make it impossible to consider the tax consequences except in a case in which there was an immediate disposition of the property. The court valued the husband’s interest at approximately $3.3 million.

‘Too speculative’: The wife appealed and prevailed. The Court of Appeals noted that prior decisions that have found taxes were “too speculative” involved the following situations: (1) It is uncertain whether, or at what point in the future, a business will be sold; (2) it is uncertain that the tax rates will be similar in the future; and (3) a sale is not made necessary by the trial court’s division of the marital assets.

All these factors were present here, the appeals court said. The husband indicated a desire to sell his businesses at the time of retirement, but the retirement date was uncertain. And retirement hardly was imminent considering the husband was only 44 years old. Further, the trial court used the current tax rates, but doing so required it to assume the rates would be the same or substantially the same in the future. But, said the appeals court, by the time the husband was ready to sell his business interests, “they could be worth far more, or far less.” Therefore, a court would “necessarily” engage in speculation if it imposed “a present-day tax-affect upon the value of the businesses in this case.” Finally, there was no indication that the distribution of the assets required the husband to sell his businesses.

Takeaway: The appeals court struck down the trial court’s tax-affected valuation as “too speculative” because the owner spouse did not contemplate a sale anytime soon and the distribution of assets did not require him to sell his business interests.

Find a discussion of Nieman v. Nieman, 2015 Ohio App. LEXIS 5021 (Dec. 14, 2015), in the Business Valuation Update; the court’s opinion will appear soon at BVLaw.

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Insider’s take on DLOM ruling

Regarding last week’s report in BVWire on the long-lasting Wisniewski v. Walsh case, Michael Meisel, an attorney on the team litigating the case on behalf of the buying shareholders, notes that, in addition to the 25% DLOM the Appellate Division of the Superior Court of New Jersey approved in its most recent decision, it earlier (in its 2013 decision) had approved a 15% key person discount to account for the unique contribution of the late board chairman (Frank Walsh) to the company’s success. This brings the discount rate to 40%—a favorable outcome for the buying shareholders.

A discussion of Wisniewski v. Walsh, 2015 N.J. Super. Unpub. LEXIS 3001 (Dec. 24, 2015) (Wisniewski II), will appear in the March edition of Business Valuation Update;  the court’s opinion will be available soon at BVLaw. A digest of the prior ruling, Wisniewski v. Walsh,  2013 N.J. Super. Unpub. LEXIS 724, and the court’s opinion are available at BVLaw.

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NACVA award winner comments on BV growth areas

P. Dermot O'Neill is the latest recipient of NACVA’s Thomas R. Porter Lifetime Achievement Award, which recognizes a member’s exemplary character, leadership, and professional achievements. In an interview in the current issue of Business Valuation Update, O’Neill talks about what he sees as growth areas for business valuation.

“Litigation and divorce are growth areas and one of the reasons I sense is that many of the ‘dabblers’ are getting weeded out,” says O’Neill, whose practice is located in Glen Mills, Pa. “The CPAs who primarily did accounting and tax work but also valuations on the side have found that it is not something you dabble in. But this has created some pricing pressures because clients are looking for the lower fees that the dabblers charged. There are also opportunities related to the fact that the baby boomers are retiring, so there will be some growth in valuations for that market as they sell or gift their businesses to family members.“

What to do: For those without experience in these areas, getting your foot in the door could be tough. O’Neill says that one idea is to represent the nonpropertied spouse in a divorce matter who typically doesn’t have the funds to pay a retainer or your regular fee. “You don’t take the engagement for free but you charge what the client can afford,” he says.

For the full interview, see the February issue of Business Valuation Update (subscription required).

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Pepperdine private capital markets project requests your input

The Pepperdine Capital Markets Project conducts ongoing research concerning the cost of private capital across market types and the investment expectations of privately held business owners. The annual research questionnaire that is designed to examine private capital markets from the perspectives of capital providers, lenders, appraisers, bankers, and private business owners is now open. Your individual responses will be kept confidential, and by participating in the survey you will receive a complimentary report on the findings. To participate in the survey or to learn more, e-mail

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Global BV news:

IVSC to discuss IVS update at meeting in Washington, D.C., March 9

The International Valuation Standards Council (IVSC) is working on a new version of IVS, and an exposure draft is expected to be issued this June. After three months of consultation, IVS 2016 will be published in late 2016. The IVSC will hold its next Standards Board public meeting in Washington, D.C., on March 9, during which it will discuss the planned consultation process further and other related topics. The Board welcomes meeting attendees to provide further comments on this matter. For more information on the IVS process, please click here. To register for the meeting, please click here.

