BVWire Issue #160-2 | January 13, 2016


Brand valuation pros defend their methods

“What is the point of brand valuations if those doing the valuing are so off target?” This was the question posed in an article by Marketing Week columnist Mark Ritson calling into question the validity of brand valuations. He found that the average brand valuation was just as likely to overstate a brand’s value by more than 500% than it was to get within 20% of the actual price paid.

Head to head: The article spawned a session at the recent Festival of Marketing during which three of the largest brand valuation firms joined Ritson on stage to defend the process. Michael Rocha, global director of brand valuation at Interbrand; Doreen Wang, global head of BrandZ at Millward Brown; and David Haigh, founder and CEO of Brand Finance argued their case for why there are such major differences in their valuations. All three experts said they can explain the differences in detail—but for clients’ ears only. They certainly were not going to reveal their techniques with competing valuation firms in the room.

The session was recorded, so check out the video.

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Protect your independence, warns Judge Laro

Most valuation experts have dealt with retaining attorneys who want to steer the valuation by reviewing draft opinions and suggesting (or even ordering) recalculations that favor their side. Experts need to know the discovery rules because much of the communication between attorney and expert may be discoverable, advises David Laro, a senior judge of the U.S. Tax Court. “If the attorney’s involvement crosses the line, the valuation evidence may be spoiled,” he says, speaking at the AICPA FVS conference in Las Vegas.

Big blunder: Judge Laro mentioned a recent billion-dollar case in which a major law firm told the valuator in writing what number it wanted the expert to reach. The communication was discoverable and ended up in court. “Think of what that does to the valuator’s credibility in court,” the judge says.

Speaking at the same session, Michael R. Devitt (professor of law, University of San Diego School of Law) also cautioned appraisers about their dealings with the attorneys. “Don’t let overzealous lawyers push you into untenable positions,” he warns. And he advised experts to know the Daubert case and the factors it sets forth inside and out because it is almost certain that the other side will file a Daubert challenge. Sort of knowing the case is no longer enough to overcome the hurdle Daubert has become.

For more coverage of this session and the rest of the AICPA conference, see the January 2016 issue of Business Valuation Update (subscription required).

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Merger mania heats up for accounting firms

It's merger mania time for accounting firms—and it won't let up anytime soon, according to the new 2015-2016 Rosenberg MAP Survey, an annual study of CPA firm statistics. Three main factors have fueled the feeding frenzy: continued slow post-recession organic growth, thousands of baby boomers with no internal succession plans in place, and competition heating up for middle-market clients (the big firms want the biggest and best clients).

“I think that we will see four or five of the top 100 firms disappear via merger deals and there will be major merge-up activity in the next 200 firms below them,” says Gary Adamson of Adamson Advisory, a practice management firm. “For the smaller firms and especially the sole practitioners, we are approaching a buyer’s market.”

Valuing a CPA firm: BVR has a new report, What It's Worth: Accounting Firm Value, which is designed for both appraisers and firm owners. It provides the latest advice, firm value drivers, and data analysis in setting forth the latest benchmarks for valuing an accounting firm.

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FASB issues final ASU on financial instruments

The FASB just released Accounting Standards Update (ASU) 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, intended to improve the recognition and measurement of financial instruments. The ASU affects public and private companies, not-for-profit organizations, and employee benefit plans that hold financial assets or owe financial liabilities.

The ASU will take effect for public companies for fiscal years beginning after Dec. 15, 2017, including interim periods within those fiscal years. For private companies, not-for-profit organizations, and employee benefit plans, the standard becomes effective for fiscal years beginning after Dec. 15, 2018, and for interim periods within fiscal years beginning after Dec. 15, 2019.

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U.S. healthcare is on the cusp of bundled payments

A Harvard Business Review article points out that definite change is in the air that will have a significant impact on the revenue picture for healthcare providers. The change has to do with the move to bundled payments, in which a single payment is made for all providers who render services during a patient’s entire “episode of care” for certain medical conditions. The payment is then split up among the providers. This is designed to increase the quality of care and reduce healthcare costs.

Just started: The article points to the mandatory bundled payment program (Comprehensive Care for Joint Replacement Model) in 75 geographic regions that was scheduled to begin Jan. 1, 2016. The model, proposed by the Centers for Medicare & Medicaid Services (CMS), forces healthcare providers in certain areas into a bundled payments scheme for procedures such as hip and knee replacements. The proposal applies only to providers in large metropolitan statistical areas (MSAs).

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Global BV news:

IVSC setting up separate standards board for financial instruments

Financial instruments are the Achilles heel of valuation, according to Sir David Tweedie, chairman of the International Valuation Standards Council (IVSC). In a recent article in The Accountant, he points out that, while business and real state valuation standards are more developed, financial instruments carry a rampant risk. In response, the IVSC is creating a separate standard board only for financial instruments. "I've spoken to Hans [Hoogervorst] and the IASB has been very helpful in offering to do anything they can, some of it would probably be more disclosure," he says.

The new IVSC: During 2015, the IVSC redefined itself after some significant internal restructuring. Tweedie says the IVSC should be built on two cornerstones: the creation of a strong valuation profession and global standard setting of quality. "The problem with the valuation profession is that, at the moment, it is completely scattered. There are all sorts of credentials; nobody knows who the good guys are …," he says.

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European goodwill impairment declines 41%

Goodwill impairments continued to decline for companies in the STOXX Europe 600 Index, according to the “2015 European Goodwill Impairment Study,” from Duff & Phelps. Goodwill write-downs dropped by a substantial 41%, from €49.6 billion in 2013 to €29.4 billion in 2014. From an industry viewpoint, Telecommunication Services had the highest aggregate goodwill impairment at €8.9 billion. From a country viewpoint, the U.K. had the highest aggregate amount of goodwill impairments at €12.4 billion.

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IFRS Blue Book now available

The IFRS Foundation has published the 2016 International Financial Reporting Standards Consolidated without early application (Blue Book). This updated edition includes the latest consolidated versions of all standards (including IFRSs, IASs, and IFRIC and SIC interpretations) as approved by the International Accounting Standards Board that are effective as of Jan. 1, 2016. This volume is available to purchase as a PDF download or as a bundled product (PDF download plus printed version).

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New enhancements make Pratt’s Stats better than ever

Pratt's Stats, the database with details of more than 24,000 private-company transactions, has a number of exciting new features that have just rolled out, including:

  • Forty-five additional data fields, including fields dedicated to purchase price allocation, franchise designation, and real estate asset value;
  • The ability to find more comps—transactions can now include up to three SIC or NAICS codes to reflect multiple lines of business; and
  • Enhanced search functionality—search by region, EBITDA, seller’s discretionary earnings, and more!

Check out this video that explains the enhancements.

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ASA debuts on-demand BV202 course

The American Society of Appraisers (ASA) has launched an on-demand option for its BV202 training course, Introduction to Business Valuation, Income Approach. The on-demand version offers pre-eminent instructors and covers the same material as the traditional, in-person course. Students can access the individual course modules, download handouts, view presentations, take practice quizzes, and a final exam any time, directly from ASA’s website. For details, click here.

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BV movers ….

People: Michael Bonetto was elected shareholder at the leading California law firm Hoge Fenton, where he is a member of the firm’s family law practice and based in Silicon Valley … Jim Brendel was named managing partner of Hein & Associates LLP and will lead the firm from the Denver office. William Mueldener succeeds Brendel as Denver office managing partner … William F. Murray, who is based in Hartford, Conn., was elected partner in the Litigation Services and Business Valuation Group at New England’s largest regional accounting firm, BlumShapiro … Paul Ribaudo was named a partner in the Litigation, Valuation & Dispute Resolution Group at Berdon LLP, New York City.

Firms: The Tucson, Ariz.-based BeachFleischman merged with Cervantes CPA Firm of Scottsdale on January 1 … The Minneapolis-based national firm CliftonLarsonAllen merged with four firms, all effective January 1: Four Point Partners of Edina, Minn.; Guthoff Mehall Allen & Co. of Bloomington, Ill.; Komisar Brady & Co. of Milwaukee;  and Galanti & Co. of Atlanta. These latest mergers come on the heels of four others last month …Baltimore-based Stegman & Co., Maryland’s oldest CPA firm, will join Dixon Hughes Goodman on June 1 … Ernst & Rabe, which ranks among Greater Cincinnati’s 25 largest accounting firms, was acquired on January 1 by the Columbus, Ohio-based GBQ Partners, greatly expanding GBQ's presence in the Cincinnati market for the first time. GBQ will now have over 160 employees in Indianapolis, Philadelphia, New York, Columbus, and Cincinnati … The Alabama-based Machen McChesney, one of the region's leading CPA and business advisory firms, acquired Wolf & Taunton, a Montgomery-based accounting firm … The California-based Squar Milner will expand into San Diego on February 1 by merging with McLean, Rotherham & Co. and its subsidiary, Hosaka, Rotherham & Co., creating the largest accounting and consulting firm in the region with over nine partners and 80 professionals and staff … The national tax advisory firm UHY Advisors merged with accounting firm MohnAllen with MohnAllen’s managing partner Harold Mohn joining UHY's Columbia, Md., office … The Milwaukee firm Wipfli LLP has merged with Steinberg Advisors based in Chicago on January 1.

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DLOM, industry-specific valuations highlight CPE events

Valuing Insurance Agencies (January 19), with Lucas Parris (Mercer Capital).

Valuing Mid-stream Oil and Gas Companies (January 27), with Tom Ramos (BDO Consulting) and Dan Visich (BDO Consulting).

Case Study: Applying the Empirical Method to Determine a DLOM (February 4), with Bruce A. Johnson (Munroe, Park & Johnson Inc.).

Measuring the Discount for Lack of Marketability for Restriction Periods of Any Length (February 16), with John Finnerty (Finnerty Economic Consulting LLC).

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

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:

Valuers on defense

Judge Laro warning

CPA firm M&A frenzy


Healthcare disruption

Global BV news

Pratt’s Stats enhanced

ASA BV202 on demand

BV movers

CPE events












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