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Take a deep dive into valuations for corporate transactions

Trends in transaction valuations will be discussed at an upcoming conference on M&A structuring—and BVR has a special offer for you. BVR partner Transaction Advisors is delighted to announce the Chicago M&A Conference on March 3, 2016, at the University of Chicago Gleacher Center. This technical and hands-on event provides intermediaries, advisors, investors, owners, and executives perspective and practical insights on the latest strategies for evaluating and structuring corporate transactions. View the agenda here.

Discount offer: When you register, use special code BVRGuest at checkout for $100 off the registration price. Join Transaction Advisors for a day of learning—and for great networking! If you can’t make it to Chicago, the conference will be in San Francisco on May 12!

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BVR releases two new guides

The latest news in the business valuation profession and complete coverage of recent court decisions is provided in two new guides from BVR:

  • The Business Valuation Update Yearbook 2016 covers the most innovative approaches and techniques, leading conferences, new court decisions, and changes in regulations and standards in the profession with on-the-ground reporting from valuation experts, thought leaders, and the BVR editorial team; and
  • The BVR Legal and Court Case Yearbook 2016 is a collection of critical valuation-related court decisions involving marital disputes, breach of contract actions, damages, dissenting shareholder disputes, estate and gift tax cases, federal taxation, intellectual property cases, bankruptcy litigation, and more. It also contains a case listing by state/jurisdiction, court, and case name, followed by a short description of the key valuation issue of each case.

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BV movers . . .

People: Dori Bailey has joined the Syracuse, N.Y., firm Bond, Schoeneck & King as a business law attorney with a focus on public and private companies in domestic and cross-border transactions. Bailey is also an adjunct professor of law at Syracuse University College of Law, where she teaches courses on banking law and business valuation law … James Cobbler has joined the Winston-Salem, N.C., firm Brendle CPA and brings over 30 years of experience in corporate and personal tax planning, M&A support, strategic planning for family-owned businesses, and business valuation … Coral Hansen has been appointed managing director of West Coast Operations in the expansion of CBIZ CRS. Hansen brings more than 25 years of financial experience, serving in senior- and executive-level positions in both the public and private sectors. Joining the new West Coast operation is Patty Chan, who brings more than eight years of forensic accounting and litigation support experience to the team … Guy Knuf has joined the Irvine, Calif., office of Hein & Associates as partner and will lead the firm’s new transaction advisory services practice … Marc Ménard has joined the Montreal business valuation and litigation support firm MFA Global as senior manager … Francis Morris has joined the Lancaster, Pa., office of Reinsel Kuntz Lesher as a manager in the Business Consulting Services Group … Josh Roth was promoted to senior financial analyst and Ransom LeMay to senior manager at the Indianapolis firm Somerset CPAs … David Schaeffer, principal at Yeo & Yeo based in Saginaw, Mich., has been re-elected to the board and will serve another two-year term … Heidi Walker was named managing director of ESOP Practice Group at Meyers, Harrison & Pia.

Firms: Henry & Horne acquired the Arizona firm Centerpoint Advisors on January 1; Principal Jeffrey Wright, who led Centerpoint Advisors for the last 20 years, has been named a director in the firm’s Litigation and Valuation Services Group … Mowery & Schoenfeld of Lincolnshire, Ill., merged with the Northbrook firm Gary Hart & Associates, on January 1, making this the firm’s fifth merger in the past seven years … Mazars has merged with the national Chinese audit firm ZhongShen ZhongHuan, adding over 1,800 professionals, including 83 partners, from 15 offices across Mainland China … The Boulder, Colo., firm R. Waidler & Associates P.C., was acquired by Eide Bailly, which is based in Fargo, N.D., on February 1; Rick Waidler, the founder, and his entire team will join the firm.

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CPE events for February

Alternative Energy—Understanding Critical Business Valuation Issues (February 11), with Rick Daubenspeck (BDO Consulting) and Donna Lobete (BDO Consulting).

Discount for Lack of Marketability for Any Restriction Period: Mastering the Average Strike-Put Option Model (February 16), with John Finnerty (Finnerty Economic Consulting LLC). This is Part 4 of BVR's Special Series on Discounts for Lack of Marketability.

Valuing Specialty Paving Contractors (February 18), with Brad Minor (Blue).

Stop Overvaluing Synergies: Master These Skills (February 23), with Jeff Litvak (FTI Consulting) and Brent Miller (FTI Consulting).

Important note to webinar attendees: To ensure that you receive your dial-in instructions to BVR’s training events, please make sure to whitelist

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We welcome your feedback and comments. Contact the editor, Andy Dzamba at: or (503) 291-7963 ext. 133
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In this issue:

N.Y. DLOM debate

Big worries

Ohio DLOM test

Recent case comment

BV growth areas

Private capital study

Global BV news

Valuation in M&A

New BVR guides

BV movers

CPE events












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